Lots of newbies have been spot trading without knowing they are spot trading. I have been investing in cryptocurrency for three years and I found the meaning of spot trading this year. This is the benefit of being consistent on Hive, you tend to learn lots of things everyday. If you can try to take the meaning of the words literally you will be able to guess what spot trading means.
Spot trading is literally trading done on the spot. You buy or sell an asset at the spot price, or the current market price. You can say it’s buying an asset at the instant price. For instance the price of a coin is $10, you pay exactly $10 for the coin, you have gotten the coin for the spot price which is $10. I call it moment trading, you buy or sell the asset for the price at that moment. The act of buying and selling the asset at the spot price is spot trading.
Spot price is the price of an asset that can be bought or sold instantly. Just like the example given above, the spot price is $10, because $10 is the price you can buy or sell the asset at that moment or immediately. The place where all these transactions are executed is known as the spot market. Transactions are done in the spot market for instant executions and deliveries.
Example of spot trading is transaction done on Binance or any other crypto exchange. The moment you execute a buy or sell order for HIVE/USD transaction you have just done a spot trading and your asset will be kept in your spot wallet. These transactions call occur both in Centralized Exchanges(CEX) and Decentralized Exchanges(DEX). But the difference is that DEX uses smart contract.
Spot Trading is way different from Future Trading, I prefer to spot trade because it’s less risky and less stressful. I don’t need to be worried constantly about the market and stressing myself mentally.
When you buy an asset, you sometimes buy it to hold because you are hoping the price will go higher so you can sell it and take your profit. When you sell an asset, you sometimes must have bought when it was lower, now you are selling it for a higher price. That’s how people spot trade most times.
But when you Future Trade, you are gambling, because you are betting against the price to either go up or go down. When you get the price to go up and it goes down, you lose, and when you exceed your leverage you get liquidated. But spot trading and staking is what I prefer because getting liquidated hardly occurs, I just have to be patient and wait for the price to get higher.
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