Bitcoin (BTC), a virtual currency, is divided into “spot trading” and “leverage trading”. The features of these will be explained in detail using specific examples.
Also, in actual transactions, it is important to properly understand the merits and demerits of each and use them properly according to the situation.
What are Bitcoin / BTC physical trading?
Bitcoin (BTC) spot trading is a transaction in which legal currency is exchanged for the corresponding bitcoin (BTC).
In-kind trading is a method of trading with the trading value at that time, trading virtual currency within the range of the funds you have.
Changing from any currency to bitcoin (BTC) is called “buying” (long), and changing from bitcoin (BTC) to local currency is called “selling” (short).
For example, if you have 1 million $ in your account and the market price is 1 BTC = 500,000 $, you can purchase Bitcoin (BTC) up to 2 BTC. And if Bitcoin (BTC) was purchased through physical trading, can be transferred to an external account.
In addition, products and services offered outside can also be obtained by Bitcoin (BTC) payment.
What is Bitcoin / BTC leverage trading?
Bitcoin (BTC) leverage trading is a transaction that allows you to buy and sell bitcoin (BTC) that is several times the legal currency (deposit) in your account.
Leverage means leverage, a tool that moves large objects with a small force.
With leverage trading, you can trade Bitcoin (BTC), which is several times the security deposit in your account. Instead, if the market reverses, it can cost several times more than the spot transaction.
For example, if you have 1 million $ in your account and the market price is 1 BTC = 500,000 $, if you set the leverage to 3 times, 1 million $ will be a security deposit and 3 million $ worth of bitcoin (BTC) You can buy it, so you can buy up to 6 BTC.
On the exchange, you can multiply leverage up to five times. Bitcoin (BTC) traded through leveraged transactions can only be used for trading.
You cannot transfer money to any account. For more detail do Bitcoin Billionaire Login.
Advantages and disadvantages of spot trading
The advantage of physical trading is that you can obtain physical bitcoin (BTC), which can actually be used as a payment method.
Bitcoin (BTC) obtained through spot trading is accepted as having common value all over the world. Basically, you can transfer Bitcoin (BTC) anywhere in the world to your account and sell it.
On the other hand, when trading with the purpose of increasing the local currency in Bitcoin (BTC) trading, it is more difficult to make profits than in leveraged trading if the range of price movement is small in spot trading.
Advantages and disadvantages of leverage trading
With leveraged trading, you can trade Bitcoin (BTC), which is several times the amount of the security deposit in your account, so if you buy and sell at the same time, you can increase the profit several times as much as spot trading.
That is the biggest advantage of leverage trading. However, it is a disadvantage and a risk of leveraged trading that the loss is spread several times as much as the spot trading.
If the market reverses unexpectedly, the deposit in your account will decrease and you will lose money.
In addition, when the damage has increased, many exchanges have introduced a “forced loss cut” mechanism.
Forced loss cut
Mandatory loss cut is a system in which losses are settled early and settlements are forcibly settled to prevent further loss expansion.
Of course, if the price fluctuates greatly, you may lose more than the margin, so please trade with plenty of funds.
Margin maintenance rate
In general, the timing at which a compulsory loss cut is triggered is based on the value of the “margin maintenance rate”.
Syatem alerts you by e-mail when the margin maintenance rate falls below 100% and forces a loss cut when it falls below 50%.
Using Bitcoin (Bitcoin / BTC) Spot Trading and Leverage Trading
In order to trade Bitcoin (BTC), it is necessary to grasp the difference between spot trading and leveraged trading.
Please understand the merits and demerits of each and use the spot trading and the leverage trading depending on the situation.