Crypto Academy/ S4W6 - Homework post for prof @reminiscence01 // student by @gracellagift
Hello steemians,
welcome to my blog. For season four week six in the beginner's course of the steemit crypto academy, professor @reminiscence01 talked about, trading cryptocurrencies. Here is my homework Task on the question one
explain the following stating it's advantages and disadvantages
Spot trading
Margin trading
Future trading
From the term, spot trading can be define as buying or selling digital assets instantly on a specific timeframe. In spot trading, you can make a purchase and your crypto will be delivered to your wallet instantly. It takes into account within the time of the payment.
A spot trade is an asset or commodity required and delivered immediately.
spot trade are immediate or near immediate requirement of a commodity,foreign currency,stock and commodities are transacted typically through spot trades.
For example, 10 shares of stock XXX on a $800 spot trade would be delivered upon the cash payment of $800.
ideally, the two counterparties agree to transact some asset or commodity at a specific price and date in the future. commodities are also bought and sold frequently on the spot market trade. Item delivery and the transfer takes place as soon as the requirement is complete. It may take several working days.
Examples of spot markets are the market for securities, commodities, and foreign exchange (forex)
If the payment on a requirement is to be made immediately, the purchaser has no choice other than to buy foreign exchange on the spot or current market, for immediate delivery. However, if payment is to be made at some future date, the purchaser has the option of buying foreign exchange on the spot market or the forward market, for delivery at some future date.
For example, you want to buy a piece of property in Japan in three months in Yen. You’re funding the purchase from a sale of a property in the United States in U.S. dollars, and you want to take advantage of the current exchange rate from Yen to U.S. dollar. Here you could use a forward.
Regardless of what happens during the next three months on the exchange rate, you would pay the set rate you have agreed on rather than the market rate at the time. This same scenario applies to importing and exporting in terms of buying products in one currency (e.g., Yen) and importing and paying for them in another currency (e.g., U.S. dollar).
Spot and forward foreign exchange agreements and contracts can be established through any sophisticated international banking facility–just ask. But you must first become a bank customer, complete appropriate paperwork and will, more than likely, have to make a deposit to serve as cash collateral.
The following are the advantages of spot trading
Spot markets offer some advantages
- manage risk: its allowing you to protect costs on products and services bought abroad. you can do your spot trading safe and consistent experience. Since you can trade from the balance which you have and also wouldn’t be ended up losing more than that you have already into your account.
the parties involved can hold onto the item until they find a better deal.
deliveries are short-lived and require only a few. Therefore, the investor can immediately obtain the purchased item after paying a certain amount of cash. It reduces uncertainty and the possibility of counterpart delivery failure.
spot trading usually require less capital. In contrast, in the futures market, the minimum investment is usually significant.
management of risks could be downfall itself. Because, you have limited balance in your account, and you can’t take full benefits of good trading opportunities. With $2000, you can make much profit from it.
is too risky to deal with the loss that may be caused by exchange rate fluctuation.
The concept of margin trading is that, trade your funds acquired by the third party to leverage your position and it’s not like spot trading. In this trading, you don’t need the entire trading value to enter the position. All you need to do is to have collateral of digital assets which is at the margin position that you are trying to enter.
For example, if you are buying $2000 worth of Ethereum (ETH). You need just $20 into your account to begin a trade of $2000 worth of Ethereum. At the time, you need to keep 1% of the amount in your account to keep the position open. Depends on your trade, you can withdraw profits or again enter into more positions.
and
Disadvantage
of
margin trading
The table below indicate the advantage and the disadvantages of margin trading
| Advantage | Disadvantages |
|---|---|
| One of the main advantage of margin trading is to gain more profit. You can trade as much as your investment on a crypto exchange. With these options, trading your crypto at the perfect time can get a return on investment. Depends on your trading style, you can get more advantages from it. | the main disadvantage of the margin trading is , there is a lot of inherent risks involved in it. You can imagine that trading 100% of your capital makes it possible for you to lose your money than your initial investment. Unlike spot trading, you can lose as much as the capital that you have |
A futures trading can be view as agreement between two parties – a buyer and a seller – wherein Two parties take opposing stances, with one agreeing to buy shares and the other agreeing to sell them at a certain price sometime later, irrespective of the prevailing market price. These details are agreed upon when the transaction takes place. As futures trading
Futures trading are available on different kinds of assets – stocks, indices, commodities, currency pairs and so on.
in addition, A futures trading contract is a trading contract or agreement between two parties to conduct a transaction at a predetermined locked down price at some point in the future. It is essentially a bet on the prospects of a stock, one of the multiple financial trades you can perform. .
The follow shows the merit and demerit of future trade
future trading, allows small speculators to participate and trade in the futures market by paying a small margin instead of the entire value of physical holdings.It allows hedgers to shift risks to speculators
it helps in determining the future demand and supply of the shares. Future trading, gives traders an efficient idea of what the futures price of a stock or value of an index is likely to be
future trading can expire, wherein, transactions requirement can not be settled by the underlying asset.
Futures trading come with definite expiration dates. Even if you have established fixed prices for the assets in the contract, as the expiration date approaches those prices can become much less attractive to othersit's can involve fast movement of futures prices. Contract prices can tick up or down daily, sometimes within minutes. If lady luck is not smiling on you on a given day, you'll receive a margin call from your broker advising you that your margin account has dropped below minimum levels, meaning you must transfer more cash to your account immediately.
With the surge in Cryptocurrencies, traders’ demand for Cryptocurrency Exchanges to perform trading. Crypto Exchanges play a vital role in the development of the blockchain industry.
Best regards
@gracellagift
Cc.
Professor @reminiscence01
Hello @gracellagift , I’m glad you participated in the 6th week Season 4 of the Beginner’s class at the Steemit Crypto Academy.
Recommendation / Feedback:
I appreciate your effort in participating in this homework task. However, you haven't completed the homework task. Some of the questions are left unattended to.
Please spend quality time in performing your homework task and try as much as possible to attend to the questions. If there's any confusion in the questions, you are free to as questions for clarification.
Remark: Homework task Incomplete
Thank you for participating in this homework task.
professor @reminscence01 Thank you so much sir,
I will make my corrections right away
Meanwhile kindly check my season three task 4
This toohttps://steemit.com/hive-108451/@gracellagift/crypto-academy-season-3-beginners-course-task-4-different-types-of-consensus-mechanism-by-proof-sapwood-student-by-gracellagift
@reminiscence01 and this too thank you
https://steemit.com/hive-108451/@gracellagift/crypto-academy-season-4-homework-post-for-task-4-for-prof-yousafharoonkhan-by-gracellagift-student
Exercise patience. It will be reviewed by the professors in charge.
Okay sir