“Spot trading” is a buy now, pay now deal where you can buy bitcoin (or other cryptocurrencies) with fiat or altcoins.
- “Spot trading” refers to the buying or selling of cryptocurrency (or other assets), where trades are settled immediately and the asset is physically delivered at the time of purchase.
- With spot trading, the exchange settles trades immediately and the underlying asset changes hands.
- Spot markets differ to derivatives markets since spot trading involves taking ownership of the actual asset and you can only trade with up to your available balance.
- The derivatives market for bitcoin are contracts based on the spot price, usually taken from several of the high-volume spot exchanges.
- Spot trading differs from derivatives markets as derivatives allow you to trade paper representations of the underlying asset and you can trade with more than your available balance.
Spot Trading Example
Suppose you want to buy 0.5 BTC at spot and the current market price (or spot price) is 9,000 USDT.
To execute the order, you will need at least 4,500 USDT in your trading account. Once the order is executed, your Tether (USDT) trading balance will decrease by 4,500 USDT and your bitcoin (BTC) trading balance will increase by 0.5 BTC. You can then withdraw your coins to a wallet you control to take ownership of those bitcoins. If the price increases to 11,000 USDT, you will have realised a profit of approximately 1,000 USDT, and this amount in bitcoin can be sold for USDT using your Interdax account to lock in the gain.
In contrast, you do not take ownership of the underlying asset with derivatives trading. Instead, you are trading a contract that represents the value of bitcoin. You can also borrow funds to leverage your position with derivatives trading, enabling you to open a position larger than the size of your trading account.
Therefore, depending on your trading style, you may want to emphasise on either spot trading or derivatives. Alternatively, you can use spot trades (e.g., BTC to USDT) if you want to sit on the sidelines and have no derivatives position open, and then convert USDT to BTC once the market is trending and open a leveraged position in BTC-PERP. Once you have exited the trade, you could then convert the profits to USDT to lock-in the value of your earnings.
Spot Trading on Interdax
Most cryptocurrency exchanges offer spot trading, where you can exchange cryptocurrencies for fiat currencies or stablecoins. When executing a buy order, you are buying the real asset (e.g. bitcoin), which you will be able to withdraw to your own wallet and take ownership of.
Interdax currently offers the following spot pairs:
To start spot trading, log in to Interdax and click on the Instruments panel on top of the trading chart.
Once you click on the button, the Instrument menu will appear. Choose “Spot” to see the markets, leverage, settlement and 24-hour percentage change. You can then click on the spot market you want to trade, e.g., BTC-USDT:
The order type and quantity for your trade can be selected using the order panel on the left-hand side of the chart. For the BTC-USDT Spot pair, the quantity for your trade is the amount of BTC you want to buy or sell.
The order panel displays the type of trading order (limit, market, stop limit, stop market, take profit, and take limit), the quantity (and limit price), and two buttons for buying and selling. You can only trade up to your available balance, which are displayed for each asset at the bottom of the order box:
The margin wheels show your balances on the left-hand side above the order panel. You can click on either asset (e.g., BTC or USDT) to zoom into the wheel and see yout available balance or funds placed on hold:
Market orders are executed immediately at the best available price. Stop loss and take profit orders are both types of market orders using triggers.
A stop loss may be used to sell BTC at the best available price once the last traded price goes below a particular trigger level. Similarly, a take profit order can be used to sell BTC at the ebst available price once the last traded price moves above a particular trigger level.
Once you have submitted your order, a confirmation screen will appear. A notification for your order submission and completion will appear on the bottom right-hand side of the screen:
When the market order has been executed, the balances will be updated. If you hover over the margin wheel for each asset, the balances will have changed.
Limit, stop limit and take limit orders can be used to trade BTC-USDT.
When choosing a limit order, you can set the limit price using the slider or by entering a price in the ‘Limit Price’ box. Enter the desired quantity into the Quantity box:
You can also choose from several order flags for your limit order under certain conditions. Hovering over the list or “GoodTillCancel” explains the options, which include “GoodTillCancel”, “ImmediateOrCancel”, "Post Only" and "Hidden". Read more about time in force options here.
Once the limit order is submitted, you’ll receive a confirmation. The limit order will be visible on the trading chart and on the order book. Open orders can be seen in the Active Orders tab of the Positions panel, as shown below:
The quantity required to submit the limit order is put aside temporarily and is shown by the margin wheel (and under Hold on the Balances page). Your available balance is equal to the market balance minus hold, initial margin and maintenance margin. If you have no derivative positions open, then your available balance is simply market balance minus hold. The value placed on hold is shown by the blue section of the margin wheel:
For example, if you have a limit order set at $15,000 to buy 0.10 BTC, and your USDT balance is $2,000, then $1,500 will be placed on hold until the limit order is cancelled or fulfilled, while the remaining $500 can be used for other orders, such as buying BTC-USDT or ETH-USDT.
Once the index price reaches the limit price, your order will be processed and a confirmation will appear on the bottom left of the screen. You can also check your transaction history to view the fill price, quantity executed, fees, and order IDs.