Crypto spot trading is the most common trading execution. Here, we describe what it is and some common strategies.
- What is crypto spot trading?
- Crypto Spot trading fees
- Crypto spot trading VS derivatives
What is Crypto Spot Trading?
➤Crypto spot trading refers to trading that is settled “on the spot.” Crypto spot trading includes sellers, buyers, and order books.
Is spot trading suitable for beginners?
Yes! Spot trading is excellent for beginners.
How does spot trading work?
Spot trading is one of the most straightforward trades.
- Sellers make an order with a specific ask or sell price.
- Buyers place an order for any cryptocurrency token with a bid price.
If there is no matching order in the order book, the order will just be added to the order book.
How do spot traders make money?
Spot traders make money by buying cryptocurrencies on the market and selling them for a higher price later. Spot market trading can be both short-term and long-term investing.
Is there any risk in spot trading?
Yes! All trading involves risk. Still, spot trading is probably the lowest risk of trading. It involves much less risk than derivative trading with leverage.
Is spot trading taxable?
Yes, in most jurisdictions. Read more about the best crypto tax software.
What are the types of spot trade?
There are two main types of spot markets – over-the-counter (OTC) and organized market exchange.
What are the advantages of spot trading?
- Spot trading is beginner friendly.
- There is no liquidation risk.
- You own your assets, and you can stake them to earn a yield
What are the disadvantages of spot trading?
- There is no way to hedge the market (Go short)
- There are limited ways to trade with leverage (Margin trading)
Crypto Spot Trading Fees
Crypto spot trading fees are often given as maker-and-taker trading fees.
- A maker adds liquidity to the order book (Limit order)
- A taker removes liquidity from the order book (Market order)
The maker generally pays less crypto spot trading fees than the taker. However, this is not always true since the trading fee can be identical between them at some points.
For a full crypto spot trading fee review, go to our article about the lowest crypto spot trading fees.
Crypto Spot Trading VS Derivative Trading
A trader should know some main differences between spot trading and derivative trading.
What are derivative trading products?
There are several different crypto-derivative products
Table Spot VS Derivative
- Spot Trading
- Derivative
No Liquidation Risk
Leverage
You own your asset
You own the right to sell or buy an asset
You can stake your asset and earn a yield
You have to pay an interest rate on your borrowed funds (if you use leverage)
4 Steps – How to become a profitable crypto trader?
There are some concepts you must master before you can become a profitable crypto trader.
We have summarized these properties in one article for you.
Read about how to become a profitable crypto trader in 4 steps.
