Instruments Xylohpones and notes

List: Crypto Trading Instruments and Products

This crypto trading guide for beginners focuses on cryptocurrency trading instruments and products. We list and compare the different trading products for crypto trading. These include,

  • Crypto Spot Trading
  • Crypto Margin Trading
  • Crypto Trading Futures
  • Crypto Trading CFD
  • Crypto Trading Perpetuals
  • Crypto Leveraged Tokens

The main aim is to provide you with basic information about each crypto trading product. 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 and what type of product.

What is a crypto trading instrument or product?

➤Crypto trading instruments refer to the different markets you can trade within the crypto sphere.

➤Similarly, traditional trading instruments like securities range from commodity futures to stocks and CFDs, currencies and metals, and more.

Many different musical instruments

The most basic crypto trading is exchanging one crypto for another at an agreed price via an order book on the spot market.

However, many more technical trading products are built to speculate on a cryptocurrency’s price.

There is margin trading which is spot trading with borrowed funds. In addition, several derivative products don’t trade on the spot but have their markets. Cryptocurrency trading products are futures, perpetual, options, leveraged tokens, and CFDs.

Crypto leverage trading is applied to all the above-mentioned trading instruments.

What is Crypto Spot Trading?

Crypto spot trading is the most basic trading you can make. Crypto spot trading means you buy a cryptocurrency for the market price; after this, you own that specific cryptocurrency. Spot trading is very similar to exchanging one currency for another.

Two hands exchanging currencies

For example, you have made a spot trade if you buy any Bitcoin on the Binance exchange. Therefore, it doesn’t matter if you buy Bitcoin for USD, ETH, or any other currency. Also, it doesn’t matter how much you.

If you are interested in spot trading, not derivative or margin trading, I will look for a crypto exchange, not a crypto trading platform.

Two great crypto exchanges are Coinbase and Binance. Read more about these crypto sites in our Coinbase review or Binance review.

What is Crypto Margin Trading?

Crypto margin trading means that you borrow funds to get leverage. 

A traditional balance scale between time and leverage

Margin trading can be pretty complex, and we recommend you calculate a bit before starting to trade. Also, it would help if you used stop loss when you deal with leverage since you risk a liquidation, which will cost you extra fees in most cases.

So, how do you calculate margin trading?

Let´s take an example.

  1. You buy 1 Bitcoin for USD 10.000 but use 3x leverage. Your position is now worth $30.000 because you lent $20.000. Your collateral(initial margin) is $10.000
  2. Bitcoin has decreased by 10%, and your position is worth $27.000. Your collateral is now only worth $7.000.
  3. Once your collateral drops below a certain level(margin level), your trading site will ask you to deposit more money.
  4. If your collateral drops, your trading site will force liquidation and repay your loan to the lender.

Platforms that allow you to engage in margin trading are numerous, the most popular being Bitfinex and Kraken. We also have a particular blog post on this topic comparing crypto margin trading platforms.

What is Crypto Trading Futures?

Crypto Futures is a complex trading instrument, and you should know what you are doing before you start buying or selling crypto futures.

A purple calender representing futures trading and the article What is Future Trading on Binance

Crypto futures are derivative contracts that obligate the parties to transact Bitcoin at a predetermined future date and price.

The buyer must purchase Bitcoin, and the seller must sell Bitcoin at the set price, regardless of the current market price at the expiration date.

Several platforms offer crypto futures contracts. Read more in our article about the best crypto derivative exchange for the USA.

What is Crypto Trading CFD?

➤CFDs (contracts for difference) are popular within the trading market in the cryptocurrency world. 

The ability to contract with the brokerage company and use their volumes is something that I have started to appreciate. 

To begin with, it helps those that do not have significant investments and allows them to profit from fluctuations. Platforms that enable clients to make CFDs are Markets.com and Plus500.

What are Crypto Trading Perpetual Contracts?

➤Crypto perpetual contracts are derivative agreements allowing investors to purchase or sell a cryptocurrency for a specified price at an unspecified point.

A calender with no dates

They differ from futures contracts since futures have a specified expiration date.

The perpetual are often settled and denominated in USDT. However, Bybit and Deribit also list perpetual contracts settled and denominated in USDC. Read more about the best USDC settled perpetual agreements.

In addition, there are inverse perpetual. The Inverse perpetual contracts use a cryptocurrency(for example, BTC) as the base currency. Traders need to confirm traded quantities in USD (Quoted currency) and then use their base currency (such as BTC) to calculate margin, profit, and loss. Read more about the best Bitcoin BTC inverse perpetual contracts.

What are Crypto Leveraged Tokens?

Crypto leveraged tokens are a crypto trading instrument without liquidation risk or collateral requirements.

Cryptocurrency token coins

Thus, crypto-leveraged tokens are an excellent crypto trading product for beginners seeking leverage exposure among crypto assets.

Still, there are risks associated with this product, and it comes with many different trading fees, which can be hard to understand for a beginner. 

However, if you are interested in researching leveraged tokens more, we suggest our article about the best crypto leveraged token trading sites.

Many exchanges offer leveraged tokens, including Binance, Kucoin, Bybit, and Gate.io. Please read our full article where Binance Leverage Tokens are explained in detail.

Crypto Trading Instruments – Summary

In this review of crypto trading instruments, we reviewed the availability of trading tools in the crypto market. The results suggest that instruments are available not just for Bitcoin but also for other cryptos. Experts and starters can work with these tools, though more experienced traders benefit most.

There are also risks associated with these instruments, especially leverage. Therefore, we advise beginners not to use these functions immediately but to educate themselves about the market first.

For further reading, see our article about starting profitable crypto trading in the EU or USA.

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