What is the spot market?
What is the spot market; A spot market is where commodities are sold and bought in the market area on an immediate basis. A transaction decision is made by the seller and the buyer through an order book in which the transaction is recorded and finalized. The commodities that can be transacted in the spot market could be physical entities like gold, oil, stocks, shares, fiat currencies, bonds, and cryptocurrencies. In commodities, Forex is the largest financial market worldwide, and Forex has a $2.4 quadrillion overall market capitalization. The comparatively crypto market has a $1.20 Trillion general market capital trading on various exchanges such as OKX, Binance, Kucoin, and Coinbase.
Cryptocurrency Spot Market for Trading
If you are interested in cryptocurrencies, first, you must comprehend the exact science of cryptocurrencies; after then, you should trade cryptocurrencies on the exchanges (CEXs & DEXs). For newbies, the spot market is the best way to start the cryptocurrency line of work. Cryptocurrency exchanges such as Binance, OKX, Coinbase, etc., provide a crypto spot market facility for interested crypto users. Such crypto exchanges have various types of markets, such as margin, options, and futures; the spot market is different from them.
Spot markets allow users to transact digital assets like Bitcoin, BNB, Ethereum, XRP, etc., with one another, and transactions are completed between buyers and sellers at real-time prices. Cryptocurrency exchanges play a role of an intermediary by rules and regulations that traders must follow.
Essential Components of Spot Trading
Crypto users must study the two essential components before getting into spot trading. The detail is as are follows:
- OTC-(Over-the-Counter)
- P2P-Peer-to-Peer
OTC-(Over-the-Counter)
It is the type of trade that ensues instantly between two parties until the transaction is complete. In OTC trading, the buyer’s demand has to be fulfilled to execute the orders; otherwise, the OTC transaction will not be completed.
P2P-Peer-to-Peer
Third parties are involved in P2P trading; for example, crypto exchanges play an intermediator role in executing the transactions among buyers and sellers. Crypto platforms offer various payments method that is based on governments’ legitimations.
How to do spot trading in Binance?
Spot trading offers to buy a digital asset at its real-time price, and buyers can sell it by getting potential profit or hold it for hoping of price appreciation. How to do Spot Trading in Crypto Exchanges is almost the same method in all crypto exchanges, but here we explain how to trade in Binance.
Prerequisites:
Users must sign in or sign-up on the respective crypto platform and complete their KYC (Know Your Customer). Users can buy USDT, called Tether, in exchange for the fiat currency of their countries. USDT is a stable currency which is the most important for trading, and its balance is always equal to US dollars. Users can buy USDT using features provided by exchanges which can be credit or debit card transactions (if the government allows), or users can get USDT from the P2P section.
Explore the Spot Market:
Users can track the spot market in the “Trade” section, which can be founded in the main menu bar of Binance. Users can explore the icon “Spot” by clicking the “Trade” tab.
Search your desired Coin:
At the right of the “Spot” page, crypto users can find the search bar, and first, search for the Coin they want to put in trade and click on it. The real-time price will show up on the left side of this page.
Charts, Candles, and Time Slots:
Users will see the charts and candles on the same page in the midsection, and users can see the time slots up the side of the charts. There are plenty of time options as 1S (Second), 1M (Minute), 1M, 3M, 5M, 15M, 30M, 1H (Hour), 4H, 6H, 8H, 12H, 24H, 1D (Day), 1W (Week) 1M (Month), so, users can select one of them and the candles will convert according to time chosen tab. For example, one candle will represent 1 hour if the time tab is selected 1H, the red candle represents that the price of the respective Coin decreases in the same time you selected, and the green candle shows the price increases.
Limit Orders:
At the bottom of the candle graph, users can track the option “Limit”, here users will enter any price, and the price of the Coin will touch o the limit that they have entered, so the order will automatically be bought. And the same process will be for sell orders.
Market Orders:
Along with the limit, users can find the “Market” tab; by clicking this tab, Binance will execute the current market price, and users can buy it at the market price of the respective Coin. And the same process will be for sell orders.
Stop-Limit Orders:
Along with the market, users can find the “Stop-Limit” tab; in the stop-limit orders, there are three options: Normal, Borrow, and Repay. As we have explained earlier, this whole trading process will be the same for sell orders.
- Normal: First, we explore the “normal” by clicking on it; you will find Stop & Limit Options. Here, the order of coins will be automatically bought at whatever price the users enter in the limit. If the price does not reach the desired point, there is a stop option. The price you will enter on the “stop” tab; when the price is there, your trade will be stopped there, and the same process will be for sell orders also.
- Borrow: The process to get in the trade is the same as we explain in the “Normal” option; the difference is that margin trading involves this Borrow, which means the third party conducts the transaction.
- Repay: The trading method is the same, and the concept is consumers will choose this option to repay their loans because the margin that has been used up is required to be repaid.
Trailing Stop:
Users can get the “Trailing Stop” tab by clicking the Stop-Limit tab. They can adjust the limit of a trade by adjusting the trailing delta percentages, which implies users can stop their trading by using percentages if the trade goes against them.
OCO: One-Cancels-the-Other-Order
OCO is placed inside the stop-limit order icon; by clicking it, you can explore it, and OCO, as the name indicates that one cancels the other order. These orders are subject to each other in which two orders are placed simultaneously. OCO specifies that if one order is executed, the other order is automatically canceled.
Explore the Open Orders, Order History, Trade History, and Funds
Users can explore the four tabs at the end of the page: Open Orders, Order History, Trade History, and Funds.
- Open Orders: Binance will show an order the user still needs to close. Here you can also track what date you placed the order, at what price, in what Coin, and how much you spent (USDT) on it. Full details are available here.
- Order History: The user can track all the orders that have been closed to date and set the time limit here, which is available in different formats. This indicates that your entire portfolio is available here.
- Trade History: If users put in more than one order, Binance will show all the current orders which still need to be closed by the user.
- Funds: Here, users can track all their funds that could result from profit or loss.
Conclusion
Commodities are bought and sold immediately in the market area on the spot market. For those interested in using cryptocurrencies, cryptocurrency exchanges offer a spot market, but users must first learn about the two key elements. Spot trading entails purchasing a digital asset at its current value to either sell it for a profit or hold onto it in anticipation of a price increase. Users must log in or register on the relevant cryptocurrency platform and finish their KYC (Know Your Customer) requirements.
Users can purchase Tether, or USDT, by exchanging their local fiat currency for Tether. To explore what is the spot market, Charts, Candles, Time Slots, Limit Orders, Market Orders, Stop-Limit Orders, Normal, Borrow, and Repay, Open Orders, Order History, Trade History, and Funds are all available for crypto users.
Frequently Asked Questions
1. Is Binance spot trading safe?
Binance is the most renowned and dedicated centralized crypto exchange worldwide, and the platform offers spot trading with easily coherent features. It is used by millions of clients worldwide and is considered safe and reliable. Binance has a user-friendly interface that helps newbies in the crypto industry and is appropriate for experienced traders too. Users can do spot trading with a low fee on this crypto platform. Users can use the features of spot trading on Binance, like a limit order, market order, stop-limit, trailing, OCO, and margin orders which are very easy to operate.
2. Can I lose in crypto spot trading?
In spot trading, losing money depends on the trader’s behaviour. Initially, traders do research and select the crypto pair and the price at which they want to enter a trade. After that, if the price swings against the trader’s research, the loss will be started. Now the trader’s behavior decides the loss; if he holds until the market recovers to the break-even point, then there will be no loss in terms of money, but loss happens in terms of time. And the second situation is that if the trader wants to save time, the loss will hit his money.
3. How many days is spot trade?
Spot trade has no time limit, and users can make a trade decision on the spot; this is the agreement between two parties; if they agree on a point, the trade will be executed. Otherwise can hold their assets until they find another buyer, but holding the trade will not be suitable for traders because they can lose the commodities’ value over time.
4. Is spot trading more profitable?
Spot trading is profitable but needs research, and it is a very profitable market if traders make good business decisions and keep a close eye on the market. The trader must know the market sentiment, news, government financial decisions, tax rates, budget variations, and every aspect that could affect the market or the trader’s favourite product’s price.