Spot trading is a common and straightforward way of buying and selling assets in real-time markets. If you're new to spot trading, here are 10 essential terms you need to know:
1. Spot Price
The current market price at which an asset can be bought or sold immediately. It's constantly fluctuating based on supply and demand.
2. Order Book
A digital list of buy and sell orders for a specific asset, arranged by price level. It shows the current offers to buy (bids) and sell (asks) an asset.
3. Bid Price
The highest price a buyer is willing to pay for an asset. This is the buy side of the market.
4. Ask Price
The lowest price a seller is willing to accept for an asset. This represents the sell side of the market.
5. Spread
The difference between the bid and ask price. A smaller spread indicates a more liquid market, while a larger spread suggests less liquidity.
6. Market Order
An order to buy or sell an asset immediately at the best available price. This is the fastest way to enter or exit a trade but may result in slippage if the market is volatile.
7. Limit Order
An order to buy or sell an asset at a specific price or better. The trade will only be executed when the market reaches the set price.
8. Liquidity
The ease with which an asset can be bought or sold without affecting its price. High liquidity means there are many buyers and sellers, allowing trades to be executed quickly at stable prices.
9. Volume
The total amount of an asset traded over a specific period. High volume often indicates strong market interest and activity.
10. Slippage
The difference between the expected price of a trade and the actual price at which it is executed. This typically occurs in fast-moving or low-liquidity markets.
Familiarizing yourself with these terms will help you navigate the spot trading environment with greater confidence.
