Trading 101: What is Spot Trading?
In this article, you’ll get to know the basics of spot trading and how to elevate your trading experience on Bitget with our tips.
What is spot trading?
Spot trading is the act of buying and selling an asset at the current market price for instant delivery, i.e. the immediate transfer of asset ownership. In general, traders utilise spot trading to yield profits from daily market movements through a combination of several small transactions.
Crypto spot trading is available on centralised trading platforms (CEXs), decentralised exchanges (DEXs), and in OTC markets. Newbies can practise spot trading in a simulated environment with TradingView Paper Trading to get a real feel for the market. Please note that crypto trading takes place 24/7 - we are the market that never sleeps.
Despite the rapid evolution of Decentralised Finance (DeFi), CEXs remain enormously popular due to the high level of liquidity and security. CEXs use the order book system to match bid and ask price, which means the more orders there are, the more liquid the market is. CEXs also provide fiat-crypto trading pairs and act as the guarantee for the completion of transactions. They are especially beginner-friendly - most individual investors made their first crypto transactions “on-ramp” or, in simpler terms, with their credit cards. Bitget is one major crypto spot trading exchange with 8 million users, ranking 3rd in terms of liquidity.
Advocates of decentralisation prefer DEXs because they are not custodial. Wallet owners keep their own private keys and their personal information - no KYC compliance is required. There are two types of DEXs, the ones with an order book system (LoopRing, Gnosis Protocol or IDEX) and the ones with the innovative automated market makers. DEXs can list more trading pairs as the listing process is not as demanding as with CEXs.
However, some problems with DEXs include blind signing (unknowingly contract approvals), lack of liquidity and slippage, that is, the price difference between the price you submit and the price confirmed on the blockchain.
Spot trading versus Futures trading
In traditional finance, futures markets usually play an important role in hedging as well as in the price discovery process. To reduce their exposure in the spot markets, investors may want to lock in a favourable price of the underlying asset in the future. Furthermore, as the futures market, for example in the U.S., often opens before the stock market, traders in the stock market can observe the sentiment and place corresponding orders for spot trade.
The key difference between Spot trading and Futures trading is the ownership of assets. Spot traders acquire the actual asset ownership when transactions are completed, but futures contracts can be settled in cash only, i.e. finalised with the transfer of associated cash positions.
One thing that also distinguishes spot trading from futures trading is the omission of minimum equity requirements. Some futures contracts may require a lower bound of investment for one single contract.
Another comparison: Spot trading and Margin trading
Both these two trading options allow for straightforward price speculation, but traders who utilise Margin trading will be able maximise their profits once the tides rise. Of course the risk of amplified losses will manifest itself if the market moves against your positions.
Traders often use Margin trading as a part of their diversification and hedging strategy to preserve their capital resilience in market downturns. Don’t forget that there are several helpful tools that come with Margin trading to limit the associated risks, such as stop-limit order.
Dive deep into Margin with Bitget Academy: What is Margin Trading?
Spot trading with Bitget
Make the best out of your crypto journey with Bitget - the leading crypto exchanges with a huge customer base of 8 million users from 100 countries worldwide.
Trading pairs, Limit Order, Trigger Order
There are over 300 trading pairs available on Bitget Spot and we are constantly adding more. Users can take advantage of our Limit Order and Trigger Order to manage their portfolio accordingly.
In terms of scale, Bitget is indeed the world’s largest digital copy trading exchange, where over 80,000 professional traders have generated a total profit sharing of US$20 million with their 380,000 followers.
Bitget Copy Trade is designed to meet the needs of every investor, be it a seasoned trader or someone completely new to the space. Beginners will learn by copying orders from a professional of their choice and profit from their expertise, while crypto geeks can establish new streams of passive income as Bitget Copy Trade professional traders. Commissions for professional traders are up to 10% of their followers’ profits, thus creating a “win-win” environment for all our users.
Get yourself acquainted with Bitget Copy Trade here: The Basics
Bitget Launchpad Bitget Innovation Zone
Bitget Launchpad was launched in early 2022 with the mission of connecting investors with potential projects. There are countless new crypto projects being launched every day; not every project is sincere and keeps their commitments. Coming to the rescue, Bitget Launchpad develops a strict vetting process to ensure the quality of projects as well as assist them with marketing and raising awareness so that both investors and development teams can enjoy substantial benefits.
All projects launching on Bitget Launchpad will also be listed on Bitget Innovation Zone, where new tokens are added every week and obviously with new gaining opportunities, encouraging investors to undertake new, exciting ventures and diversify their portfolio. Keep up with new projects on Bitget Launchpad here.
Ready to open your crypto trading account? Join Bitget today, earn your rewards, and let Bitget Academy empower you with our expertise knowledge!
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