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  • Writer's pictureGlobal MoonXBT

Spot Tutorial 1: Understanding Spot Trading


1. What is spot trading?

Spot trading is when you buy or sell cryptocurrencies and receive the tokens immediately.

Spot trading logic is simple. Buy at a low price and sell at a high price.

Spot trading takes place in the spot market and is concluded through a trading platform or an over-the-counter market (direct trading between two parties). Trading in the spot market can only be done with the assets held, with no leverage or margin.


2. Spot trading order types

Market orders: A market order is an order to buy or sell immediately at the current best price and requires liquidity to be filled. By using market orders in the trading platform, you can buy and sell your asset holdings at the desired spot price and at the fastest possible speed. However, there is no guarantee that the market price will remain constant during the execution of the order.


Limit orders: Limit orders are orders with a specific buy or sell price. To place a limit order, you need to set a maximum or minimum price at which you are willing to buy or sell an asset. Your order will then be recorded in the order book and will only be executed when the market price reaches the limit price (or higher).


3. Advantages of spot trading

1. Prices are transparent and depend only on market supply and demand.

In contrast, contract markets often contain multiple reference prices. For example, the marker price in the Coin Security contract market is derived from other information such as funding rates, price indices, and moving average (MA) bases. In some traditional markets, marker prices are also influenced by interest rates.


2. The rules, reward rewards, and risk calculations of spot trading are simple to understand and the barriers to participation are low.

Investing $500 worth of BNB in the spot market is easy to calculate the risk based on the bid price and the current price.


3.No need to check frequently after placing an order.

Unlike derivatives and margin trading, spot trading eliminates the need to worry about forced closings or margin calls. Traders can enter or exit a trade at any time. Except for short-term trades, traders do not need to check their investments frequently.

Overall, spot trading is better for beginners and long-term holders

It is easy. Spot trading is the simplest form of trading to grasp and understand. It takes more effort to master contracts and options.

There is no liquidation. Since you physically own the tokens, you don't need to worry about being liquidated. Even if your cryptocurrency keeps falling, you can wait for a favorable price wave before selling.

It costs less energy. As there is no liquidation, you don't need to keep your eyes on the price chart. You can enjoy your life! Hold On for Dear Life) and relax.

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