Before starting their journey in cryptocurrency trading, one of the major confusion that the traders have been facing every time is spot trading or margin trading & which one is suitable for us. These are the two trading options given to the traders that you have to decide before begin your trading journey. In the article, let's discuss spot & margin trading, and also you can choose from it.
What is spot trading?
From the term, we could define that spot trading is buying or selling your digital assets instantly on a specific timeframe. In this type of trading, you can make a purchase and your crypto will be delivered to your wallet instantly. It takes into account within the time of the payment.
For example, if you are buying $2000 worth of Ethereum (ETH) with a spot trading process, you will need to have a balance of $2000 into your account at the date of settlement (usually T+2 days of the trade). Otherwise, the exchange wouldn't allow you to enter into the process.
Advantages of spot trading:
For the beginners, spot trading is the best strategy which aid to manage your risk. From Koinbazar, you can do your spot trading safe and consistent experience. Since you can trade from the balance which you have and also wouldn't be ended up losing more than that you have already into your account.
Disadvantages of spot trading:
The disadvantage of spot trading is that in some situations managing your risks could be downfall itself. Because, you have limited balance in your account, and you can't take full benefits of good trading opportunities. With $2000, you can make much profit from it.
What is margin trading?
The concept of margin trading is that, trade your funds acquired by the third party to leverage your position and it's not like spot trading. In this trading, you don't need the entire trading value to enter the position. All you need to do is to have collateral of digital assets which is at the margin position that you are trying to enter.
For example, if you are buying $2000 worth of Ethereum (ETH). You need just $20 into your account to begin a trade of $2000 worth of Ethereum. At the time, you need to keep 1% of the amount in your account to keep the position open. Depends on your trade, you can withdraw profits or again enter into more positions.
Advantages of margin trading:
The main advantage of margin trading is to gain more profit. You can trade as much as your investment on a crypto exchange. With these options, trading your crypto at the perfect time can get a return on investment. Depends on your trading style, you can get more advantages from it.
Disadvantages of margin trading:
In margin trading, there is a lot of inherent risks involved in it. You can imagine that trading 100% of your capital makes it possible for you to lose your money than your initial investment. Unlike spot trading, you can lose as much as the capital that you have.
Which trading strategy is the suitable one for you?
Eventually, the choice of strategy depends upon the trader's choice. Because no one understands that more than you do. Based on your risk tolerance and knowledge of investing, you need to choose which is the right strategy for you.
