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There are many modes in Binance's contract trading, such as USD-M future, COIN-M future, Cross Margin, Isolated Margin, and so on. Investors need to choose the most suitable trading according to your own needs and investment strategies. Today, we will tell you contract trading on Binance.

The difference between contract trading and futures

What are futures?

Spot trading refers to the exchange of the two assets will happen immediately when the transaction occurs.

The model of futures trading is a legal agreement to buy or sell something at a predetermined price at a specified time in the future. According to the stipulations of contracts, the buyer and seller will buy or sell assets of a certain quantity and quality at a certain time and place in the future at the price of the contract. As long as they meet the defined transaction behavior, it can be called "futures."

Contract trading is similar to futures trading, but there are a few differences between contract and futures trading.Binance's contract trading is a perpetual futures contract without settlement date and greater operating leverage (up to 125 times). When you trade perpetual contracts, there will be no physical delivery issues and no expiration date. It is more like contract for difference. When you buy and sell perpetual contracts on Binance, the thing you buy and sell is a contract. Accordingly, you will not get real assets such as Bitcoin and Ethereum. All profits and losses are based on the price fluctuations in the market. Due to there are no real assets be trade in contract transaction, it is more flexible and convenient to invest. 

Contract transactions also involve margin. In margin trading, there are two forms of margin as following.

Initial margin: The initial margin refers to the percentage of the purchase price that must be covered by the investor's own money. When opening a position, the user must place the minimum margin required by the contract in the account.

Maintenance Margin: The maintenance margin refers to the amount the investor must maintain in the margin account after the purchase has been made to keep the position open. If the market trend is contrary to your forecast, you will lose your margin. If your margin is less than the required maintenance margin, the system will liquidate your position.

Due to you can use margin system in contract trading, contract tradings can be like leveraged trading. You can use leverage to amplify capital to invest. For instance, you can use a margin of USDT 100 to operate a contract transaction of USDT2,000, and your leverage is 20 times.

After understanding the mode of contract trading, we will tell you how to use contract trading on Binance platform next time.