Today I bring you pure content: Spot trading + Guide: From Basics to Martingale Strategy (DCA)
1. Introduction
For beginners, cryptocurrency trading can be a complex field. Spot trading, as one of the simplest traditional methods of buying and selling financial assets, is an important starting point for entering this field. This article will provide you with a detailed introduction to the fundamentals of spot trading, including its differences and advantages compared to other trading forms. It will also demonstrate spot trading operations using Binance as an example, while delving into the Martingale Strategy (DCA) and how to apply this strategy for trading on OKX+. Please note that the content of this article is for informational sharing only and does not constitute investment advice.
Introduction to the Basics of Spot Trading
Basics of Spot Trading
(1) What is Spot Trading?
Spot trading is an immediate and direct form of trading, with transactions settled instantly without any leverage. It can be used for various asset classes, such as cryptocurrencies, stocks, commodities, forex, bonds, etc. Although trades can be conducted directly between traders, they are usually facilitated by trading platforms like Binance. In spot trading, both parties immediately fulfill the contract, actually delivering assets and making payments. These assets include actual goods or financial assets. This form of trading generally takes place on stock exchanges or cryptocurrency trading platforms, ensuring transparency and fairness in transactions. In the cryptocurrency field, purchased cryptocurrencies can be stored in wallets for various uses, such as transfers, staking, voting, or governance, and can also be traded on the market.
The difference between the Spot Market and the Contract Market
Spot markets execute immediate or short-term trades with instant delivery based on current market prices determined by supply and demand; whereas contract markets involve contracts with future delivery dates, with prices determined by the agreement between buyers and sellers.
(3) The difference between Spot Trading and Margin Trading
Spot trading requires full payment to purchase assets and immediate delivery, while margin trading allows borrowing funds to establish larger positions, amplifying potential gains and losses.
(4) Advantages of Spot Trading
Lower risk: The spot market only involves buying and selling orders, without worrying about forced liquidations or margin calls, suitable for users who want to buy and hold. Simple and clear: Spot trading operations are straightforward, everyone can participate, making it suitable for beginners. Instant opening and closing: Traders can enter or exit trades at any time.
3. Binance Spot Trading Operation Guide
(1) How to Access the Binance Spot Interface
Log into your Binance account and click 'Trading' → 'Spot Trading.'
The page will redirect to the Binance trading interface, where the left side shows the order book (sell orders are red, buy orders are green), the middle shows the trading chart (using BTC/USDT as an example), and the right side shows the trading pair list (you can use the 'search' function to find specific trading pairs). The area below the chart is for creating buy and sell orders, and you need to recharge your spot wallet before placing buy and sell orders. If you want to buy BTC with USDT, you need to first recharge USDT into your spot wallet; click the '+' on the chart to recharge your account and select your preferred method.
(2) How to Use USDT to Buy BTC
Select the order type; a limit order is for setting a specific price for the order (not necessarily the current price), while a market order is to execute the order as quickly as possible at the current real-time price.
If using a limit order, set the price and the quantity to be purchased, and click 'Buy BTC' to create the order. A notification will appear at the top right of the screen confirming the successful creation of the order, and traders can track current orders at the bottom of the trading interface.
When BTC reaches the order price, the order will be executed.
3) How to Sell BTC for USDT
Select the order type, set the quantity, and click 'Sell BTC.' After choosing a market order, the sell order will be created and executed immediately at the market price.
(4) How to View Order Details
Traders can view details of historical orders and transactions at the bottom of the trading page. Click the 'Edit' button next to 'Price' and 'Quantity' to edit the current order, click the trash can icon on the right to cancel a single order, or click 'Cancel All' to cancel all current orders.
4. Types of Markets for Spot Trading
(1) Over-the-Counter Trading (OTC)
Buyers and sellers trade without an exchange, with traders or brokers acting as market makers. OTC prices are usually cheaper but not always public, and they are more private and less regulated than exchange trading, allowing investors to buy and sell large amounts of cryptocurrency with minimal impact on market value.
(2) Peer-to-Peer (P2P)
Traders can trade directly, similar to OTC trading, without third parties or intermediaries. Traders can choose trading conditions that suit them, but the lack of third-party custodial services may lead to a risky trading environment, and there may be issues with slow settlement times and lack of liquidity.
(3) Centralized Exchanges (CEXs)
Like traditional stock exchanges and online brokerage firms, they use an order book method to match buyers and sellers, provide custodial services, have fast transaction speeds, high security, and customer protection, but will charge transaction fees. This is currently the most common way to access the cryptocurrency spot market.
(4) Decentralized Exchanges (DEXs)
No need for brokers or intermediaries; trading is achieved through automated market makers (smart contracts). Users can trade directly from their wallets without sacrificing privacy or exposing themselves to counterparty risks. Transaction fees are usually lower, but fees may spike when the blockchain network is congested, and there may be issues with limited liquidity and poor user experience.
5. Potential Risks of Spot Trading
There are no alternative solutions if issues arise after spot trading is completed.
Spot market returns are generally lower compared to futures and margin trading, as the latter two can achieve higher returns through leverage.
In some cases of physical delivery, it may be necessary to handle issues such as storage of physical assets.
Spot trading is not suitable for hedging models and risk avoidance plans.
Therefore, participants in cryptocurrency spot trading should be cautious, only investing funds they can afford to lose, and selecting reliable, high liquidity, and high-security exchanges.
6. Introduction to the Martingale Strategy (DCA)
(1) What is the Martingale Strategy (DCA)?
It is a strategy where traders purchase specific assets at set time intervals, allowing them to buy assets at multiple price levels to average the cost. If the market trend is contrary to the initial trade, better entry prices can be obtained, and positions can be closed for profit upon reaching the profit target. Currently widely used in the cryptocurrency sector, but does not guarantee capital protection; investors must control risks. OKX has introduced Martingale strategies for both spot and contract trading in the crypto sector, optimized for the characteristics of the crypto world, and is an automated batch, low-point bottom-fishing strategy.
(2) What is the difference between the Martingale Strategy (DCA) and Regular Investment
People often confuse 'DCA' and 'Regular Investment.' Regular investment is to invest a fixed amount at fixed time intervals, regardless of market trends; whereas DCA is more flexible, allowing control of the purchase price, triggering buy orders when prices fall to a fixed percentage, and triggering sell orders when the market recovers and reaches the profit target.
(3) The Operating Principles of the Martingale Strategy (DCA)
Users start trading strategies through parameters (or selecting preset parameters). From the start of the trading trigger, the order is executed a certain number of times. If the asset price falls by a specified percentage, the strategy tool executes a second trade (which is a multiple of the first order), repeating this cycle until it reaches the maximum number of orders, profit-taking level, or stop-loss level. If the profit target is reached, the next trading cycle begins. OKX's Martingale Strategy (DCA) has advantages such as enhanced intelligent strategies (determining the best parameters using backtesting parameters and token characteristics), flexible startup conditions (allowing continuous trading cycles that can run indefinitely through profitable orders or selecting entry times using technical indicators), and high capital utilization (investors can flexibly retain the minimum necessary funds).
(4) Trading Cycles of the Martingale Strategy (DCA)
DCA operates on a continuous investment model, where a complete trading cycle includes the initial order and profit-taking order. The 'profit order for each cycle' refers to the percentage of profit the trader wishes to earn in each trading cycle; the trading cycle ends upon reaching the profit target; the stop-loss price = average transaction price of the initial order * (1 - stop-loss target), triggering the stop-loss price will end the entire strategy and will not automatically start a new cycle.
7. How to Create a Martingale Strategy (DCA) for Trading on OKX
On OKX's navigation bar, hover over 'Trading' and then click 'Strategy Trading Tools' (you can also click directly on strategy trading or click on Strategy Square/Create Strategy).
In the Strategy Square, select average cost strategies, then choose either the spot Martingale strategy or the contract Martingale strategy as needed (this time taking the spot DCA Martingale strategy as an example).
You can choose the smart creation feature provided by OKX (to be used directly based on historical backtesting and risk preferences).
If you want to create it yourself, click the manual creation button and fill in the basic parameters.
If advanced settings are needed, continue to fill in the parameters, confirm, and click to create the strategy.
After deploying the spot Martingale strategy tool, you can view it in the strategy section at the bottom of the main screen of the trading strategy tool. Click the 'Details' button on the far right to view specific data and operation status of the strategy, and click the 'Stop' button next to it to halt the strategy.
Risk Warning
There are risks associated with spot trading and the Martingale Strategy (DCA) such as difficulties in handling abnormal situations after trades are completed, limited returns, physical delivery issues, unsuitability for hedging, unpredictable market trends, no capital protection, impact from parameter settings, and platform-related risks. Investors should be cautious and use funds they can afford to lose.
