Spot trading comes from the traditional financial world and represents such a type of trade when one buys or sells a financial instrument at some current market price, the so-called spot price, for its immediate delivery.
In the realm of digital assets, crypto spot trading involves buying and selling coins at the current market price in real-time. It means that one buys certain amounts of cryptocurrency, and the seller, usually an exchange, transfers them to him instantly, and vice versa. There and then, such a transaction occurs instantly, thus enabling both parties to get the assets of their choice.
How does spot trading in crypto work?
Cryptocurrency spot trading involves two parties agreeing on a price to buy or sell tokens on an exchange. The current price of an asset is called the spot price.
How it works
- A buyer places an order to buy at a specific price. This is called the bid, which is the maximum price the buyer is willing to pay for the cryptocurrency token.
- A seller places an order to sell at their price — the ask, which is the minimum price the seller is willing to accept to sell the asset.
- The order book contains an ask side for sellers who want to sell and a bid side for buyers who want to buy. It displays the current buy and sell orders to help traders make informed decisions.
Once the buyer’s bid matches the seller’s ask, the trade is executed. For example, if a trader places an order to buy BTC at a market value of $82,093, the transaction will automatically occur on the bid side of the spot trading order book when a seller is willing to sell at that price ($82,093). Similarly, when a trader places an order to sell a cryptocurrency, that transaction will take place on the ask side of the order book.
How to start spot trading in crypto?
Using the Binance exchange as an example, let’s look at how crypto spot trading works.
After logging in to Binance, navigate to the spot trading page. If you haven’t yet decided which coin to buy or how to choose a trading pair, you can read our article on selecting the best trading pair based on specific criteria. If you already know your choice, let’s proceed.
For instance, you’ve decided to buy 0.05 BTC with USDT from your account. Ensure that you have a sufficient amount of the quote currency (in this case, USDT) to complete the purchase.
On Binance, there are two types of orders you can use: Market Order and Limit Order.
- Market Order executes the trade instantly at the current market price, providing a quick and guaranteed transaction.
- Limit Order lets you set a specific price at which you want to buy or sell. However, this order may not be filled if the set price isn’t reached.
Once you’ve chosen your order type, place the order for 0.05 BTC to finalize the purchase. Afterward, information about your trading pair will appear in the Order Book and your Trade History.
Is crypto spot trading profitable?
Spot trading offers an approachable entry into cryptocurrency trading, but it requires strategy and discipline to yield profit. Patience, research, and the right tools can help build a solid foundation.
The profitability of spot trading cryptocurrencies depends on an individual’s trading skills, risk management, market conditions, and other factors.
How to make money with spot trading
- Educate yourself
Take the time to understand how crypto markets work before diving in. A strong foundation in the basics will benefit you as markets evolve. TradeSanta’s guides or educational content on YouTube are great starting points for beginners. - Start small and scale up
Begin with a modest investment, observe how your trades perform, and increase your position only as you gain experience. Demo accounts can also provide a risk-free environment for practice. - Set stop-loss orders
Placing stop-loss orders is a key risk management tool to minimize potential losses. When set correctly, these can prevent significant losses during volatile market swings. - Use a trading bot
Automating trades with a bot can enhance your decision-making and help you act quickly on market signals. TradeSanta trading bot, for instance, offers risk management tools, trading signals, and bot templates to streamline your trading strategy. - Join a trading community
Engaging in platforms like Telegram, Discord, or Reddit crypto groups can offer valuable insights and support. However, always do your own research before acting on anyone’s advice.
By following these steps, you’ll set a foundation for successful spot trading and potentially avoid common pitfalls in this volatile market
Crypto spot trading vs crypto futures trading
Now that we’ve covered the specifics of spot trading, some traders may ask: which is better, trading cryptocurrencies on the futures market or the spot market? As always in the investment world, you will not find a clear-cut answer, and if someone tells you the opposite, it’s more likely that person is being misled. This is because the choice depends on the characteristics of the trader: experience, risk tolerance, specific situation, etc.
Below you will find a comparison table that aims to reflect the specifics of both types of trading. But first of all, what are futures? Crypto futures are contracts that reflect the value of the underlying cryptocurrency. By buying a futures contract, an investor does not buy the underlying asset itself but becomes the holder of a contract with the obligation to buy or sell the asset at a future date. This means that, unlike a spot, the transaction will take place on a specific date rather than immediately. For example, when you trade a BTCUSD contract, you are not buying or selling BTCs, but trading on the expected value of BTCs. In other words, you are betting that the price of BTC will move in parallel with the value of the contract without actually owning the asset.
| Feature | Spot Trading | Futures Trading |
| Price setting | Based on live market prices — you buy or sell at the current price. | Driven by the spot price and other market factors. |
| Ownership | You own the asset outright once the trade is completed. | You don’t own the asset; you’re holding a contract to buy/sell at a future date. |
| Leverage | No leverage — you need the full capital to buy the asset. | Leverage is available — you can control a larger position with less capital, but it increases risk. |
| Risk | Limited to the amount you invest (spot price volatility). | Higher risk due to leverage and margin calls — you could lose more than your initial margin. |
| Execution Speed | Trades execute instantly at the current market price. | Execution depends on the contract and time of expiry — trades don’t happen immediately. |
| Trader Type | Ideal for short-term traders and investors looking for simplicity and direct ownership. | Suitable for experienced traders, hedgers, or those speculating on price movements over time. |
| Use Case | Best for quick entry/exit trades, day trading, or holding assets directly. | Useful for hedging, taking speculative positions, or trading on price movements without owning the asset. |
FAQ
What is crypto spot trading?
Crypto spot trading involves buying or selling crypto assets at the current market price with trades executed immediately.
Which is better, spot or futures trading?
Everything depends on the trader’s goals and risk tolerance. If simplicity and immediate ownership are in view, then spot trading is better; if higher returns are aimed at with the use of leverage, then one may get such an opportunity in futures trading, though it is riskier. The former is preferred by beginners, while experienced traders might prefer the latte