When it comes to cryptocurrency trading, there are different forms of trading in the financial market. One of the main form of trading is the spot trading which is the most common and straightforward type of trading that simply involves a trader buying or selling any cryptocurrency from an order book on any exchange. Most cryptocurrency exchanges have what is known as spot trading section that provides traders the order types, tools and features to perform spot trading activities. For instance, a trader wants to buy HNT token, the trader logs into his/her exchange account, goes to the spot trading section and places a buy or sell order from the order book by either inputting his/her own price or buying or selling at the market prices. Depending on the order type used by the trader, the buy or sell order can be filled immediately or waits for the order to be matched and filled.
When it comes to spot trading in the financial market, there are a lot of benefits associated with it. Some of the benefits associated with spot trading in the financial market are… Firstly, spot trading gives traders the freedom to buy or sell any cryptocurrency instantly on the spot. Secondly, no minimum capital required to perform spot trading. Thirdly, Traders can buy low and sell high at any time without any restrictions. Fourthly, Spot trading is transparent and is executed through the exchange order book. Fifthly, Spot traders have the freedom to buy and hold, and sell at any time. Sixthly, the prices on spot trading are real-time. Seventhly, Spot traders have full control of their order decisions. Lastly, Spot traders can either buy at current market price using the market order type or set their own desired price and wait for the order to be filled
Even though spot trading offers a lot of benefits, there are still drawbacks associated with spot trading. Some of the drawbacks are; Firstly, fraders who buy or sell using spot trading can buy or sell their cryptocurrency higher or below their actual true value due to price volatility or low liquidity on the order book. Secondly, once an order has been executed using the spot trading, there is no refunds. Thirdly, price slippage can lead to unfavorable trades. Fourthly, the order book can be easily manipulated by whales. Finally, prices can be manipulated by bots which can lead to unhealthy trading environment.
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