Type of Trading
Now that you know more about the different types of exchanges, let's dive deeper into the crypto-trading world. In this module, we'll explain two major trading types, Spot trading and Perp trading, and how they work.
Introduction
Now that you know more about the different types of exchanges, let’s dive deeper into the crypto-trading world. In this module, we’ll explain two major trading types, Spot trading and Perp trading, and how they work.
Crypto trading is the process of buying and selling cryptocurrencies on an online exchange platform. Crypto traders use technical analysis and charting tools to identify trends and make informed decisions about when to buy and sell digital assets. Crypto trading can be highly profitable, but it also carries a high degree of risk due to the volatile nature of the cryptocurrency market.
Spot Trading
Spot trading is a type of securities transaction that involves the immediate delivery of securities and payment of the corresponding cash amount. Spot trading is the most common type of securities transaction and is typically used to buy and sell stocks, bonds, commodities, currencies, and other financial instruments. Spot trades are usually conducted over-the-counter (OTC) or through an exchange.
Benefits of spot trading
Low Fees: Spot trading typically has lower fees than other trading methods, such as futures or options.
Quick Execution: Spot trades are executed quickly, allowing traders to take advantage of short-term price movements.
Leverage: Spot trading allows traders to use leverage, which can magnify gains and losses.
Liquidity: Spot markets are highly liquid, making it easy to enter and exit trades.
Accessibility: Spot trading is accessible to both retail and institutional traders.
There are three ways you can do Spot Trading
1.Centralized Exchanges
Centralized exchanges (CEX) are managed by a centralized institution that provides convenient and secure trading for both parties. Trades are aggregated between buyers and sellers by means of pending orders in the order book. Before one can trade on a centralized exchange, one needs to register a trading account and complete KYC (identity authentication) before trading.
2.Decentralized Exchanges
Decentralized exchanges (DEX) have no centralized institution participating in matchmaking. Decentralized trading in the crypto market is done by liquidity in smart contracts and implementing liquidity pricing based on algorithms.
Users provide liquidity to the trading pool or start trading directly, simply by connecting their wallets to the smart contract. The assets of users remain in their wallets throughout the trading process while users do not need to register an account or KYC.
3.Over-the-Counter
Over-the-counter (OTC) refers to transactions outside the trading venue. Unlike trading in a CEX or DEX, OTC does not require a fixed venue or platform, identity authentication, or strict rules. Trading parties mainly negotiate privately or through intermediaries in the form of one-to-one transactions, and the price is quoted through negotiation, rather than market pricing.
OTC brings certain risks as they are not guaranteed by a centralized institution. However, as a critical addition to the financial market, it has become an important method of spot trading due to its flexibility and openness.
Perp Trading
Perp trading is a type of trading that involves the purchase and sale of perpetual contracts. Perpetual contracts are derivatives that do not have an expiration date and can be held indefinitely. Perp trading is popular among traders who are looking to take advantage of the high leverage and low fees associated with these contracts. Perp trading is also attractive to traders who are looking to hedge their positions or speculate on the price movements of various assets.
Benefits of perp trading
Diversification: Perp trading allows investors to diversify their portfolios by investing in different asset classes. This can help reduce risk and increase returns.
Leverage: Perp trading allows investors to use leverage to increase their returns. Leverage is the use of borrowed money to increase the potential return on an investment.
Liquidity: Perp trading provides investors with the ability to quickly and easily buy and sell assets. This can be beneficial for investors who need to access their funds quickly.
Low Fees: Perp trading typically has lower fees than other forms of trading. This can help investors save money on trading costs.
Access to Different Markets: Perp trading allows investors to access different markets that may not be available through traditional trading methods. This can provide investors with more investment opportunities.
Conclusion
Spot Trading and Perp Trading are two popular ways of trading. Spot trading is rather suitable for beginners and the most common way to start trading. While Perp Trading is riskier, it’s suitable for pro traders who already have many trades in their pocket and know how to manage risk.
Highlight
The most accessible and easiest way to do trading for beginners is Spot Trading. You can try it at the Gate Spot market.
Try Uniswap or Sushiswap if you want to experience trading on a DEX platform. Remember to be cautious and learn about the token first before investing in it.
Perp Trading is more suitable for experienced traders who are aware of the high risks and are familiar with trading.
Main Video
Related Articles
Type of Trading
Now that you know more about the different types of exchanges, let's dive deeper into the crypto-trading world. In this module, we'll explain two major trading types, Spot trading and Perp trading, and how they work.
Introduction
Now that you know more about the different types of exchanges, let’s dive deeper into the crypto-trading world. In this module, we’ll explain two major trading types, Spot trading and Perp trading, and how they work.
Crypto trading is the process of buying and selling cryptocurrencies on an online exchange platform. Crypto traders use technical analysis and charting tools to identify trends and make informed decisions about when to buy and sell digital assets. Crypto trading can be highly profitable, but it also carries a high degree of risk due to the volatile nature of the cryptocurrency market.
Spot Trading
Spot trading is a type of securities transaction that involves the immediate delivery of securities and payment of the corresponding cash amount. Spot trading is the most common type of securities transaction and is typically used to buy and sell stocks, bonds, commodities, currencies, and other financial instruments. Spot trades are usually conducted over-the-counter (OTC) or through an exchange.
Benefits of spot trading
Low Fees: Spot trading typically has lower fees than other trading methods, such as futures or options.
Quick Execution: Spot trades are executed quickly, allowing traders to take advantage of short-term price movements.
Leverage: Spot trading allows traders to use leverage, which can magnify gains and losses.
Liquidity: Spot markets are highly liquid, making it easy to enter and exit trades.
Accessibility: Spot trading is accessible to both retail and institutional traders.
There are three ways you can do Spot Trading
1.Centralized Exchanges
Centralized exchanges (CEX) are managed by a centralized institution that provides convenient and secure trading for both parties. Trades are aggregated between buyers and sellers by means of pending orders in the order book. Before one can trade on a centralized exchange, one needs to register a trading account and complete KYC (identity authentication) before trading.
2.Decentralized Exchanges
Decentralized exchanges (DEX) have no centralized institution participating in matchmaking. Decentralized trading in the crypto market is done by liquidity in smart contracts and implementing liquidity pricing based on algorithms.
Users provide liquidity to the trading pool or start trading directly, simply by connecting their wallets to the smart contract. The assets of users remain in their wallets throughout the trading process while users do not need to register an account or KYC.
3.Over-the-Counter
Over-the-counter (OTC) refers to transactions outside the trading venue. Unlike trading in a CEX or DEX, OTC does not require a fixed venue or platform, identity authentication, or strict rules. Trading parties mainly negotiate privately or through intermediaries in the form of one-to-one transactions, and the price is quoted through negotiation, rather than market pricing.
OTC brings certain risks as they are not guaranteed by a centralized institution. However, as a critical addition to the financial market, it has become an important method of spot trading due to its flexibility and openness.
Perp Trading
Perp trading is a type of trading that involves the purchase and sale of perpetual contracts. Perpetual contracts are derivatives that do not have an expiration date and can be held indefinitely. Perp trading is popular among traders who are looking to take advantage of the high leverage and low fees associated with these contracts. Perp trading is also attractive to traders who are looking to hedge their positions or speculate on the price movements of various assets.
Benefits of perp trading
Diversification: Perp trading allows investors to diversify their portfolios by investing in different asset classes. This can help reduce risk and increase returns.
Leverage: Perp trading allows investors to use leverage to increase their returns. Leverage is the use of borrowed money to increase the potential return on an investment.
Liquidity: Perp trading provides investors with the ability to quickly and easily buy and sell assets. This can be beneficial for investors who need to access their funds quickly.
Low Fees: Perp trading typically has lower fees than other forms of trading. This can help investors save money on trading costs.
Access to Different Markets: Perp trading allows investors to access different markets that may not be available through traditional trading methods. This can provide investors with more investment opportunities.
Conclusion
Spot Trading and Perp Trading are two popular ways of trading. Spot trading is rather suitable for beginners and the most common way to start trading. While Perp Trading is riskier, it’s suitable for pro traders who already have many trades in their pocket and know how to manage risk.
Highlight
The most accessible and easiest way to do trading for beginners is Spot Trading. You can try it at the Gate Spot market.
Try Uniswap or Sushiswap if you want to experience trading on a DEX platform. Remember to be cautious and learn about the token first before investing in it.
Perp Trading is more suitable for experienced traders who are aware of the high risks and are familiar with trading.
Main Video
Related Articles