Steemit Crypto Academy | Homework - Task 3 by @besticofinder | How to spot trade? Everything a beginner need to know
What is Trading?
The action or activity of buying and selling goods and services.
Definitions from Oxford Languages
Buying and selling is the activity we perform in any trading, instead good and services we speculate price movement in cryptocurrency via an exchange and engage cryptocurrency trading.
Spot Trading or Margin Trading
- Spot Trading:
Spot means to say 'On the Spot' as to instantly, hence name itself suggest the meaning of this trading pattern. To execute spot trading, you have to be in a spot market.
This is where the spot trading happens in the Binance exchanger. Crypto sellers and crypto buyers get together to trade their crypto assets in such spot markets. The current price usually refers as the Spot Price. Buyers execute a trade at the immediately available spot price that sellers are asking for. Once the offer and bid equals then the trade instantly settled. However, the spot price fluctuates in every second due to the demand and supply in that trade market. Traders must have the available assets balance in their account to pay for the trade they initiated by the date of settlement. If not, exchanger will not allow the trade.
According to the trades we do on exchanger we have to pay a fee for the platform. Different exchange platforms have different trading fee schedules. Binance seems to have the lowest trading fees compared to the other exchangers. They offer FREE Deposit fee for all the coins they listed and only charge a fee for withdrawing.
Binance Fee Schedule
Advantages of Spot trading
If you are a beginner this is the method to follow. Since you need to understand the platforms and gain more knowledge on charts, you need to minimize the risk involvement. Also, it is easier to execute a trade buy bidding or offering. The amount involvement is up to you and you have the full control over your decision.
Disadvantage of Spot trading
Limited capital in your account won't give you the profit you could have earn through a good trading opportunity. Hence, making profits will be slow and steady progress.
With this method traders can borrow funds from a third party to perform leverage trading. Traders will gain access to greater sums of capital which will lead to the higher margin of profits on successful trades. However, this method is riskier and will involve losing the capital unlike spot trading.
This is where the Margin trading happens in the Binance exchanger. You can simply click Cross 3x or Isolated 10x to access the margin trading. In cross 3x user will earn up to 3 times profits. If after closing the position the profit generated not enough to repay the borrowed amount, the system will not deduct automatically from the user's wallet. The user will have to refund manually the owed amount.
Advantages of Margin trading
Simply the profit you can earn. However, recognizing the right moment to trade is essential. With the little collateral amount trader have in their account can multiply by 100x with margin trading.
Disadvantage of Margin trading
High risk involvement. This is a game with probability and you never know how chart will play in next second. Trader might lose all the funds if the trade won't success.
I look forward to the 04th lesson of this exciting course.
Thank you Steem Team & @besticofinder