Spot Trading is the process of buying and selling cryptocurrency at the current market price for immediate delivery.

How It Works: The Most Direct Form of Trading

Spot trading is often considered the most straightforward and fundamental type of trading in both traditional finance and crypto markets. When you perform a spot trade, you are buying or selling an asset "on the spot," meaning the transaction is executed instantly at the best available price. This method allows you to take immediate ownership of the asset, which is then held in your wallet.

This form of trading is primarily used for two main goals: a long-term investment strategy, such as HODL, or for short-term profits, where traders buy an asset at a low price and sell it at a higher price. Spot trading is typically less complex and carries lower risk than other methods like futures or margin trading, as you are not using leverage or contracts.

Spot Trading vs. Other Trading Types

The key difference between spot trading and other forms of trading is ownership and timing. In spot trading, you own the underlying asset and can hold it for as long as you want. In derivatives trading, you only own a contract that represents the asset, and the contract is limited to a specific time in the future.

Spot trading can be done on a variety of platforms, including a centralized exchange or a decentralized exchange. On a CEX, trades are executed through a digital order book, where open buy and sell orders are matched. On a DEX, trades are often facilitated by a liquidity-pool. In both cases, the goal is to buy or sell an asset at its real-time market price.