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Spot Crypto: Understanding trading in cash and its differences with other methods
Trading spot , also called cash trading , is the simplest and most direct method to buy and sell an active . If you start in the world of cryptocurrencies , Understanding the crypto spot is the first step before exploring more advanced strategies. This guide explains what trading in cash , why it is so called, how it works, and how it differs from other forms of trading such as trading on margin or term contracts .
Table of contents
What is the crypto spot?
The term spot designates the cash market , that is to say the place where traders buy and sell digital assets at the current market price , also called spot prices . As part of the TRADING spot , the transaction is immediate: as soon as you place a purchase or sale order, the asset changes ownership instantly, and you can remove it to your wallet or keep it on the platform .
The cash trading is therefore the most direct form of trading in cryptocurrencies : there is no lever effect , no derivative products, and no debts. You buy cryptos to really own them, or you sell assets that you already have.
Why do we call it "spot"?
The word "spot" comes from the English "on the spot", which means "on the way" or "immediately". On a cash market , the transaction is done at the moment, at the price of the market when order is executed. Unlike other types of trading where the delivery of the assets can be deferred or conditioned to contracts, here everything is immediate. It is this simplicity that makes trading spot ideal for beginners.
How does the TRADING spot work?
The spot is to buy or sell a crypto (for example Bitcoin , ethereum or other cryptos ) directly on an exchange platform Here's how it works :
- You create an account on a platform
- You deposit funds (euros, dollars, or other cryptocurrencies ).
- You place a purchase or sale order on the cash market .
- The transaction is executed at the current market price (the Spot price ).
- The assets purchased are immediately available on your account or your wallet .
In trading in cash of cryptocurrencies , there is no notion of debt or margin: what you buy really belongs to you, and what you sell must already be in your possession. Traders use this trading method to take advantage of market price fluctuations and make potential gains depending on price fluctuations .
Where to make the purchase spot in crypto?
For European users, we recommend the Bitvavo platform The platform offers:
- Very competitive costs (maximum 0.25 % on the platform USDC pairs of the Platform ).
- Very rare spreats and explicitly mentioned if necessary, including on the beginner interface while many platforms invoice fees not mentioned high. An example of displaying costs on Bitvavo:
- Over 350 cryptocurrencies available.
- staking , lending and integrated DCA options
- An environment regulated and registered with European financial authorities.
- A simplified interface for beginners and a pro platform for more trading options.
- The possibility of making free deposits in euros by bank transfer or SEPA.
- Excellent security with partial insurance on funds in the event of a problem.
The advantages of trading spot
- Simplicity: Ideal for beginners who want to understand trading without complexity.
- Real possession of digital assets .
- No risk linked to the leverage or forced liquidation.
- Transparency on spot transactions and costs.
- Attractive option for beginners who wish to invest in the long term.
The limits of cash trading
- Potential gains are limited to the actual fluctuation market price .
- No leverage to increase exposure (unlike margin trading ).
- Less suitable for experienced traders seeking to maximize profits on small market movements.
Cash trading vs other types of crypto trading
To fully understand trading in cash , this method can be compared to the other trading options available on cryptocurrency platforms . Here are the main differences between trading spot , margin trading and (future) contracts
Spot trading vs trading on margin
- Trading spot : you buy and sell assets that you really have, without borrowing funds.
- Margin trading : You can borrow money from the platform to increase your exposure thanks to a lever effect (for example, 2x, 5x, 10x). This makes it possible to multiply potential gains , but also losses.
- Trading with leverage implies additional risks: if the market evolves against you, you can be liquidated and lose all or part of your committed capital.
- Unlike cash trading , trading on margin requires rigorous risk management.
Spot Trading vs term contracts (future)
- Trading spot concerns the purchase and immediate sale of digital assets at the Spot price .
- The term (or future) contracts are agreements to buy or sell an asset on a later date, at a price set in advance. You do not have the underlying asset
- Traders can use a lever on future, which increases the volatility of the results .
- Trading of term contracts is more complex and exposes to risks of liquidation or rapid losses in the event of a high fluctuation in the market.
Spot trading vs options and derivative products
- The spot trading is based on the actual property of cryptos .
- The options and other derivative products are complex financial instruments that allow you to speculate on price fluctuations asset itself.
- These products are reserved for experienced traders due to the associated risks.
Why choose the trading spot to start in crypto?
Trading in cash is the attractive option for beginners because it allows you to understand trading without having to manage the complexity of derivatives or lever . Here is why:
- You can buy cryptos and keep them as long as you want.
- You control your assets : they are yours, and you can transfer them to an external wallet
- You limit the risks associated with trading with leverage .
- You benefit from transparency on costs and market prices .
- Ideal for investment , without liquidation pressure.
How does the spot trading work on the main platforms?
Most cryptocurrency platforms offer a cash market accessible to everyone . Here are the typical steps:
- Create an account on the platform of your choice.
- Place funds in trustee ( Euro , dollar) or cryptocurrencies .
- Access the cash or spot .
- Buy and sell assets at the current market price or through a limit order.
- Manage your digital assets from your account or transfer them to an external wallet
Spot transactions are generally subject to low costs, clearly indicated before each operation.
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Risks associated with cash trading
The cash trading remains subject to the volatility of cryptocurrencies . Price fluctuations can be significant, and there is no guarantee of potential gains . Investors be aware:
- Suddenly lower risks of market prices .
- The need to secure their digital assets (prefer a Wallet for large amounts).
- Transaction costs that may vary depending on the platform and the volume.
Unlike margin trading or term contracts , there is no risk of forced liquidation, but the value of your assets can decrease if the market evolves unfavorably.
In cash trading strategies: How to optimize your purchases and sales?
Trading spot can adapt to different trading strategies :
- Buy and Hold : Buy a crypto and keep it over a long time, focusing on the long -term increase.
- Direct trading between users : Some cash markets allow direct trading between buyers and sellers, without intermediary.
- Arbitration : Take advantage of price differences between several platforms to buy low and sell high.
- Scalping : multiply small transactions on low market fluctuations
Traders can thus adapt their trading strategy to cash trading their investment objective .
Spot Trading: for whom, and when to favor this method?
Trading spot is ideal for:
- Beginners who wish to discover Crypto trading without complexity.
- Investors who want to really have their assets and manage them at their own pace.
- Those who seek to avoid the risks linked to the lever and the liquidation.
- Users who want to take advantage of the market trends
For experienced traders , cash trading can be combined with other trading options to diversify strategies and optimize yields.
Summary: SPOT Crypto vs Other types of trading
- Crypto spot : buy and sell assets at market prices real possession, no lever .
- Margin trading : Borrowing funds to increase exposure, lever effect , risk of liquidation.
- Term contracts (future): Speculation on the future price, no possession of the asset , lever possible, increased complexity.
- Options and derivative products: complex instruments to speculate on fluctuations without having the asset .
Conclusion: Understanding trading in cash to invest better in the crypto
The cash trading is the basis of crypto trading , offering a simple, transparent and accessible method to buy and sell cryptocurrencies . It allows investors to really own their digital assets , to take advantage of market fluctuations
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Noah
Training engineer, I quickly became interested in the field of finance. Convinced that decentralized finance has a bright future ahead of it, I participate in its democratization by developing Crypternon.
