Both spot trading and perpetual trading allow you to gain exposure to market prices, but they work very differently.
Understanding these differences can help you choose the product that’s right for your trading goals.
Spot Trading | Perpetual Contracts |
You buy and own the asset. | You trade a contract linked to the asset’s price. |
You generally profit only when prices rise. | You can potentially profit whether prices rise or fall. |
No leverage is required. | Leverage is available. |
No liquidation risk. | Positions may be liquidated if margin requirements are not met. |
No funding payments. | Funding payments may apply while positions remain open. |
Ownership
With spot trading, you own the asset you purchase.
With perpetual contracts, you never own the underlying asset, you simply gain exposure to its price movements.
Market Direction
Spot traders generally benefit when prices increase.
Perpetual traders can choose to trade in either direction by opening Long or Short positions.
Leverage
Spot trading typically requires you to pay the full value of the asset.
Perpetual contracts allow you to control larger positions using leverage.
Risk
Spot trading does not involve liquidation.
Perpetual contracts use leverage, meaning market movements can affect your position more significantly.
Understanding leverage and liquidation is essential before trading perpetuals.