What is spot trading?
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 4 min
In short
Spot trading means buying or selling the actual asset with money you already have, with delivery happening at the moment the order fills. Because nothing is borrowed, a falling price can never leave you in debt. What you buy is normally yours to withdraw to your own wallet.
Key points
- You can only trade with funds you actually hold
- No borrowing means no liquidation and no margin call
- What you buy can be withdrawn to your own wallet
- Losses are capped at the amount you put in
Definition
A trade in which the asset itself changes hands as soon as the order fills, funded entirely from balances you already hold rather than from margin or borrowing.
Deposit 100,000 yen and buy bitcoin with it, and the balance records that amount of bitcoin as yours. If the price halves, the position is worth 50,000 yen — but the loss stops at the 100,000 yen you committed, and no one can bill you for more. That ceiling is the main difference from margin trading.
Most exchanges let you withdraw spot holdings to an external address. Moving them to your own wallet insulates you from an exchange failure or a withdrawal freeze, but hands you full responsibility for the private key. Leaving them on the exchange is easier to manage and means accepting the exchange's own risk.
Spot screens usually come in two forms: an order book where you post your own price, and a dealer-style window where the operator quotes a price to you. The wording is the same but the real cost differs, because the dealer quote generally has its margin built into the price.
Watch out for
- · Dealer-style windows can carry a wide gap between buy and sell quotes, so a position may show a loss the moment it opens
- · Assets left on an exchange are frozen during outages or withdrawal suspensions
- · Spot still carries full price risk — the value can fall far below what you paid