In this crypto trading instruments article, we provide quick glance on instruments like
- Crypto Spot Trading
- Crypto Margin Trading
- Crypto Trading Futures
- Crypto Trading CFD
- Crypto Trading Perpetual Swaps
The main aim is to provide you with basic information about each crypto trading instrument. After this, you will have the basic knowledge about them and be able to determine what trading instrument is best for your trading.
In addition, we go through the top Bitcoin trading platforms and suggest what site is suitable for trading what instrument.
What is a Financial Instrument?
According to Investopedia, “Financial instruments are assets that can be traded”
The asset can be cash, a contractual right to deliver or receive cash or another type of financial instrument, or evidence of one’s ownership of an entity.
Further, a financial instrument is a medium which can be traded, commonly categorized into two categories: cash instruments and derivative instrument.
In this guide the asset will be cryptocurrencies.
- Cash instruments are spot trading and margin trading for cryptocurrencies.
- Derivative instruments are CFDs, Futures and Perpetual Swaps.
What is Crypto Spot Trading?
Crypto spot trading is the most basic trading you can make. Basically, crypto spot trading means that you buy a cryptocurrency for the market price and after this you own that specific cryptocurrency.
For example, if you buy any amount of Bitcoin on Binance exchange you have made a spot trade. It doesnt matter if you buy the Bitcoin for USD or ETH or any other currency. Also, it doesnt matter how much you.
If you are interested in spot trading and not derivative trading, or margin trading, I would look for an crypto exchange and not a crypto trading platform.
Crypto Margin Trading
The availability of the instrument like margin trading really sets platform apart from its other rivals in the industry. The ability to borrow funds form the exchange and make a profit out of it does have its own advantages. Suffice to say, starters should experiment first with demos, as the instrument itself is complex. Platforms that allow you to engage in margin trading are numerous, with most popular being Bitfinex and Kraken. We also have a special blog post on this topic, a comparison of crypto margin trading platforms.
This platform is considered to be the largest one in the world in terms of USD to BTC daily trade. Bitfinex offers numerous functions at your disposal when engaging in margin trading. The marketplace offers an adequate number of cryptos (over 30) of them and trading pairs (over 70 of them). To know more, simply go to Bitfinex review to read our in-depth analysis of the trading platform.
This European trading platform offers both simple exchange and margin trading marketplaces. You have several levels of trading forms, them being Simple, Intermediate, and Advanced. The limit functions allow you to set price restrictions, so your margin trading profit/loss would be completely under your control. To get more details regarding Kraken, make sure to read our Kraken review and analysis of the platform.
Crypto Trading Futures
A crypto trading future contracting refers to a process, in which trader sets a predetermined price to be sold or bought sometime in the future. The contract is used when an investor is sure of his or her analysis of the future trends in the market. It is one of the more complex instruments that are rare to find in the crypto world. This is mainly due to high fluctuations in the value of coins.
BitMEX is one of the leaders in the industry when it comes to trading instruments, and futures are no different. You have the ability to engage in contracts with the help of leveraging 100x for bitcoin. Other cryptos that are also available for futures are Cardano, Bitcoin Cash, Ethereum, Litecoin, and Ripple. Read more in our BitMex review.
Crypto Trading CFD
CFDs (contracts for difference) are popular within the trading market in cryptocurrency world. The ability to make a contract with the brokerage company and use their volumes is something starts to appreciate. It helps those that do not have large investments, to begin with, and allows them to make a profit from fluctuations. Platforms that allow clients to make CFDs are Markets.com and Plus500.
The platform offers CFDs for cryptos like bitcoin, Ethereum, Litecoin, and Ripple. The Markets.com, apart from coins, also has over 2.000 assets available for trade, while its services are available globally. You have the option to start out as a demo account, switching to real one once you get a hang of it.
Plus500 is yet another trading platform that offers CFD contracts. You use the coins to make your strategies, without really owning any of it apart from profit or loss. The available cryptocurrencies at this market are bitcoin, Ethereum, Bitcoin Cash, Bitcoin Gold, Litecoin, and Ripple.
Crypto Trading Swaps
If we are talking about the most common trading instrument, it would fair to mention swaps as one of them. The function is used when a trader wishes to swap around his coin with altcoins owned by the platform. Many exchanges offer crypto-to-crypto service, often fixing popular cryptos like BTC, ETH, and LTC for the contract.
Binance started out form an ICO project, which resulted in a new coin (BNB) and platform as well. It is strictly a crypto-to-crypto trading marketplace with over 200 trading pairs and 100 cryptocurrencies available. The main coins for swap contracting are bitcoin, Ethereum, BNB, and USDT. You can read our review about it in our Binance review.
The US-based platform offers very similar services that Binance does. It is also a crypto-to-crypto trading platform, offering numerous coins for trading. Swaps are possible through trading pairs, which account for over 100 of them. Main coins for trading pairing are BTC, ETH, XMR, and USDT, as seen in the snapshot below.
Crypto Trading Instruments - Summary
In this review about crypto trading instruments, we went over the availability of trading tools in the crypto market. The results suggest that instruments are available not just for bitcoin, but for other cryptos as well. Both experts and starters can work with these tools, though more experienced traders would benefit the most.
There are also risks associated with these instruments, especially leverage. We advise beginners not to use these functions right away but to educate themselves about the market first.