For beginners. Term spot trading looks like something difficult and confusing. But in this article, you will learn about spot trading without any confusion. You will learn about what spot trading is, how to start, pros and cons, and advantages and disadvantages. Let’s begin with.
What is spot trading?
Spot trading in cryptocurrency refers to the buying and selling of cryptocurrencies at the spot at current market price. In spot, you own the coin without any contract and future requirement. Asset and payment exchange at the same time immediately after placing the order.
For example
- A wants to buy 5000 dollars of Bitcoin
- B wants to sell. T
- hey exchange dollars and bitcoin instantly. Without any delay.
- Now A owns the bitcoin, and B sells it immediately.
Spot Trading vs Futures & Margin: What’s the Difference?
Spot trading is different from other trading strategies, like futures and margins.
- In a spot, a buyer is the owner of cryptocurrency. And translation took place at the market price
- Futures are like buy and sell future contracts at a predetermined future price and date.
- Margin is like borrowing money by depositing some amount as security. Help you take a large position with limited capital.
Why is spot trading best for a beginner?
As a beginner without any confusion. You are simply able to buy and sell cryptocurrencies at a market price. As you own the cryptocurrency. And trade execution immediately. Help beginners start trading with a basic knowledge of buying and selling anytime.
How to start spot trading:
There are a few steps you need to take to execute your first trade.
- Select a Platform: Selecting a platform is the first and most important step.
- The crypto world is full of scams, hacks. Do your proper research before selecting a platform. Do not follow blindly any influencer, etc.
- Low service fee. Could not affect you on a small trade, but make a huge difference on a large one.
- Could the Coins you want to trade be supported by the platform?
- Open Account: To open an account with the platform, you need to
- Sign up with your email or phone number.
- Verify your identity
- Connect your wallet or bank account to deposit fiat or crypto
Execute a trade: Once your account is funded, you are ready to start spot trading. Select the section of spot trading, and select the trading usually in ( Sui/Quote), like Btc/Usdt. Select the quantity of cryptocurrency used to execute the trade. Click on long or buy as per the platform display. The trade is executed immediately, and now you own the specific cryptocurrency. You can sell at any time immediately after making a profit.
Pros and Cons of Spot Trading:
Like every other thing in the world, spot trading also has some Pros and Cons.
Pros:
- Own digital assets you acquire
- Used to borrow crypto assets
- Earn Yield on the decentralized lending pool
- Straightforward and Simple
Cons:
- Risky due to the volatile nature of cryptocurrency
- Need to be up to date for profitable trades
- Due to ownership, there are security concerns, fraud, and hacks
Conclusion
Spot trading is best for beginners to who want to start crypto trading. Due to simple nature. Easy to understand. But due fast changing events in crypto. you need to up to date of market trends. Otherwise you loss trades. Before execute trade. Make sure to do your own research.