Spot, Futures, and Sentient
Which Suits You the Best?
If you’ve ever thought about spicing up your trading, you’ve probably looked beyond spot markets and felt the dizzying array of features at your disposal. The varying levels of intricacies, customizations, and sophistication found within these toolsets are designed for different — and sometimes very specific — trading strategies in mind, and can be very potent tools for profit in the hands of experienced traders.
But what method suits you the best? For the purposes of this article, we’ll be taking a very brief view of spot and futures trading, in order to address and take into account as many traders as possible. This is because the number of strategies and ways one can utilize these tools is too vast to neatly pack into an easy-to-digest article, and we want our posts to be easily comprehensible for newcomers. This is also why we’ve decided to include Sentient in this conversation; as you’ll come to learn below, it is especially useful for those who would like to partake in complex trading strategies without having to understand the processes involved.
It should also be noted that this article, like all the others that precede and proceed it, does not constitute financial advice. For a complete understanding of trading, strategies, and trading tools, it is important to read through guides, articles, and books written with the intent of educating the readers and prepping them for real-life trading.
With that out of the way, let’s take a brief look at spot trading.
Spot trading is perhaps the simplest form of trading, and what one envisions when they think of buying and selling cryptocurrencies. When you decide to buy a particular asset in the spot market at a particular price point, you’re making a direct purchase of the said asset, which is then transferred to your wallet.
With the token now under your ownership, you can proceed to hold it for as long as your heart desires, and, at any point, sell it in the open market for what it’s worth — or place a sell order at the price of your choosing. On the same note, you can also choose to withdraw your tokens from a CEX (Centralized Exchange) into your non-custodial wallet, and utilize the token in a Dapp or DeFi protocol.
Futures trading, on the other hand, is more about agreements than the actual asset itself.
When you engage in a futures trade, you are establishing contracts between yourself and other traders that give you certain rights and obligations that you have to execute and abide by in the future. Here, you don’t own the underlying asset, but rather the right to buy or sell at a specific price and date.
This means you cannot withdraw the underlying asset to a non-custodial wallet, nor can you hold it for as long as you’d like. You are at the mercy of the conditions of the futures contract, as well as the external factors you are anticipating — primarily, the price of the agreed-upon asset.
Advantages of Spot and Futures Trading
The main takeaway is that spot trading is as direct and straightforward as it comes and that the trader is under no obligation to perform any actions at any time. Users that like to keep it simple and keep track of less may find this to be the best option for them. Similarly, users that are open to using the assets on-chain in a DeFi protocol may find spot trading to be the best fit.
Futures trading may be a little more complex, but it offsets that by unlocking various potentials. For instance, with futures trading, you can short an asset if you’re expecting prices to drop, which can come in handy in a bear market such as the one we’re in right now. There are also other features such as leverage, which, while increasing the risks involved with the trade, also allows for higher profits despite a trader’s limited capital.
What Sentient Offers
The features offered by futures trading open up a lot of functionality, strategies, and possibilities which are important to formulate and execute a range of trading strategies that are suitable for different situations. At a certain point, they’re almost a requirement for better efficiency.
Sentient not only utilizes both spot and futures trades but also various trading strategies that require one (or both) to be effective and profitable. Since it automates every trade, users — beginners and experts alike — can, in a sense, partake in these trades and strategies by lending their assets to Sentient to trade on their behalf, without any requirements other than the basic understanding of interacting with a Dapp.
The best part? Since the UI is so clean and user-friendly, no trader would find it complicated or difficult to use! On the contrary, depositing, tracking, and withdrawing assets on Sentient is as easy as it comes; you can watch this video for reference, where our lead Ethereum Developer, Mohamed Saleh, goes through the protocol explaining the various features found within.
What’s the best approach for you depends on your level of knowledge and expertise in the market, and whether or not you’d like a hands-on or off approach regarding your position. A long-term holder may choose to buy and forget about their assets for a year or longer, whereas a short-term trader may check the charts daily, if not hourly.
The beauty of Sentient is that it appeals to all sorts of traders, particularly those who prefer a hands-off approach. Checking charts and following the market is a demanding task, not to mention keeping track of all your open positions; but for an advanced algorithm like Sentient, it is a walk in the park. Not only can it consistently perform these tasks 24/7 at lightning speeds, but it can also keep track of more, multitask, process data… without needing to catch a breath.
Which option sounds like the best for you? Let us know your thoughts, as well as your experience in the market in our community groups!