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  • Writer's pictureGlobal MoonXBT

Advantages of Spot Markets

Updated: May 17, 2022

Every type of trading and strategy you'll encounter has its advantages and disadvantages. Understanding these will help you reduce risk and trade more confidently. Spot trading is one of the more simple ones, but it still has strengths and weaknesses.

Advantages of spot markets

1. Prices are transparent and only rely on supply and demand in the market. This aspect contrasts with the futures market which often contains multiple reference prices. For example, the market price in the MoonXBT futures market is derived from other information, including the funding rate, price index, and Moving Average (MA) Basis. In some traditional markets, the market price might also be affected by interest rates.

2. Spot trading is straightforward to take part in due to its simple rules, rewards, and risks. When you invest $500 on the spot market in BTC, you can calculate your risk easily based on your entry and the current price.

3. You can “set and forget”. Unlike derivatives and margin trading, with spot trading, you don't need to worry about being liquidated or getting a margin call. You can enter or exit a trade whenever you want. You also don't need to keep checking your investment, unless you want to make short-term trades.

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