What is Spot Trading at Binance? When you learn about cryptocurrency trading on Binance, you will see many tutorials related to spot trading and spot wallet. However, you do not understand and distinguish what the spot trading method is? It is different from other crypto trading methods on Binance. This article will walk you through the details of spot trading.
Table of Contents:
1. What is spot trading?
Before we learn about the concept of Spot trading, let’s look at a real-life example:
Your child has a lego set worth 500,000 VND.
Your grandchild has 10 comics, each worth 100,000 VND. Because both are tired of their things, so they decided to change immediately. At that time, your son took home 5 comics. And your nephew has 5 of his books and 1 set of lego just mistaken for your nephew.
This is a real example of spot trading. The cryptocurrency market is similar.
Spot trading on Binance (spot trading) is a method of trading (buying or selling) one coin for another at a price at the time of the transaction. And through trading, you gain or lose from the difference between the buy and sell prices of the cryptocurrency pair at different times.
For example,:
Trade the BTC/USDT cryptocurrency pair. The current market price of the BTC/USDT pair is 32000. This is 1 BTC = 32000 USDT. You have 32000 USDT in your wallet and want to buy 1 BTC. Do the following:
Choose the BTC/USDT pair and place an order to buy BTC. Immediately, in your wallet, there is 1 BTC and no more USDT.
Then you made 1 spot transaction of the BTC/USDT pair.
To profit from spot trading, when the market price rises to 1BTC = 35000 USDT. Place a Sell BTC order. At that time, your wallet will have 35000 USDT and no more BTC.
Therefore, after 2 spot trades, you have a profit of 3000 USDT. (The example does not include transaction fees for your understanding.)
P2P trading is the manual execution of buy and sell transactions between two users on the exchange, knowing who they are dealing with. While spot trading is when you execute an electronic order matching transaction, you only know at what price the order is executed and you don’t know exactly who you are dealing with.
The spot market has a continuous order matching speed, so it has a much better level of liquidity than the P2P trading method. In addition, you can also preset the price you want to buy or sell, and the order will be executed automatically.
2. Spot orders on Binance
Spot trading is popular because there are different types of orders. Depending on the type of order, you will easily buy or sell coins at the desired price. To learn and know how to apply it in practice, here are the 4 types of spot orders on Binance:
- Limit Orders
- Market order
- Stop Limit Order
- OCO order.
Limit order
This is an order to buy or sell cryptocurrency at a price you have chosen. After placing the order, the order will be automatically filled when the market price reaches the set price.
Example: Currently, the market price is at 1 BTC = 32000 USDT and you have 35000 USDT. Place a Buy BTC order with a limit order, setting the purchase price to 30000 USDT. When the market price drops to 30000 USDT, the exchange will execute your order. So you will have 1BTC and 5000 USDT in your spot wallet.
Market Order (Market)
This is an order to buy (or sell) a coin at the current market price.
Example: The market is currently priced at 1 BTC = 32000 USDT. You have 35000 USDT in your spot portfolio. Place an order to immediately buy 1 BTC in your spot wallet. There is 1 BTC and 3000USDT left (assuming the transaction fee is 0).
Stop-limit order
This order type combines 2 orders, including a stop order and a limit order. When you place a stop-limit order, the limit order is immediately triggered if the market price reaches the stop price. With such a principle of operation, traders often use stop-limit orders as stop-loss orders in the cryptocurrency market.
Example: The market is currently priced at 1 BTC = 32000 USDT. You have 35000 USDT in your spot portfolio. Place a stop-limit order. Buy 1 BTC at the stop price at 30000 USDT and the limit price at 29000 USDT. When the market price drops to 30000, the pending limit order will be triggered at 29000. When the market reaches the price of 29000, your wallet will have 1 BTC and 6000 USDT.
OCO Order
OCO stands for One Cancels the Other, which is an order to cancel the remaining order. OCO orders allow users to place two orders at the same time. The OCO order is a combination of a stop order and a stop-limit order. When 1 order is processed, the exchange will immediately cancel the other order.
Example: The market is currently priced at 1 BTC = 32000 USDT. You have 35000 USDT in your spot portfolio. Place an OCO Buy 1 BTC order as follows:
Limit Order: Price (the price of a limit order) at 33000 USDT. When the market reaches this price, the Buy BTC order at 33000 is immediately activated and cancels the stop-limit order.
Stop-limit order: Stop at 31000USDT. At this price, the limit order of the stop-limit order is activated.
Limited to 30000USDT. At this price, the order to buy BTC at 30000 will be fulfilled and at the same time cancel the limit order at 33000
3. Binance Spot Trading Portfolio
Spot wallet on Binance is a wallet to store the coins you use to trade spots. When you want to trade a spot, you need to have a coin in your spot wallet. If your coins are in a P2P wallet, you need to perform a transfer from a p2p wallet to a spot wallet before making a spot transaction. In addition, you can also deposit coins from other exchanges on Binance’s spot wallet and vice versa. In addition, if you do not trade, you can also store the coins on a spot wallet.
To access the spot wallet, do the following: select “Wallet” in the dashboard, then continue to select Fiat and Spot.
In the Spot wallet interface, you can track the balance of the coins, perform transactions related to the spot wallet and transfer it to the interface of other wallets on the Binance exchange.
Conclusion
We just learned about spot trading, how to type orders in spot trading and spot portfolios. In the following articles, we will continue to learn about the features and other types of transactions on Binance.
