Are you thinking about getting involved in cryptocurrency spot trading? If so, it’s important to know that the exciting practice has a few basic concepts behind it, some popular tactics that traders use regularly, as well as several pros and cons. Take time to review the ups and downs and basic information about crypto spot trades and how they work before putting real money on the line.

Those who spend a few hours per week or per day buying and selling in the spot market are part of the fast-paced world of cryptocurrency markets. To begin, view the learning process as a four-part system. Part one is about gaining an understanding of what you’ll be doing. The following three pieces of the puzzle include learning the advantages, disadvantages, and common tactics. Here’s how to get underway.

How Spot Trading Works

Consult any beginner’s guide to cryptocurrency, and you’ll see a section on spot trading, which happens to be one of the simplest and most frequent ways people buy and sell crypto like bitcoin, Ethereum, Cardano, and others. Spotters typically acquire them and sell them on the open, also called the spot market. They don’t use derivatives like CFDs (contracts for difference) to speculate on price, don’t use leverage or borrowed money to make their purchases, and mainly operate as pure speculators who buy low and sell high.

The spotter’s usual aim is to turn a profit on a round-trip transaction. A huge number of them follow bitcoin prices exclusively and wait for price pullbacks. A spotter might hold for an hour, day, week, or month. The end strategy is to sell at a price higher than your entry point.

Trading Cryptocurrency Bitcoin

The Upside

Pros of spotting include its utter simplicity. Additionally, those who do spot trading of crypto pay no commissions because they don’t use an intermediary. They purchase directly from a seller. The technique also means participants hold the actual assets in their portfolios until they sell. There are no borrowed funds involved. A spotter makes no frills, direct purchases of cryptocurrency for speculative purposes.

The Cons

Probably the biggest downside is not having access to leverage, as you might have through a CFD broker. Small price moves might make the practice counterproductive for long periods of time. When you use a broker and gain access to more buying power, even a so-so price swing can be highly profitable or cause a bigger than normal loss. The other primary negative aspect of the spot is the inability to short the market or make profits on price declines. Using a CFD, for instance, lets users speculate on rises or falls in crypto prices without the obligation to own the underlying currency.

That’s why spot enthusiasts are always hoping the prices go up. They essentially have no way to earn a profit in a downward-trending market. Tactics for spotters are basic, mostly focusing on following trends and looking at moving average cross-overs. Due to high volatility in crypto markets, most traders view long-term charts, like weekly or monthly time frames, and pay attention to 200-day moving averages to gain insight into trend changes.

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