Those willing to learn and grow as a trader can eventually earn a full-time income, and in some cases, much more. If you're ready to get in on the action yourself, you're going to have to choose a strategy. Whether you choose to trade stocks, forex, crypto, or another type of asset, you need to know how you will make trades.
You can trade futures, options, trade with margin, or trade within the spot market.What is spot trading, and why is it the most popular way to trade? Continue reading below to learn all about the spot market.
Start Trading the Simple Way
There are many advanced strategies when it comes to day trading.
Futures trading involves the buying and selling of contracts to purchase an asset at a future date, for a specified time. Likewise, options trading is the buying of contracts that give you the right to buy an underlying asset, without the obligation to actually buy it.
Trading with leverage allows you to borrow money to make larger trades than you can afford on your own. And these strategies are all very powerful. With enough practice, each one can make you a lot of money. But they can be very confusing to new traders, and very risky. Instead, a better approach is to learn the basics of trading in the spot market.
What is Spot Trading?
Spot trading takes place in the spot market. The term "spot trade" refers to the fact that money is exchanged for actual assets, to be delivered immediately at the specified time.
In most cases, this is immediate. Buying Bitcoin on a cryptocurrency spot market means that Bitcoin is added to your account as soon as the trade takes place.
In other cases, spot transactions have a settlement date. In the past, stocks took as long as five days before a transaction was settled. For most stocks, bonds, and foreign currencies today, this date is two days after the transaction occurs, referred to as T+2.
Once the transaction is settled, the asset is in your possession.
The spot market lists the spot price of a particular asset, which is the actual going rate, as determined by supply and demand in the market.
Buyers place orders by listing the price at which they want to buy, while sellers list their assets for sale at their predetermined price. In more liquid markets, this rate is changing constantly.
Benefits of Spot Trading
Trading in the spot market is simple. You check the price of an asset. If it looks good to you, you place an order and receive your shares. It's the instantaneous type of buying and selling we are used to.
There are no complicated contracts or expiration dates to be concerned with. If you want to buy and hold assets long-term, purchasing in the spot market assures you get immediate ownership. Then, any increase in prices means gains in your account.
A spot market is also a great option for short-term traders. Because assets trade hands in real-time, it's easier to make continuous buy and sell orders.
If you buy an asset, and the volatility of the spot price leads to a big gain in five minutes or an hour, you can sell the asset for a profit. So spot trading is a great strategy for day traders and scalpers.
What Can You Trade in the Spot Market?
Almost any type of asset or commodity can be traded in the spot market.
What is Spot FX Trading?
Forex is the biggest financial market in the world, with trillions of dollars moving hands on a daily basis.
It's the process of buying one currency for another. The exchange rate of the currency acts as your transaction fee. So you can trade popular currencies like GBP/USD and EUR/USD in the spot market.
What is Spot Stock Trading?
Stocks are also a great option, as you'll receive your shares right away. You can buy stocks from any stock market that your broker has access to, such as the NSYE or the NASDAQ. For access to a broader range of equities, you can spot trade indices and ETFs as well.
What is Spot Trading in Crypto?
Cryptocurrency is also a popular choice in the spot market. Buying crypto in the spot market means that transactions clear instantaneously. There is no settlement date, and your crypto arrives in your wallet right away.
What is Spot Gold Trading?
Commodities are also available in the spot market. Obviously, you aren't going to receive physical bars of gold. Rather, you are trading a commodity contract, with the intention of assuming ownership in a short time.
With commodities, in particular, most traders use the spot market in conjunction with the futures market. Commodities include any physical item, like gold, silver, oil, wheat, coffee, etc.
Where is Spot Trading Done?
Spot trading can be done in one of two ways; over the counter (OTC) or on an exchange.
OTC trades take place directly between buyers and sellers. There is no broker or order book in the middle of the transactions. OTC orders are typically reserved for those who make much larger transactions.
Most people, however, make spot trades through an exchange. Exchanges act as brokers, connecting buyers and sellers together. They have an order book, which shows a list of offers from sellers and orders from buyers. With this order book, the price is constantly adjusting based on current orders.
Almost any brokerage offers spot trading, as it is the most basic form of trading. Those looking to trade futures, or use leverage, may have to look a little harder to find a viable exchange.
Learn Strategies from the Expert Teacher
Are you ready to get started as a trader? There is unlimited opportunity to make an income in any of the markets described above, from stocks to crypto, and from the spot market to futures.
It can be overwhelming to try learning how to trade on your own. If you want to increase your chances of long-term success, you need mentors and a community.
Dr. Clemen Chiang, Ph.D., has spent over 20 years as a Wealth Coach to more than 50,000 students. His proprietary methodologies and strategies help people all around the world. Join the free webinar and learn the trading strategies you should be implementing from the Expert Teacher himself, Dr. Clemen Chiang!
If you want to speed up your journey to becoming a wealthy trader, be sure to sign up for the Spiking Cryptos Trading Masterclass so that you can learn to trade, invest, and build generational wealth in the best ways possible.
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