Spot, futures and CFDs
Lesson 23 · practical guide
Spot trading generally involves the asset itself. Futures and CFDs are derivatives whose value references an asset without giving the same ownership. Derivatives add margin, financing, expiry, liquidation or counterparty risks.
What you will learn
Distinguish spot, futures and CFDs before you choose a product.
Key terms
- Spot — buying or selling the underlying asset for current settlement.
- Futures — a contract whose value and settlement follow agreed future terms.
- CFD — a leveraged contract settled on the price difference, usually without owning the asset.
Follow these steps
- Ask whether you receive the asset or only a contractual price exposure.
- Read expiry, funding, margin, liquidation, settlement and counterparty terms.
- Compare the total cost of holding overnight and during volatile periods.
- Use the simplest product that meets the objective; complexity is not a return.
Practical advice
Two products can reference the same price but have completely different ownership, fees and loss mechanics. Read the contract specification before placing an order.
Long-form explainer
The full guide
Read this lesson as a chapter: understand the mechanism, test the assumptions and apply the idea with a clear risk limit.
Product structure determines what you own
Spot trading normally means buying or selling the underlying asset for current settlement. A futures contract creates an agreement with defined terms for a future settlement and may require margin. A CFD generally gives exposure to the price difference without ownership of the underlying asset. The legal, fee and counterparty arrangements can therefore differ substantially.
Leverage, funding, expiry, collateral and liquidation are product features, not small details. A chart may look identical across products while the outcome differs because of financing, contract roll, spread or a forced close. Before trading, identify the exact instrument and read its specification.
Choose the simplest structure that fits the goal
If the goal is long-term ownership, a leveraged derivative may introduce risks that are unnecessary for that purpose. If the goal is short-term hedging or a defined strategy, the derivative's mechanics must be understood first. “More advanced” does not mean “more suitable.”
Compare a product by ownership, expiry, margin, funding, counterparty, liquidity and maximum possible loss. Test the calculation on paper with both a favourable and unfavourable move. The exercise often reveals that the visible percentage change is not the true amount at risk.
What usually goes wrong
The core mistake is assuming that products referencing the same price behave the same way. Owning the asset outright, holding a futures contract and holding a contract for difference differ in ownership, funding costs, expiry, counterparty exposure and how losses can accumulate. The second error is choosing the leveraged version because it requires less cash, without noticing that the cash requirement was the only thing limiting the loss in the simpler product.
People also skip the contract specification. Tick size, expiry, settlement method, funding intervals and the exact conditions under which a position can be closed are not fine print; they are the product. A fourth mistake is assuming a derivative tracks the underlying perfectly. Basis, funding and low liquidity can push a derivative's price away from spot, particularly when markets move fast, which is exactly when you care. If you cannot explain in one sentence what you own and who owes you what, the simplest structure that achieves your goal is almost always the right choice.
How it works
With spot crypto, custody and network transfer are central. Futures may use leverage, funding or expiry. A CFD is a contract with a provider and may include financing; you normally do not own the underlying asset.
Ask how price is marked, who is counterparty, what collateral does, what happens during a gap and which protections apply in your country.
Worked example
Numbers make an idea concrete. Here is a small, illustrative one — not a forecast.
A €1,000 cash purchase can fall to €700 without margin liquidation. A €1,000 leveraged derivative can be closed after a smaller adverse move if collateral falls below its threshold.
Before you act
Run through these questions before you commit any money or make a decision based on this lesson:
- Do I own the asset or a contract?
- What are margin and liquidation rules?
- Who marks the price and is counterparty?
- Is the product legal and suitable here?
Practice this lesson
Reading is a start; doing the exercise is what makes the idea stick.
Compare a spot product and derivative for the same asset by ownership, custody, leverage, fees, liquidation, expiry and provider risk.
Further reading
Educational content only: This guide is not personal financial, legal or tax advice. Markets involve risk, including the possible loss of capital. Verify current rules, fees and product availability in your country.