Since their inception, cryptocurrencies have seen rapid growth and widespread market adoption, as evidenced by the assets tied to crypto assets that have started to appear in the portfolios and trading methods of numerous asset managers. The process of purchasing and selling cryptocurrencies to profit is known as cryptocurrency trading.
Trading in cryptocurrencies can be defined in terms of its objective, mode of operation and trading approach. For example, the asset being exchanged, or cryptocurrency, is the goal of cryptocurrency trading. The manner in which cryptocurrencies are traded depends on the type of transaction, such as futures, options or perpetual contracts that take place on the market.
An investor’s trading strategy for cryptocurrencies specifies a set of predetermined guidelines for buying and selling on cryptocurrency exchanges. One of the basic trading methods to invest in cryptocurrencies is spot trading, in which traders buy assets with the hope of selling them at a higher price in the future.
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This article will discuss what spot trading is, crypto spot trading signals, how to do crypto spot trading and what are the risks of crypto spot trading.
What is a spot market in crypto?
The base market, where crypto assets are instantaneously exchanged and settled, is known as a spot market, and trading in this market includes buying digital currencies like Bitcoin (BTC) or other altcoins and hodling them until their value rises.
Related: Bitcoin spot vs. futures ETFs: Key differences explained
It is called spot trading because the transactions are settled “on the spot.” Furthermore, spot markets include sellers, buyers and order books. Sellers make an order with a specific ask or sell price, and buyers place an order for any cryptocurrency token with a particular bid or purchase price. The bid price is the highest price that a buyer is ready to pay, and the ask price is the lowest price that a seller is willing to accept as payment.
The order book has two sides: The ask side for buyers eager to buy and the bid side for sellers willing to sell. The order book records bids and asks in the order book. For instance, in spot trading, if Bob makes an order to purchase BTC, this transaction will instantly go to the bid side of the order book. When a seller from the crypto spot trading platform is selling at the same specifications, this order is automatically filled.
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