Hello Everyone i want know that what is the Difference between Margin Trading and Spot Trading. I don’t know anything about Margin and Spot Trading.
MARGIN TRADING= Margin trading is a method of trading assets using funds provided by a third party. When compared to regular trading accounts, margin accounts allow traders to access greater sums of capital, allowing them to leverage their positions. Essentially, margin trading amplifies trading results so that traders are able to realize larger profits on successful trades. This ability to expand trading results makes margin trading especially popular in low-volatility markets, particularly the international Forex market. Still, margin trading is also used in stock, commodity, and cryptocurrency markets.
In traditional markets, the borrowed funds are usually provided by an investment broker. In cryptocurrency trading, however, funds are often provided by other traders, who earn interest based on market demand for margin funds. Although less common, some cryptocurrency exchanges also provide margin funds to their users.
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SPOT TRADING = As the name suggests, spot trading takes place in the spot market at the spot (aka current) price. With spot trading, you are essentially executing a trade at the immediately available asking and bidding price that market participants are asking for. And because of the immediate nature of spot trading, you will need to have the available assets to pay for your trade by the date of settlement.
For instance, if you are buying US$1,000 worth of Ethereum with spot trading, you will need US$1,000 balance in your account by the date of settlement (usually T+2 days of the trade). Otherwise, the exchange will not allow you to enter into the Ethereum position.
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