Since their founding Cryptocurrency This is evidenced by the rapid growth of crypto-related assets and their wide adoption in the market. Portfolio and trading method Numerous asset management companies.the process of Buy and sell cryptocurrencies for profit Known as cryptocurrency trading.
Cryptocurrency trading can be defined in terms of its purpose, mode of operation, and trading approach. For example, the assets to be exchanged, or cryptocurrencies, are the goal of cryptocurrency trading. The way cryptocurrencies are traded depends on the type of transaction, such as: futures, options or perpetual contracts It takes place in the market.
investor’s cryptocurrency trading strategy specifies a set of predetermined guidelines for buying and selling in cryptocurrency exchangeOne of the basic trading methods for investing in cryptocurrencies is spot trading, where traders buy assets in hopes of selling them at a higher price in the future.
Related: Investing in Cryptocurrencies: The Ultimate Indicator of Crypto Trading
In this article, we will explain what spot trading is, crypto spot trading signals, how to trade crypto spot, risks of crypto spot trading.
What is the virtual currency spot market?
The base market where crypto assets are instantly exchanged and settled is known as the spot market, and trading in this market involves purchasing digital currencies such as Bitcoin (Bitcoin) or other altcoin Hold them until the value goes up.
Related: Bitcoin Spot ETFs and Futures ETFs: Explaining the Key Differences
It is called spot trading because the trade is settled “on the spot”. Additionally, the spot market includes sellers, buyers, and order books. Sellers place orders at a specific ask or offer price, and buyers place orders for any cryptocurrency token at a specific bid or buy price. The bid price is the highest price a buyer is willing to pay and the ask price is the lowest price a seller is willing to accept as payment.
The order book has two sides. The ask side is for buyers who want to buy, and the bid side is for sellers who want to sell.Order book record Bid and ask in the order bookFor example, in a physical trade, if Bob places an order to buy BTC, this trade will immediately move to the Bid side of the order book. This order will be automatically filled if the crypto spot trading platform seller sells with the same specifications.
When Bob enters an order to sell BTC in the cryptocurrency spot trading example above, the trade continues on the ask side of the order book. Green orders in the order book represent buyers of a particular token, and red orders represent sellers of that token.
What is virtual currency spot trading?
The goal of spot trading is to buy low and sell high in order to make a profit, but given the volatility of the crypto markets, I’m not sure this tactic will always benefit the trader.
Spot price, trade date, and settlement date are three key concepts in spot trading. The current price of an asset is called the spot price, at which traders can immediately sell the asset under consideration. Additionally, you can buy and sell cryptocurrencies with other users on various exchange platforms.
The spot price changes as new orders are placed and old orders are filled. A trading date represents the date on which a trade was opened and recorded and the market actually traded. The assets involved in the transaction are actually transferred on the settlement date, also called the spot date.
Depending on the type of market traded, it may take a day or several days from the trading date to the settlement date. For cryptocurrencies, it usually happens on the same day, although it can vary between exchanges and trading platforms.
How does crypto spot trading work?
A market order on an exchange allows traders to buy or sell an asset at the best available spot price. The spot market is usually BTC, Ether (ethereum), BNB (BNB) and even fiat currency.There are many ways to buy and sell coins on many cryptocurrency exchanges, and spot traders have different fundamentals and technical analysis approach to make trading decisions;
Trades can be found on centralized exchanges. Decentralized Exchange (DEX) Or the over-the-counter (OTC) market. To use a centralized exchange, you must first deposit the cryptocurrencies you want to trade into your account. Centralized exchanges often charge fees for listing, trading and other trading activities.
Blockchain technology is used to match buy and sell orders on the DEX, and crypto spot trading strategies can be done directly from the trader’s wallet. smart contractTrading can be done directly on the OTC platform, through a broker executing trades on behalf of the client, or over the phone in the internet age.
Pros and Cons of Crypto Spot Trading
Buying an asset at spot price makes it a true asset owner and allows traders to sell the asset or redeploy it to offline storage as they please.In addition, spot trading allows traders to use their cryptocurrency assets for additional functions such as online payments and online payments. staking.
In addition, spot trading is margin tradingIn other words, you can invest in crypto assets without worrying about losses due to price fluctuations or margin processing. As a result, there are no margin calls, so traders do not risk contributing more of their money or losing more money than they already have in their accounts.
However, the biggest drawback of spot trading is that it does not offer the potential revenue amplification benefits that leverage in margin trading offers. Furthermore, due to the lack of leverage, the potential profit in the spot market is lower than in margin trading.
How to find cryptocurrency trading on Binance?
After creating a Binance account, spot trading on the platform is a simple procedure. Crypto spot trading commission on Binance for BTC and BUSD spot trading pairs is 0%. Here are the steps to find a trade on Binance:
- You can access the Spot trading platform by selecting “Trade” → “Spot” on the Binance site.
- You will see the trading view interface with some exciting elements.
- Cryptocurrency trading pairs and other market data such as daily price movement and volume are displayed at the top.
- All open buy and sell orders for an asset are listed in the order book and sorted by price. You can customize your historical price data in this chart view. TradingView, already included in Windows, provides access to comprehensive technical analysis tools.
- You can search for different trading pairs in the top right corner. By clicking on the little star you can save your favorite crypto pairs and select the ones you want to trade on the spot market.
- A buy or sell order is created in this section. You can choose from a variety of order types. Limit orders, market orders, stop limit orders To conduct physical transactions.
Spot and futures trading
As mentioned above, spot trades are executed instantly and delivered instantly. However, contracts in the futures market are paid after the buyer and seller agree to exchange a specified quantity of items at that price. Buyers and sellers often reach financial settlement rather than handing over assets after the contract expires on the settlement date.
The table below shows the difference between these two types of transactions.
spot trading and margin trading
Day traders initiate short-term trades with low spreads and no expiry on physical trades for fast delivery of the underlying. The difference between the offer (buy) price and the bid (sell) price of an asset is known as the trade spread.
Margin trading, on the other hand, allows traders to take larger positions as they may borrow money from a third party at interest to make a large profit. However, it also magnifies potential losses, so it is essential to be careful not to lose all of your initial investment.
The differences between spot trading and margin trading are summarized in the table below.
Is virtual currency spot trading profitable?
Traders usually dollar cost averaging and wait for the next bull market Profit from spot trading. However, rewards require patience and nothing is instant in a volatile cryptocurrency market. Furthermore, before trading crypto assets or utilizing spot trading strategies, it is wise to conduct due diligence and manage risks to avoid losses. But is physical trading of cryptocurrencies good for beginners?
Each investor has a different risk-return profile, and given the highly volatile cryptocurrency market, you should weigh the pros and cons of your chosen trading strategy (in this case, spot trading). , means that traders should exercise caution when deciding which asset to trade and should be familiar with the market before starting.
