According to Coinmarketcap.com, over 546 cryptocurrency spot exchanges exist, with a total 24-hour trading volume of over $30 billion. This shows the number of people who engage in spot trading and those who want to make money with it. 

While many get involved in spot trading, a greater percentage of them lose a lot of money whenever they are trading. The major reason is a lack of knowledge on how to engage in spot trading. 

Knowledge is key, and in this article, you will learn how spot trading works, the difference between spot trading and futures trading, and how to trade it profitably. 

What is Spot Trading?

Source: TradingView & BingX

Spot trading is a form of financial market where crypto assets are publicly traded immediately, depending on the type of asset. In other words, spot trading is the process of buying and selling crypto assets almost immediately and at the current market price. 

Spot trading is derived from all the assets sold and bought at the spot price (the current price). Spot trading is also known as the cash market, as traders make payments upfront and taking ownership of the assets is not mandatory.

Spot trading is popular among day traders, who can open long or short positions to make massive profits from assets. For example, if you think an asset’s price will increase, you open a long position in the asset. If you also guess that the asset will massively decrease in price, you will open a short position on it. Shorting an asset simply means buying it when it decreases in price with the intention of selling it off when it increases. When you sell off these assets, you repurchase more when the price decreases again. 

Spot Trading vs. Futures

Spot trading is different from trading in futures, and it can be identified by many of its characteristics. As the name implies, the buying and selling of assets in spot trading is almost spontaneous. It happens immediately, and you, as the buyer, take delivery of the assets you purchased immediately. 

However, things are quite different with futures trading. The name of this type of trade also depicts what happens whenever it occurs. Futures trading occurs when the buyer and the seller sign a contract for when to make the transaction in the future. 

When the contract between the buyer and the seller matures in the future, they come to a cash settlement. This differs from spot trading, which involves immediate delivery rather than a cash settlement.  BingX’s crypto exchange is a leading platform worldwide where crypto enthusiasts trade spots, futures, and even enjoy copy trading opportunities.

Source: TradingView & BingX

Pros of Spot Trading

Transparent Pricing 

The price of assets on the spot market is affected by demand and supply, so you will know if the price of an asset will change positively or negatively. This factor differentiates spot trading from other forms of crypto trading. This makes pricing transparent, as you know why an asset is rising in the market and why it is falling. 

Straightforward 

Another characteristic that entices people to trade spots is its straightforward rules and risks. When you engage in spot trading, most of its trading parameters make it straightforward to calculate your profit, rewards, and losses. 

For instance, if you should invest in Spot with about $1,000, you can easily tell if you are losing or gaining in the market using your entry point and your current price. Assuming your entry price was $1,000 and you are trading at $1,200, you are already making a profit of $200. The same thing applies when you are losing money in spot trading. It, however, is better represented on a crypto exchange like BingX. 

Zero Worries on Maintenance Margins 

When you engage in other trades, such as margin trades or futures, you often have to worry about liquidation, margin calls, or interest payments. But with Spot trading, there’s something called “set and forget.” This means that when you buy an asset in spot trading, you can leave the asset for many years and don’t have to worry about margin calls. In other words, you can buy Bitcoin in 2023 and leave it till 2025 without worrying about all these factors. 

Cons of Spot Trading

Fewer Profits 

Although spot trading makes a profit, it is not as much as other forms of trading, such as futures or margin trading. You can invest in multiple positions using a little capital in futures or margin trading. 

Low Trade Volume 

Especially during a bear market, you might find selling and buying certain assets difficult on a spot trading platform. Many traders often avoid buying or selling certain altcoins during a bear market. There’s a low trade volume, and it heavily affects what is happening in the spot market. 

Tips on How to Conduct Profitable Spot Trading

Source: Token Metrics

Understand Spot Trading First 

If you are a beginner in spot trading, you must understand spot trading and what you stand to gain or lose before making a trade. For a start, you can read and assimilate blog posts like this, buy courses, and get a mentor to teach you all you need about spot trading. 

Have a plan 

If you want to engage in any type of crypto trading, including spot trading, you should have a trading plan ready before you start anything. A trading plan contains all the rules guiding your actions when trading. It tells you what to do in any situation, such as when losing or making money. It also contains your strategies for how to make more profit while spot trading. 

Look for Opportunities 

Except if you are using copy trading platforms, you should actively look for opportunities to help you close more profits in spot trading. You should follow the news more often and do thorough market research before engaging in any trade. 

Choose Short or Long Positions 

You should decide whether to trade short or long when you engage in spot trading. Short positions are mainly for assets that would decline in price, while long positions are for assets that would increase in price. 

Trade Spots Like A Pro On BingX

Spot trading is a financial market where assets are bought and sold almost immediately. It is common among day traders, as many have made and lost a lot of money while spot trading. To be on the winning side, you must know how spot trading works, have a trading plan, and actively look for opportunities in the market. A global crypto exchange like BingX offers you amazing copy trading features so you can trade spots like a pro.

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