Hi friends, Here is my Homework Task for Spot Trading and Margin Trading by @besticofinder
For new users, it is very hard to understand and start their crypto trading journey.
Because they don't know what is the meaning of Trading also. Trading means simply buying any coin at a low price and selling at a high price. From this, we can earn additional money from our investments.
At starting I am also facing a lot of issues doing trading but luckily I got good friends, so they help me a lot in learning Trading. So before start trading first learn and watch some videos regarding Trading.
Question Number 1:-
Explain Spot Trading and Margin Trading
Engineers must go with Spot Trading. Margin Trading is a little bit risky.
Doing trading using our founds at the present market price is known spot trading.
For example, now I wish to buy a BAT coin using my BTC, so I place my order on seeing the order book and current market price base. All those details it's visible on the trading page so no need worries about it.
In my below screenshot I doing trading BAT/BTC in Binance Exchange. For this, I just go to my account, then choose the BAT/BTC pair.
I wish to buy BAT coins at the present market price. No need to wait. On checking the order book now it trading around 1145 sat, so place my order at 1142 sat around.
For placing an order just go BUY option, then place limit buy at 1142 sat for buying a bat.
Once you place your order when the price hit your limit price your order gets executed.
Then after you can check your BAT in your wallet.
Now my order executed at my condition successfully. Now I receive my Bat assets in my wallet. Like that we also sell our assets based on market price.
Like that we do Spot trading based on the current market price.
Here we do trading with our founds. Don't take any Loans or anything here. Completely we invest our Founds only here.
Margin Trading means doing trading with borrowed money from Exchanges on keeping our assets as Collateral.
For example, If you having $100 worth of amount in your wallet, but on seeing market condition you predict any other coin get a huge pump soon., but not having additional money to invest there. In that case on keeping 100$ worth of assets in collateral, you can borrow money from exchanges, using this you can invest those money in your wished coun, after finishing your trade you can repay those amount with Interest.
Here the risk is high at the same time rewards also high.
For example, your invested coin on using your borrowed money get dump huge then you lose your collateral amount too. So be care full on doing Margin Trading.
New users pls away from it, Until getting experience in Trading.
How To Do Margin Trading
I have previous experience in Margin Trading. But I lose my money here due to not knowing the crypto field. So New users don't go for it.
Doing Margin Trading is also very simple. For this just go to your Binance Account. At the bottom we can see the Trade option, just click it.
Then after this screen, now click Margin.
Now you need to transfer your funds to Margin Wallet, this just clicks three dots (...) Symbol. You get this screen.
Then select the Transfer button.
You get this screen,
All your assets do not support keep as collateral, only support good coins. For example in my wallet now I having BAT.
So on keeping BAT as collateral I can possible to borrow some money from Exchange.
For this here I choose BAT assets then need to Transfer those from Spot to Margin wallet.
For these Transactions, we no need to pay any fee here. Because of those assets tester from one wallet to another wallet in One Account. So no need to pay an additional fee here.
For Example, here I transfer my 500 BAT coins to Margin then I go for borrowing USDT. For this they offering 544$, this 2X from our 500 BAT coins current price.
Here we need to pay interest for every one hour. We can keep those how many days you want but need to repay borrowed money along with interest.
This feature useful sometimes but risky too. But here you can do trading with huge money on investing small collateral amount.
If you do not get success in your trade then you lose your collateral amount in a short period.
Question Number 2:-
Discuss the advantages and disadvantages of Spot Trading and Margin Trading
Advantages of Spot Trading
- Here we can hold our assets how long we wish.
- Invest our own money so no need to fear seeing a sudden market dump too.
- No need to pay any additional fee for holding in our wallet.
Disadvantages of Spot Trading
- Here you earn a low profit, based on investments only.
- Not possible to grab sudden opportunities in the market because we struck in that coin
- Miss good profits too.
Advantages Of Margin Trading
- Here possible to trade big amount using small founds too.
- Possible to book good profits in a short period.
- Without seeking our long term coins, on keeping those as collateral we can possible to trade another coin too.
Disadvantages Of Margin Trading
- If the market gets a sudden crash you lose all your founds permanently.
- Need to repay borrowed money along with Interest.
- New users don't know market conditions so possible to get huge lose
In each type of trading, we having some advantages along with disadvantages too. Based on market condition we must choose our trade as per our needs.
My strong advice New Users don't enter like those trading until getting Experience.
Thank You very much for reading my post.