Spot Trading

Introduction

Spot trading offers a simple way to invest and trade. With crypto investing, your first experience will likely be a spot transaction in the spot market, for example buying ArdCoin at the market price and holding.

Spot markets exist across different asset classes, including cryptocurrencies, shares, commodities, forex, and bonds. You're probably more familiar with spot markets and spot trading than you think. Some of the most popular markets, like the UBX or MSE (Mongolia Stock Exchange), are spot markets.

What’s a Spot Market?

A spot market is a financial market open to the public where assets trade immediately. A buyer purchases an asset with fiat or another medium of exchange from a seller. Delivery of the asset is often immediate, but this depends on what’s being traded.

Spot markets are also known as cash markets because traders make payments upfront. Spot markets come in different forms, and third parties, known as exchanges, typically facilitate trading. You can also trade directly with others in over-the-counter (OTC) trades.

What’s Spot Trading?

Spot traders try to make profits in the market by purchasing assets and hoping they’ll rise in value. They can sell their assets later on the spot market for a profit when the price increases.

The current market price of an asset is known as the spot price. Using a market order on an exchange, you can purchase or sell your holdings immediately at the best available spot price. However, there’s no guarantee that the market price won't change while your order executes. There also might not be enough volume to satisfy your order at the price you wanted. For example, if your order is for 10 ArdCoin at the spot price, but only 3 are on offer, you will have to fill the rest of your order with ArdCoin at a different price.

Spot prices update in real-time and change as orders match. Over-the-counter spot trading works differently. You can secure a fixed amount and price directly from another party without an order book.

Depending on the asset, delivery is immediate or typically within T+2 days. T+2 is the trade date plus two business days. Traditionally, shares and equities required the transfer of physical certificates. The foreign exchange market also previously transferred currencies via physical cash, wire, or deposit. Now with digitized systems, delivery takes place almost immediately. Crypto markets, however, operate 24/7 allowing for usually instant trades. Peer-to-Peer trading or OTC can however take longer for delivery.