What are Spot and Future Trading?

Spot Trading involves executing transactions based on the current market price, where the trader acquires actual ownership of the asset. On the other hand, Future Trading does not involve direct ownership of the asset. Instead, buyers and sellers enter into contracts agreeing to buy or sell a position at a predetermined price, with the transaction taking place at a specific future time. 


In Spot Trading, the asset is purchased or sold immediately, reflecting the current market conditions. This allows the trader to have direct ownership and control over the asset. In contrast, Future Trading entails trading contracts that represent an agreement to buy or sell an asset at a predetermined price and future date. The contracts derive their value from the underlying asset, but ownership of the actual asset is not transferred during the trading process. 


Future Trading carries higher risks compared to Spot Trading, but it also offers the potential for greater rewards. The predetermined price and future settlement date introduce additional uncertainties and market fluctuations that can result in increased profits or losses for traders. 


It is important for traders to consider their risk tolerance, market analysis, and investment objectives before engaging in either Spot or Future Trading, as each approach has its own benefits and considerations.