Leverage and contract are both common investment transactions for investors. Many investors often use these two methods, but they don't know which one to use. So, what is the difference between leverage and contract? Today, I will focus on the difference between leverage and contract.

What's the difference between leverage and contract?

1 operates in different ways:

Leverage is to borrow money from the platform and over-allocate assets in the spot market. The operation process will include borrowing interest rate+transaction interest rate. The contract adopts the delivery contract mode, that is, you can choose the leverage ratio of the product itself before trading. This model eliminates the need to borrow money in the spot market for leverage.

2 different definitions:

Leveraged trading is to invest several times the original amount with a small amount of money in order to obtain a return or loss that is several times the fluctuation of the investment target. A contract is an agreement that the buyer agrees to receive assets at a specific price after a specific period of time and the seller agrees to deliver assets at a specific price after a specific period of time.

3 The rules are different:

Leveraged trading is that investors use their own funds as a guarantee to amplify the financing provided by banks or brokers for foreign exchange trading, that is, to amplify the trading funds of investors. Futures contract is a standardized contract designed by the exchange and approved by the national regulatory agency. The holders of futures contracts can fulfill or cancel their contractual obligations through the settlement of spot or hedging transactions.

4 different characteristics:

Leveraged trading has the characteristics of 24-hour trading, global market, few trading varieties, flexible risk control, two-way trading, flexible operation, high leverage ratio, low transaction cost and low entry threshold. Futures contracts are characterized by small and wide, two-way trading, no need to worry about performance, transparent market, tight organization and high efficiency.

When trading a contract, if you want to use leverage, you need to pay a performance bond (guarantee), that is, a trading bond. Generally, transaction guarantee only accounts for a small part of the total contract value. Traders can control contracts with huge value with relatively few virtual funds, which can bring great flexibility and high transaction efficiency to traders.