Spot trading is the most common type of trading on crypto exchanges, which consists of buying and/or selling cryptocurrencies and immediately making a profit (or loss). Trading on the spot market is the easiest to learn, so it is highly recommended for beginners to start with it. 7b invites you to take a deep dive into the spot market and its features.
What is a crypto spot market?
The spot market is a market with special conditions for settlement of transactions between traders. And all orders in this market are called spot orders. Such a market is characterized by the instantaneous emergence of property rights during the conclusion of a transaction. This is the main distinguishing feature of transactions on the spot market. Prices in this market show the actual and most real situation. Simply put, the usual purchase of Bitcoin in the BTC/USD pair, without using margin and contracts, is just a spot market. In terms of security, this is the least risky type of trading. Even after buying a cryptocurrency and watching it fall, you can safely wait for the asset to grow back — for the waiting time you have become an investor.
What’s spot trading?
A spot transaction is an obligation to buy or sell cryptocurrency, which implies immediate delivery at the current market price, which is also called a spot rate. The spot market on crypto exchanges looks like an order book, displaying the activity of buyers and sellers. Buyers enter the market with their asset value (bid), which is the maximum amount they have the opportunity to spend. Sellers enter the market with an offer price (ask), which is the minimum amount for which they are willing to sell their crypto asset. In the order book, you can see all these prices and start trading based on these indicators.
In order to buy crypto on the spot market, you have to define the bid. In order to set an adequate or just a favorable price, look through the order book. It records all offers for the asset. On most exchanges, you can sort the order book by the desired pair. For example, BTC/USDT.
The order book looks like this:
This screenshot shows an order book of the spot market for the BTC/USDT pair. This means that you can buy (or sell) BTC for USDT. It is worth paying attention to those figures that are in the second line — these are the optimal purchase prices.
In order to sell crypto on the spot you have to determine your ask. Having determined the optimal price, place an order. The four most common are limit, market, stop limit and stop market. Some platforms expand the opportunities of traders with additional orders, more complex (at first glance), with special conditions.
Over-the-counter crypto trading
OTC trading (Over-the-Counter) is a type of trading in which the seller and the buyer conclude a trade directly with each other, bypassing the exchange. Transactions can be concluded with the help of professional intermediaries, for example, brokers. This option is considered one of the safest and most reliable. Within the framework of OTC trading, one large transaction is often carried out. And, as a rule, the transaction is not recorded in the order book and is not publicly displayed, which guarantees the confidentiality of the contract. What are OTC transactions for? Let’s explain it in simple words. Imagine, that you have bought 10 BTC 7 years ago and decided to sell them now. After the rapid rise in the price of it, the value of your savings has skyrocketed, so for a quick sale you need someone who can pay for everything at once. In addition, the direct sale of cryptocurrencies will have almost no effect on its price on the exchange. Transactions of such a scale will not bring down the price of the asset, so both sides are in the black.
Limitations of OTC trading
The main limitations of OTC include:
- Difficulties with asset sale
Although OTC trading is used in order to easily and quickly sell large volumes of cryptocurrencies, it is not always that easy. You may well face a situation where there is no demand for the asset that you want to sell, or you will have to significantly reduce the sale price in order to find a buyer.
Since OTC transactions are not recorded in the order book, as in traditional exchange transactions, they are considered less transparent. The sale or purchase price is not disclosed to the public in OTC trading.
OTC trading significantly increases the risks of unfair cooperation between the parties. So, for example, there may be a situation when you have agreed to sell an asset, but the buyer has not fulfilled the condition of the transaction.
How to spot trade on 7b broker app
7b crypto broker was created in order to facilitate the trading process as much as possible. Spot trading via 7b is as simple as 1-2-3. Just follow the simple instructions:
- You need to log in to your account or create a new one.
- Transfer the asset you wish to sell.
- Select the asset you want to purchase.
- Choose the right moment for the transaction. You can also set up a stop loss to avoid possible losses.
- Enter the desired amount.
- Confirm the transaction.
Cryptocurrency spot trading, fortunately, is a very simple trading option that is not difficult to understand and implement. If you are selling or buying cryptocurrency, then you are already a participant in the spot market. The main thing is to remember the key feature of spot trading — these are trades executed instantly. It is the current spot price of the crypto asset that is valid without any delays.