What is a spot order? What are the advantages and disadvantages of trading with Spot orders? That is a common question of many traders when they first enter the cryptocurrency market. In the article below, readers will learn in detail about this form of trading, as well as how to distinguish between Spot trading and Futures trading Crypto. Let’s refer to Crypto Trading now!
Find out What is a spot order.
Spot trading, or Spot trading, is a traditional form of cryptocurrency trading. Crypto buying and selling takes place immediately, at the current market price. Simply put, in Spot trading, cryptocurrencies are transferred directly between market participants, that is, buyers and sellers.
What are the characteristics of Spot order trading?
Spot trading has the following outstanding features:
- Transaction Time: Spot order transactions are instant. The settlement process is done in a short time. Therefore, traders do not need to wait.
- Ownership: Unlike Futures trading Crypto, investors can spend money to buy a digital asset and establish ownership of the asset in Spot trading.
- Once the buyer pays the seller, he will receive the property immediately.
- Simple trading rules: In Spot trading, you only need to care about the current value of the asset you want to trade.
- Spot trading allows buyers and sellers to exchange assets and make payments directly without going through an intermediary.
- Spot trading is highly flexible, as traders can buy and sell assets at any time during market opening hours.
Advantages of What is a spot order?
Spot trading is an extremely popular form of trading in the Crypto community because it has the following advantages:
- Highly flexible in transaction timing, providing convenience for traders.
- Saves trading time for investors, because Spot trading takes place very quickly.
- Newcomers to the cryptocurrency market who do not have much experience can still learn and apply Spot trading.
- The risk of price volatility is relatively low.
Limitations of Spot orders in Crypto trading
Besides the outstanding advantages, Spot order trading also has certain limitations. When trading Spot in Crypto trading, you can only buy and sell the amount of assets corresponding to the amount of money you have. You cannot use leverage, unlike the Initial Margin. So What is initial margin?
This is a form of initial margin. In which, the trader must deposit a minimum amount of money on the total value of the order. With Initial Margin, you can combine leverage to increase profits.
Another limitation that you need to keep in mind when applying Spot trading is the direct risk from the market. Because there is no support from leverage or contract conditions, this is a disadvantage for investors.
See more: Instructions for using margin effectively for trader
Compare Spot trading and Futures trading Crypto
From the above information, you have understood What is a spot order. Besides Spot trading, Futures trading Crypto is also a way of investing in Crypto that many traders apply. Let’s compare these two forms of trading.
What is the similarity between Futures trading and What is a spot order?
There are many similarities between Spot and Futures trading such as:
- Both aim to buy/sell Crypto to profit from price differences.
- The underlying market of these two forms of trading is the digital asset market.
- Both have potential risks from market fluctuations.
- Traders participate in trading through cryptocurrency exchanges.
Difference between Spot trading and Futures trading Crypto
To know the difference between Futures trading and What is a spot order, you can refer to the table below.
| Comparison factor | Futures trading | Spot trading |
| Transaction time | Happens immediately | Takes place in the future |
| Transaction price | Based on current market prices | Price is negotiable |
| Time of payment | Payment after transaction | Payment when the contract expires |
| Risk | Direct risk at the time of transaction | Risk from future price fluctuations |
| How to prevent risks | Quantitative management, pre-transaction transfers,… | Sign futures contracts, contracts for price difference,… |
| Limit | No limit on time or number of transactions | There are certain limits |
| Lever | No leverage | Has leverage |
| Credential | High | Short |
| Transaction Fees | Fees by the transaction amount | Fee regulation based on contracts |
See more: Open an Bybit account – explore the crypto exchange
How to invest in Crypto effectively with What is a spot order?
Whether you apply Spot trading or any form of Crypto trading, you need to base it on three factors: Investment purpose, trading experience, and risk level.
Based on the purpose of investing in cryptocurrency
Spot trading is suitable for traders who want to own assets in the long term and do not care about leverage. At this time, investors can make many transactions in turn to earn profits. For coins/tokens with stable growth rates, traders can avoid the risk of market price fluctuations in a short period.
Based on experience in Crypto trading to place Spot orders
If you are a person with deep knowledge in the Crypto field, and not afraid to challenge new things, traders can apply many different forms of trading. However, if you are a newbie, and not confident in your ability to predict market trends, consider choosing Spot trading.
As mentioned above, Spot trading does not use leverage. This helps limit risks but also prevents investors from earning “huge” profits.
Based on the level of risk in Crypto investment
It is undeniable that Spot trading is relatively low risk for traders. Even if you do not have much capital, you can still apply the method of buying low – selling high to profit from the price difference in a fixed period. After gaining a lot of experience, investors can participate in Futures trading, combined with leverage x10, even x100 times the existing assets.
Based on the level of profit and risk for Crypto investors, managers/businesses operating in the cryptocurrency market will adjust their business strategies accordingly, thereby affecting the Gross Margin ratio. So what is gross margin ratio?
This is the gross profit margin ratio, which measures the profitability of a business. By determining the Gross Margin, you can know how much gross profit the business will receive for each dollar of revenue generated.
Conclude
Through this article, you have understood What is a spot order and how to apply Spot trading. Depending on the purpose, experience, and ability to predict trends, traders choose the appropriate form of trading. Don’t forget to update the latest articles at Crypto Trading so as not to miss out on useful knowledge about the Crypto field!
FAQs
Here are some frequently asked questions about Spot trading.
How much capital is needed to invest in cryptocurrency?
For those who are new to trading, the starting capital can be from a few hundred thousand dong. If you are a professional investor, you can spend several million to tens of millions of dong.
What is leverage in Crypto trading?
This is a tool that allows traders to borrow capital to seize trading opportunities. The purpose of using leverage is to increase the profit margin while helping traders repay the loan.
What is Liquidation in Crypto Trading?
Liquidation is the act of selling losing positions so that a trader does not go into negative equity. Liquidation occurs when a trader cannot meet the maintenance margin requirement.
