Crypto Academy Week 3 Homework @besticofinder [ Sri Lanka ]
One of the biggest problems sellers have before starting their journey is to decide between spot trading and line trading. Indeed, these are two trading options offered by traders that you should take before taking your trading trip. Here's what you need to know about these two to help you make the right choice between spot trading and line trading.
What is Spot Trading?
As the name suggests, spot trading takes place in the local market in the price range (aka current). By trading spots, you are actually trading at the fastest available price of asking and bidding the market participants they want. And because of the rapid nature of the spot trading, you will need to have the assets available to pay for your trade on the day of payment.
For example, if you buy Ethereum which costs US $ 1,000 for trading in spots, you will need a balance of US $ 1,000 in your account on the payment date (usually T + 2 trading days). Otherwise, the exchange will not allow you to replace Ethereum.
What is margin Trading?
Margin trading is the concept of borrowing money from third parties to use your position. Margin trading is not the same as local trading. With line trading, you do not need to have all the trading money to replace it. All you have to do is have a mortgage on the property next to the position you are trying to enter.
For example, suppose you are looking to buy Ethereum worth US $ 1,000. Since trading platforms like Overbit give you up to 100x power on crypto currencies, this means you only need US $ 10 in your Ethereum trading account for US $ 1,000.
At any time, you only need to keep 1% (100x) of the contract amount in your account to keep the position open. Depending on the nature of your business, you may be able to withdraw profits or make multiple appointments.
Advantages of spot Trading
First of all, spot trading helps you manage your risk. Since you can only trade the balance you have, you will not end up losing more than you already have in your account. Spot trading ensures that you only trade based on the goods you have and prevent overuse.
Disadvantages of spot Trading
The profitability of trading risk management spots can be a problem in itself in some cases. Because you are limited in your account balance, you cannot take full advantage of good trading opportunities. So, even if you have a solid guaranteed trade, you can make as much money as your capital allows. For only US $ 1,000, there is only so much you can do with US $ 1,000.
Advantages Margin Trading
The biggest benefit of choosing a trading margin is the opportunity to increase your profits. Having a promotional feature in margin trading allows you to trade more than 100x of your capital on crypto instruments. With margin trading, good trading at the right time can give you many benefits.
Depending on your trading style, having a margin trading can be of great benefit to you. Take low frequency traders for example. Low-profile sellers only enter certain positions they are most confident in. Margin trading enables them to take full advantage of the low frequency but high trading that these traders may have noticed.
Disadvantages of Marine Trading
There is a natural risk involved in line trading. As you can imagine, trading up to 100x of your city allows you to lose more money than your initial investment. This is not the same as the spot business where you can only lose as much as the capital you have.
When trading on the line, your position can be closed if you do not have enough limit to support losses over time. Therefore, another factor to consider is the interest of your position, which is an uncertain amount depending on the position of your position and the platform you choose.