Spot Trading vs. Margin Trading

Spot Trading

Spot trading means buying and selling cryptocurrencies “on the spot” for immediate settlement. Spot helps you manage risk as you can only trade with capital you have. 

Given the nature of spot trading, you need to have the available balance in one currency to exchange for another.

For example, to purchase $1,000 USD worth of BTC with spot trading, you need a balance of $1,000 USD (plus fees) in your account and trade this balance in the BTC-USD pair’s order book when you buy.

Spot trading is the default trading mode on Blockchain Exchange when you log in.

Margin Trading

Unlike spot trading, margin trading allows you to trade in greater size than your account balance by temporarily borrowing from Blockchain.com. 

The multiple applied to your account is called leverage. Leverage is measured in multiples. On Blockchain.com, you can trade with 2X, 3X, 4X, or 5X leverage.

Not only can you buy (“go long”) with margin trading to increase your purchasing power, but you can also sell (“get short”) a position when you anticipate a decline in an asset’s prices. In the case of shorting, your P&L increases as the cryptocurrency decreases in price.

Margin trading is an optional feature on the Blockchain Exchange and must be activated by toggling to the Margin tab (pictured below).

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Important note
When considering trading on margin, you should determine how the use of margin fits your own investment philosophy. It is important that you fully understand the risks, rules, and requirements involved in trading digital assets on margin. Margin trading increases your level of market risk. You may lose some or all of the collateral you post in connection with a margin trade. Blockchain.com may initiate the sale of digital assets in your account, without contacting you, to meet a margin call. You are not entitled to an extension of time on a margin call. Further details are set out in the Margin user agreement.

 

 

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