What Is Spot Trading in Crypto?
Since 2009, cryptocurrency has become one of the key assets in the financial market, slowly paving its way to mass adoption. Cryptocurrency trading is one of the most popular strategies to earn more cryptocurrency in the market. The trading process involves buying and selling cryptocurrencies to generate profits. Spot crypto trading is surely a common trading type accessible to every crypto trader.
What makes spot trading different is that it includes trading cryptocurrency against a different type of asset, like fiat currencies or other crypto, for example. This is the easiest way for beginner crypto traders to get a hang of the cryptocurrency market and expand their investment portfolio. Investors who wish to trade their assets should have a certain trading plan, or strategy. In this article, we will cover the basic spot trading concepts, as well as pros and cons of spot trading to help you build your own spot trading strategy in the future.
What is Spot Market Trading?
The base market, or a spot market, is the place where crypto like Bitcoin or Ethereum is constantly being exchanged or traded immediately. The reason why it is called the “spot” market is that all transactions are carried out on the spot.
Another fast way to get started with crypto is to start accepting it. If you happen to be a small business owner who wishes to make their entry to the crypto market, you can accept cryptocurrency as payment for your services. The Plisio cryptocurrency payment gateway is a good place to start. Start accepting cryptocurrency in just a few steps and accumulate crypto that you can freely spot trade later.
Spot markets comprise of sellers, buyers (traders) and order books. It works like that: sellers create an order with a certain ask or sell price, while buyers place orders for any cryptocurrency coin or token with a certain bid price. The bid price is usually higher than the ask price, as the bid price is usually the top price the buyer is willing to pay, and the ask price is the lowest price the seller is ready to accept. The difference between the ask and bid price is called the spread.
The order book. In turn, marks bid and ask prices. Let’s imagine John is looking to create an ETH purchase order. Once the order is made, this transaction will monetarily go to the bid section of the order book. When there is a seller who wishes to sell ETH at the same terms John specified, the order is considered filled.
Spot crypto trading is similar to trading in the stock market, as crypto assets are being traded immoderately. Spot market involves a wide range of different assets like cryptocurrency, shares, bonds, etc. It is the simplest way of trading crypto as it doesn’t require any extra knowledge or extra commitment. With spot trading, crypto holders can hedge against the future crypto price volatility as traders can purchase or sell it any moment they sense the future price movements.
Spot Trading Pros
The primal advantage of spot trading is that it is the strategy, which is quite easy to understand. It is one of the most efficient ways to get started on the crypto market fast and to learn what’s what.
There are no legal bindings to the trading process and no deal terms. Spot trading opens an opportunity to profit on the asset price change rather than just on the price movement direction. Spot trading is good for both short-term and long-term trading approaches.
Spot Trading Cons
One of the main spot trading disadvantages is the market volatility and sudden price movements. However, it concerns every sphere of the cryptocurrency market and there is not much traders can do about it, so the only way to fight it is to adapt and use it to your own advantage.
As a rule, spot trading includes such service fees as exchange, deposit and withdrawal fees, so traders must come prepared.
Every exchange has a limited range of cryptocurrencies available for spot trading. You might not find a buyer or seller for your specific cryptocurrency order.
Spot trading is a perfect crypto trading method for crypto beginners as it asks for no commitment nor excessive knowledge, trading on a spot enables traders to use their assets to seize additional opportunities like staking or online payments. In addition, the strategy is usually not as risky as margin trading, as you’re not bound to any legal procedures.
In case you don’t have any crypto to spot trade, you can start with accepting cryptocurrency to pay for your goods and services. The Plisio cryptocurrency payment gateway is a great starting point for crypto beginners who wish to grow their business and expand their market reach. Start accepting cryptocurrency with the lowest fees on the market and get started with spot trading right away!
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