What is Leveraged Trading? What is Contract Trading? (Difference between Leveraged Contracts)

What is leveraged trading? What is contract trading? Leveraged trading is a type of digital asset derivative trading that allows investors to trade on different platforms and increase capital utilization through hedging.

What is leveraged trading? What are the benefits of contract trading? The risks and returns of contract trading are exactly the same. The advantage of leveraged trading is that it can achieve indiscriminate cross-market arbitrage without the need for third-party intermediaries. Leveraged trading has the advantages of unlimited amplification, small spreads, and combinability. For those who are not familiar with traditional financial knowledge or understand cryptocurrencies, in short, it means that no intermediaries are needed to complete the operation and profits can be obtained quickly at a lower cost.

Difference between Leveraged Contracts

Digital currency leveraged contracts have the following characteristics:

(1) Leveraged trading, is a common investment tool in the cryptocurrency market. The existence of leverage allows investors to achieve greater returns through simple buying and selling hedging.

(2) Derivative markets with high risk management and return rates.

(3) High volatility, significant price changes, and high speculative attributes. Therefore, they are also called “arbitrage” or “gambling”.

(4) The high leverage characteristic leads to frequent liquidation. For example, for currencies like Bitcoin, if there is a sharp decline (a decline of more than 50%), they may face extreme margin liquidation; in the event of losses, bankruptcy, or even black swan events, users may lose part of their funds.

(5) The trading platform itself is a large group of market participants supported by a large number of professionals and the capital market. With more and more people joining this industry, the more users on the platform, and the more extensive the services provided by the platform. Therefore, in the initial design of the product, we can consider leveraged tokens as a feasible investment target for pricing and realizing profits.