Spread Trading Made Easy: A Practical Guide to Maximize Returns

Spread trading represents a sophisticated investment strategy that allows traders to operate simultaneously on two assets, capturing the price difference (spread) between them. Unlike conventional trading, spread trading offers a safer and more predictable approach, as you are not betting on specific price directions but rather on the variations between pairs of instruments. This method has become increasingly popular among traders seeking consistent returns with less directional risk exposure.

Effective Strategies: Why Traders Choose Spread Trading

When you execute a spread trade, you are essentially creating a balanced operation where one position buys and another sells simultaneously. This means you can profit in both rising and falling markets, as long as the relationship between the two instruments moves in your favor.

The practical benefits are significant. First, the spread is locked in at the time of execution—the difference between entry prices matches exactly what you planned, with no surprises along the way. Second, atomic execution ensures both trades happen together or not at all, eliminating the risk of one leg being uncovered. Third, you save up to 50% on trading fees by using spread orders instead of submitting two separate orders.

Flexibility is also notable. You can combine spot with perpetual contracts, perpetuals with expiry contracts, or even two different expiry dates. Each combination allows you to explore strategies such as funding rate arbitrage, carry trades, or effective hedging against market volatility.

Fundamental Structure: Essential Elements of Spread Trading

To master spread trading, you need to understand its basic components. A combo is simply a pair of positions with different expiry dates. These two positions are called the near leg (the one that expires first) and the far leg (the one that expires later).

Instruments are always ordered from the closest to the furthest in this sequence: Spot > Perpetuals > Short-term expiry > Future expiry. When you initiate a buy operation in a combo, you are buying the far leg and selling the near leg simultaneously. The opposite applies for sell operations—you sell the far leg and buy the near leg.

The spread is simply the numerical difference between the entry prices of the two legs. A spread of -100 that moves to -80 has increased (because -80 > -100), while one that moves to -120 has decreased. This concept is fundamental to understanding your gains and losses.

Operational Aspects: How to Execute Your First Spread Trade

The platform supports limit and market orders, allowing you to choose your strategy. You can also set parameters such as post-only, good-till-canceled (GTC), immediate-or-cancel (IOC), or fill-or-kill (FOK), depending on your execution preferences.

Once both legs are executed, they behave like regular positions. You can manage them individually, adjust leverage (up to 10x for spot and up to 100x for futures), and close them when appropriate. The system operates in both unidirectional position mode and cross margin or portfolio margin mode.

Practical Example: Real Profit Scenarios

Consider a practical example with a Spot-Perpetual combo. Alice sells a combo at an order price of $50. If the spot price is $1,000 and the mark price of the perpetual is $1,100, the entry prices are automatically calculated:

• Perpetual entry price = ($1,100 + $1,000 + $50) ÷ 2 = $1,075
• Spot entry price = ($1,100 + $1,000 - $50) ÷ 2 = $1,025

When Alice sells a combo, she profits if the spread narrows. If the position exits at $94 (perpetual) and $83 (spot), her P&L is:

• Perpetual: -$6 per contract
• Spot: +$6 per contract
• Total: break-even (with minor variations depending on quantity)

If the spread moves further in her favor (to $93 and $83), gains increase. The core concept is—you are not betting on directional moves but on the relative changes between the two instruments.

Cost and Efficiency Optimization

One of the most tangible advantages of spread trading is cost reduction. Trading fees are 50% lower compared to submitting two separate orders on the traditional order book. VIP users benefit from this discount already applied to their existing VIP fee rates, creating double savings.

Additionally, when involving spot, you can choose to activate leverage for margin trading or keep everything in regular spot trading. Each leg can have its own leverage setting, providing maximum control over your risk exposure. Once executed, the combo follows standard margin requirements and liquidation rules, ensuring safe and predictable operation.

Spread trading combines sophistication with security, offering traders a powerful tool to capture market opportunities while maintaining risk under control. Whether through arbitrage, hedging, or exploiting mispriced spreads, this strategy represents a natural evolution for traders looking to go beyond conventional directional trading.