Crypto Academy Week 3 Homework Post For @bestcofinder

Hello to all my Steemian Friends!
I will Discuss about my Week 3 Homework Task given by @besticofinder.

In this Post , I will discuss about Spot Trading and Margin Trading.

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Firstly , I will discuss about Spot Trading and It's Features.

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What is Spot Trading?

Spot Trading takes Place in the Spot Market at the Spot (Current) Price. Spot Price Means Current Price.

With Spot Trading, You are essentially executing a trade at the immediately available asking and budding price that market traders are asking for.

And Just Because of Spot Trading, You will need to have the available assets to pay for your trade by the date of settlement.

For Instance , Let Suppose If you are buying $1000 worth of Litecoin with Spot Trading, then You will need $1000 balance in your account.

This is all about Spot Trading.

Now , I will discuss about Advantages and Disadvantages of Spot Trading.

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Advantages of Spot Trading

• For Beginners , Spot Trading helps you to manage your risks.

• Since You can only trade the balance that you own , You will not end up losing more than what you already have in your account.

• Spot Trading ensures that you only trades based on the assets that you own and avoid over-leveraging.

Disadvantages of Spot Trading

• The ability of Spot Trading of managing risk can be a downside itself in some situations. Because you are only limited to the balance in your account. You cannot take full advantage of good trading opportunities.

• As , Even If you have have a trade that you have a strong conviction, You can only make as money as allowed by the capital of your own.

This is all about Spot Trading.

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Now , I will discuss about Margin Trading.

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What is Margin Trading?

Margin Trading is the concept of borrowing funds from a third party to leverage on your position.

Margin Trading is unlike Spot Trading. With Margin Trading, You do not need to have the entire trade amount to enter into a position. All You need to do is to have a collateral of assets that is at a margin of the position that you are trying to enter.

For Example, Let's say you are looking to buy $1000 worth of Litecoin. Since some trading platforms provide you with a leverage of upto 100x on crypto instruments.

This means you only need $10 in your account to trade $1000 worth of Litecoin. At any point, You only need to keep 1% of the contract amount in your account to keep the position open.

Depending on how your trade goes, you might even be able to withdraw profits or enter into more positions.

Now, I will discuss about Advantages and Disadvantages of Margin Trading.

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Advantages of Margin Trading

• The Biggest Advantage of opting Margin Trading is the opportunity to amplify your profits.

• Having the leverage element in Margin Trading lets you trade as much as 100x of your capital on crypto instruments. With Margin Trading, a good trade at the right moment can yield you a lot of returns.

• Depending on your trading style, having margin trading can be a huge advantage for you.

• Low Frequency Traders only enter into positions that they are really sure of. Margin Trading let them take full advantage of the low frequency but high probability trades that these traders are identified.

Disadvantages of Margin Trading

• There is a risk involved in Margin Trading as you can imagine, Trading up to 100x of your capital makes it possible for you to lose more money than your initial investment. This is unlike Spot Trading where you can only lose as much as the capital that you have.

• When Trading on Margin, Your Position may be liquidated if you don't have enough margin to support the losses on time.

• Another factor to think about is the interest on your position, which is an uncertain amount depending on the direction of your position and the platform you choose.

Which Strategy is right for us?

Now, The ultimate question is that Which one should traders choose?

Well, The choice of strategy comes down to you as a trader. That's because no one can understand you more than you do.

Based on your own understanding of your risk tolerance and knowledge of trading and investing, You need to decide which strategy is best for you.

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It is all about Spot Trading and Margin Trading.

Hello @besticofinder . Please Check my Homework Task .

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Cc:-
@steemitblog
@steemcurator01
@steemcurator02
@besticofinder

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Greetings from India!