Tuesday, June 28, 2022

What Is Spot Trading In Crypto

What Is A Spot Trade

What is Spot Trading? How can I make money from the crypto spot market?

A spot trade, also known as a spot transaction, refers to the purchase or sale of a foreign currency, financial instrument, or commodity for instant delivery on a specified spot date. Most spot contracts include the physical delivery of the currency, commodity, or instrument the difference in the price of a future or forward contract versus a spot contract takes into account the time value of the payment, based on interest rates and the time to maturity. In a foreign exchange spot trade, the exchange rate on which the transaction is based is referred to as the spot exchange rate.

A spot trade can be contrasted with a forward or futures trade.

Support And Resistance Levels

Support and resistance levels are psychological on-chart areas, where the assets price used to show a turning point. If a support or resistance level gets broken, the price is very likely to be setting up the base of a new trend.

A support level accumulates price bottoms in the same area, while the resistance level refers to price tops. If the price drops and breaks the support level, we might see the beginning of a new bearish trend. Contrary to this, if the price increases and breaks a resistance level, this might be the beginning of a new bullish trend.

Support and resistance levels work exceptionally well for determining entry and exit points on the chart.

Whats The Difference Between Spot Markets And Futures Markets

Weve already mentioned that spot markets make instant trades with almost immediate delivery. On the other hand, the futures market has contracts paid for at a future date. A buyer and seller agree to trade a certain amount of goods for a specific price in the future. When the contract matures on the settlement date, the buyer and seller typically come to a cash settlement rather than deliver the asset.

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What Is Crypto Spot Trading

Cryptocurrency spot trading is the process of buying and selling digital assets such as Bitcoin and Ethereum for immediate delivery. In other words, cryptocurrencies are directly transferred between market participants . In a spot market, you have direct ownership of cryptocurrencies and are entitled to economic benefits such as staking participation.

Exchanges such as Binance facilitate spot trading activities, enabling users to conduct fiat-to-crypto and crypto-to-crypto transactions. Spot exchanges act as intermediaries for buyers and sellers to bid and ask for a crypto asset. When a bid or offer is matched, the exchange will facilitate the trade. Spot exchanges operate 24 hours a day / 7 days a week, which means you can buy and sell crypto any time and any day.

Lets take a look at an example.

Suppose you want to buy Bitcoin with fiat in the spot market. In this scenario, you could go to a crypto exchange spot market to look for a BTC/USD trading pair and place a buy order at your desired price and quantity for the execution. After completing your transaction, your Bitcoins will be stored in a spot wallet where you could hold them until their value increases. Alternatively, you could convert it to buy other altcoins that you believe may rise in value.

When holding cryptocurrencies in the spot market, you could potentially benefit from capital appreciation as the value of your cryptocurrency increases over time.

How To Choose An Exchange

LEARN CRYPTO TRADING: Spot Trading

There are several key factors that should be taken into account when looking for a crypto margin trading exchange.

Available leverage. Check whether the leverage the exchange offers is right for you. Keep in mind that leverage might be different for each traded cryptocurrency.

Fees. Learn more about the platforms trading fees. How much will it cost to withdraw funds? Are there any additional or hidden fees?

Liquidity. You can check the liquidity of various crypto margin trading exchanges on websites like CoinMarketCap. The higher the liquidity, the more efficient and fluid your trades on that platform will be.

Security and reputation. The security of your funds must be the priority of every exchange. Crypto margin trading is already extremely risky, so your trading platform of choice has to have all the basics covered high-level security, a robust connection, a wide range of trading instruments and tools, and so on.

There are quite a few reliable crypto exchanges out there that let their users trade on margin. Exchanges like Binance or BitMex are perfect for expert margin traders, while our full-featured trading platform Changelly PRO is better suited for beginners. That said, however, all of these crypto margin trading platforms are great for all kinds of investors, and we recommend trying them all out first to see which one suits you best.

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What Is Spot Trading

Spot trading is the most common form of trading, especially in crypto assets, and is the most basic form of investment. Spot trading is simply the direct purchase or sale of an asset such as a commodity, stock, bond, or even currency. Crypto spot trading is the same, except it is the direct purchase or sale of a cryptocurrency such as Bitcoin, Ethereum, DOGE, or others.

When spot trading, cryptocurrencies can be exchanged instantly between market participants who are buying and selling them. Just like with any purchase of a physical item, buyers then directly own the crypto they buy from a spot trade. Exchanges that support spot training, like Binance, comprise buyers and sellers who agree on bid-offer prices to facilitate trades.

These trades can happen any time of the day, anywhere in the world, since crypto exchanges operate online. New entrants can buy crypto with fiat currencies on exchanges and can even determine what price they want to enter a position.

What Do The Coincodecap Signals Offer

We offer technical analysis that is based on trading opportunities. Furthermore, We aim to increase your knowledge in the cryptocurrency environment by publishing blogs on Coinmonks and CoinCodeCap. If you want to get started with CoinCodeCap and also to request news updates in the crypto market, you can join our telegram channel and enjoy all the perks of a crypto trading signal.

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How To Trade On A Crypto Spot Market

For example, if you are a buyer who is happy with the best sell price available, the values on the order book tell you that you can purchase up to 0.519999 BTC or $6,890.39 worth at the price of $13250.78. Any more BTC than this and you will be forced to purchase the remainder at the next best price of $13250.81. As you successfully purchase your desired amount of BTC, the order book will automatically update and remove these quantities and prices accordingly. In other words, you will be taking liquidity away from the order book. This is also known as a , meaning an order that automatically executes against the best possible price. This is a fast and convenient way to guarantee the execution of a trade.

Once you and a seller match, your account will instantly be deducted the correct amount of USDT and be credited with the corresponding amount of BTC. Please note that these trading activities can happen for almost any pair of popular crypto assets. Phemex currently offers 14 cryptos against USDT. This is the most basic and straightforward way to trade cryptocurrencies. However, Phemex also offers a derivatives market. This requires much more advanced knowledge that will be covered in our next article: How to trade Crypto Derivatives?

Still confused about Spot Trading and Futures Trading? ReadSpot Market vs. Derivatives Marketon Phemex Blog

Chapter 2are You A Trader Or Investor

LEARN CRYPTO TRADING: Spot Trading

One of the most frequently asked questions, Is trading better than investing?While both methods help you profit in the financial or crypto market, but there is indeed a difference.

So, lets see how they are different from one another.

Find out if youre in for short-term profits or instead for long-term gains.

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Forward And Futures Contract

Another popular cryptocurrency trading method involves futures trading and forward contracts.

Futures contracts are traded on exchanges, where the price is settled daily at a future rate. Crypto futures are more suitable for margin trading, where leverage takes place to maximize profit.

Forward contracts lock in the two parties into a formal agreement now to execute a trade in the future at a preliminary agreed rate. Forwards are a great solution to hedge exchange rate risk.

How To Trade The Spot Market With Bybit

If youre interested in trading the spot market with Bybit, the following is a step-by-step guide to help you get through the process.

  • Create an account on Bybit. Register on Bybit web or Bybit App and do the KYC verifications to unlock a higher trading volume, higher deposit and withdrawal limits.
  • Buy BTC or USDT with your preferred fiat currency on Bybit Fiat Gateway to access the spot trading pairs.
  • Once your account is funded, hover over the spot market hub to trade spot pairs by selecting your limit, market, and conditional orders.
  • The spot market chart is prepared with customizable historical data of an asset with standard and advanced displays. There are different technical indicators incorporated into the chart for you to analyze the asset.
  • The order book provides the utmost transparency to be alerted with the buy and sell orders. So that you can adjust your bid/ask price.
  • Keep in mind, however, that only market and limit orders and then only conditional market orders will be filled immediately at the best available spot price. Once youve inputted the necessary buy or sell information, all you need to do is press the Buy BTC or your preferred digital assets button to execute the trade.

    There are 15 spot trading pairs available on Bybit, including BTC/USDT, BIT/USDT, EOS/USDT, XRP/USDT, ETH/USDT, LINK/USDT, DOGE/USDT and more. Every transaction performed in Bybits spot market will be charged with 0.1% maker and taker fees.

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    What Is Cryptocurrency Trading

    On a top-level, trading cryptocurrency is very similar to trading forex.

    Both markets run around the clock, have elaborate derivatives built on top of them , and enable traders to speculate on different currency pairs .

    That said, while forex purely consists of trading fiat currency pairs between each other, in cryptocurrency markets, there are two pair categories:

    • Fiat to crypto trading: Where cryptocurrencies are traded against traditional fiat currencies. e.g. BTC/USD
    • Crypto to crypto trading: Where cryptocurrencies are traded against other cryptocurrencies and traditional fiat currencies are NOT involved. e.g. ETH/BTC

    Generally, if you are just getting started and are looking to make your first cryptocurrency trade, you should stick to fiat to crypto trading. Fiat to crypto trading is mostly done on regulated coin exchanges and is simpler to grasp at first.

    Finally, its important to note that there are many different ways to trade the above-mentioned cryptocurrency pairs. At the time of writing, there are cryptocurrencies spot markets, futures markets, and options markets.

    Next, well outline why trading cryptocurrencies is attractive, followed by the different ways to trade a market like Bitcoin.

    What Is A Cryptocurrency Exchange

    Crypto Trade Spot

    A cryptocurrency exchange platform is a business that allows you to buy, sell, and trade digital currencies. For example, Phemex has a Buy Crypto page that allows you to select the cryptocurrency you wish to buy, the amount, and the method of payment. Options include credit cards, bank transfers, ApplePay, and more. The most important part of this process is to correctly enter your wallet address as the destination for your newly purchased crypto. Recall that although wallets come in a variety of forms, the most convenient option for trading is a built-in wallet. Simply find your target cryptocurrencys deposit address on the Assets page of your account and copy and paste it into the relevant field.

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    How Does Spot Trading Work On Phemex

    On Phemex, we have 34 spot trading pairs that traders can choose from. We also allow users to buy crypto with a credit card directly. Spot traders can decide to trade, which means they can buy or sell any of these 34 cryptocurrencies against USDT. The best benefit of trading on Phemex is that Premium members are not charged any trading fees. Phemex is the first major spot exchange to offer this model, as many other global crypto exchanges and all of our competitors generally charge 0.1% for every trade. Premium Membership prices range from $9.99/month to 69.99/year.

    To learn the technology behind spot and futures, head over to our AcademyHow to trade crypto?

    Spot Trading Vs Futures Trading: The Main Differences

    Crypto spot trading and futures trading have some clear differences to be aware of before you start trading. As mentioned previously, the prices of an asset is usually different. When you engage in spot trading, the transaction occurs immediately. Futures trading differs because both parties must agree on a price, which will be locked in a contract until the transaction is completed at a later date. When the contract matures on the pre-determined date, the buyer and seller come to a settlement.

    Fluctuations in spot prices occur based on the assets volatility and the market sentiment in real-time. Because both parties must agree on a price when trading futures contracts, the speculated pricing is based on several different factors and isnt always determined by the assets volatility. The date of delivery also differs substantially between the two options. While futures transactions can be completed months after the purchase, spot trading generally occurs immediately. Some additional differences include:

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    Liquidity And Trading Volume

    Liquidity is crucial for all financial assets and crypto, nonetheless. The more liquidity of an asset, the easier it trades on that asset as the demand and supply are present. Naturally, it means you can easily open a position and exit the market, too .

    Lesser-known cryptocurrencies have little to no liquidity. Entering a large fund into a virtual currency with low liquidity is risky. It could only mean that the coin could only be another obsolete project deemed detrimental to your funds.

    Instead, it would be a wiser choice to trade on assets with larger trading volumes. Usually, the larger the trading volume represents better prospects.

    What Is Cryptocurrency

    Setting up Crypto Spot Trading Charts on the Tradingview Platform

    Simply put, cryptocurrencies are digital forms of currencies. They can be used to pay for goods and services just like conventional currencies. Like how the traditional forms of currencies can be traded against one another on the forex, cryptocurrencies can also be traded against specific pairs on specialized platforms called cryptocurrency exchanges.

    The difference is that unlike conventional currencies such as the U.S. dollar, cryptocurrencies are often not controlled by a single entity. They are also secured using complex cryptography coupled with a new form of online public ledger called a blockchain. It is distributed to anyone and everyone interested in having a copy. Watch the short video below to understand how blockchain works before we proceed further.

    Watch the video: Simply explained: How does blockchain work?

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    What Is Blockchain

    A blockchain is a shared digital register of recorded data. For cryptocurrencies, this is the transaction history for every unit of the cryptocurrency, which shows how ownership has changed over time. Blockchain works by recording transactions in blocks, with new blocks added at the front of the chain.

    Blockchain technology has unique security features that normal computer files do not have.

    Network consensus

    A blockchain file is always stored on multiple computers across a network rather than in a single location and is usually readable by everyone within the network. This makes it both transparent and very difficult to alter, with no one weak point vulnerable to hacks, or human or software error.

    Cryptography

    Blocks are linked together by cryptography complex mathematics and computer science. Any attempt to alter data disrupts the cryptographic links between blocks, and can quickly be identified as fraudulent by computers in the network.

    What Is A Non

    Non-spot transactions refer to futures. The price according to the spot price may be agreed upon when the contract is initiated. But the delivery of the assets, as well as the transfer of funds, happens at some agreed upon date in the future.

    Derivatives markets, such as BitMEX, are not spot markets. They deal with different types of contracts, such as perpetual swaps. Again, payment and delivery of the assets take place at a later date.

    To give some context, a good example of a non-spot market, or a futures market, would be the Chicago Mercantile Exchange . This exchange is for buying and selling futures and options.

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    Important: Before You Start Trading Cryptocurrencies

    To make your crypto experience even more convenient, we have prepared an extremely detailed guide where we take a deep dive into the industrys best cryptocurrency news aggregators, data websites, tools, and portfolio trackers that every crypto trader should be aware of. Therefore, we highly recommend you read our Master Bitcoin in 2021 guide and know more about what unique tools the industry offers. This guide was prepared by a professional crypto data analyst and investor.

    Heres the short breakdown of the information youll find in our aforementioned guide:

    Difference Between The Crypto Spot Trading And The Derivatives Trading

    spot
  • Leverageâ Leverage helps the traders to move towards future contracts because of the investment. They are highly capital efficient and without leverage, it is not possible for the trader to invest. For example, to buy 1 Bitcoin in the spot trading market, you would need some considerable amount of dollars, say, $50,000 based on the existing market rate. But see, with a futures contract, you can open a bitcoin futures position at a fraction of the cost. This can be possible only if you have leverage. The higher the amount of leverage, the lesser you will have to spend on that particular trading position.
  • Liquidityâ The future markets offer profound liquidity with trillions in month-to-month volume. For instance, the Bitcoin futures market sees a normal month-to-month turnover of $2 trillion, far more prominent than the Bitcoin detect marketsâ exchanging volumes. Its hearty liquidity upholds the interaction of value disclosure and permits brokers to execute in the market quickly and effectively. A fluid market is for the most part connected with less danger in light of the fact that there is consistently somebody able to take the opposite side of a given position, and dealers will cause less slippage.
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