Crypto Academy Week 3 Homework Post for @besticofinder: Spot Trading & Margin Trading

Homework Task by @besticofinder

Hello to all my brother’s ans sisters , I hope you all are doing very well. and enjoying the steemit.
In this post , I am here to submit my homework task 3 which I have carried out as required by @besticofinder, crypto professor.

Margin trading

When you are trading with margin trading , Margin Trading allows to combining the funds that you have on an Exchange with borrowed additional funds from the broker or an exchange that you are in order to trade and buy assets. This means that you can get leverage on your actual investment or funds.

Margin trading is the process of borrowing funds to buy stock from your broker or an exchange. Basically a loan to you from your broker

For Example: As You want to purchase a bitcoin and you have in your account only $1000 to buy a bitcoin . but you want to get even more exposure to bitcoin that your thousand dollars. Well then if you are on a margin Trading platform , then you can borrow . Let's say you borrow $9000 , So that you now in total you have your $1000 Plus in additional $9000 you borrow from the exchange or a broker . Now you have ten thousand dollars to buy bitcoins in total. That sounds great of course because now you get a much larger exposure to the assets that you are going to purchase. And with that radio, you have a 10x laverage. That means that whatever your funds is in this case $1000, the real exposure that you have into bitcoin would be 10x of your initial investment. So when the stock moves up , you are getting higher returns .

But There is a one condition, when you are borrowing funds from your broker, you will have to sell off your shares the same day . This can be risky if the price falls too low at the last minute of the trade.

So This is the Margin Trading. Margin trading is a high-risk, high-reward trading strategy .You will also make profit and sometimes you will also have to suffer loss.

The reality is that margin trading is an inherently risky strategy that can transform even the safest blue-chip stock purchase into a high-stakes gamble. It allows aggressive traders—both individuals and institutions—to buy more shares than they could otherwise afford. When things go according to plan, these investors make a lot of money. When things go south, it can get really ugly, really quickly.

Spot Trading

The concept of Spot Trading is taking from the stock market and refers to the process of buying and selling of any cryptocurrency in which the exchange settles the trade immediately .

In simple words , when traders are taken and settled instantly , It is known as Spot Trading. It is necessary that , The traders are booked on the spot and not on a specific date in future.

To trade with Spot Trade, there are many tradeing ideas available in the market. You can be a buyer or a seller.

Example

Let’s say an online furniture store in Germany offers a 30% discount to all international customers who pay within five business days after placing an order.

Danielle, who operates an online furniture business in the United States, sees the offer and decides to purchase $10,000 worth of tables from the online store. Since she needs to buy euros for (almost) immediate delivery and is happy with the current EUR/USD exchange rate of 1.1233, Danielle executes a foreign exchange transaction at the spot price to buy the equivalent of $10,000 in euros, which works out to be €8,902.34 ($10,000/1.1233). The spot transaction has a settlement date of T+2, so Danielle receives her euros in two days and settles her account to receive the 30% discount.

Thank You

Cc:-
@besticofinder
@steemcurator01
@steemcurator02