Crypto trading instruments

Crypto trading instruments

Instruments in the trading world are assets that can be traded in the market. It can be anything that holds some kind of value. Traders keep juggling these assets, buying and selling them, to drive the market and make profits. These instruments are broadly divided into two categories i.e. Cash Instruments and Derivative Instruments.


Cash instruments

These are such instruments that markets value directly. Hence, their value is inherent to them and not derived from anything else. Securities, loans, deposits, Crypto Spot Trading, Margin trading, etc. are classified as such.

  • Crypto Spot Trading: This is the simplest type of instrument which most people use without even knowing its name. Crypto spot trading means to buy a cryptocurrency and own it. Buying an asset from the seller using the funds you have is the most intuitive thing that people already do on a daily basis. Crypto exchanges help with these types of transactions. Spot trading is the simplest transaction that takes place in a day to day trading and most beginners are involved in such transactions only.
  • Crypto Margin Trading: In this instrument, you use both personal and borrowed money to get leverage. It is a bit complex and one should always calculate ahead before venturing into this instrument. Your owned asset is the collateral amount, and if its value drops below a certain threshold, your trading platform would automatically liquidate your assets. Money to your lender is paid back after such liquidation. Kraken, Binance, Bitmex, and other big exchanges support Crypto Margin Trading.

You can also find cryptocurrency trading signals to help you with your portfolio development.

Derivative instruments are instruments whose value is derived from some underlying value. Forwards, Futures, Options, and Perpetual Swaps are put under this category.

  • Crypto Futures Trading: Futures contract binds the contracting parties to trade in an asset at a predetermined date and price. Such instruments prove very useful in protecting the contracting parties from excessive price swings. It is always a smart move to use crypto signals to supplement your strategy while dealing with these instruments. MyCryptoParadise, AltSignals, Margin Whales, etc. are a few of the signals providers which support futures trading on cryptocurrencies. BitMex, PrimeXBT, Binance and BitRex are some exchanges which deal in crypto futures contracts.
  • Crypto CFD Trading: “Contracts for difference” instrument is popular among the traders who don’t own large funds. Dealing in these instruments help them make profits from market fluctuations. Such a contract is made by the traders to take advantage of the volumes of the brokerage company. One can trade in bitcoin, Ethereum, Ripple and other popular currencies through this method.
  • Swaps Trading: This is one of the most common ways traders trade in the crypto market. In this facility, traders exchange the cryptocurrency that they own with other altcoins of their choice. Such services are available for all the popular cryptocurrencies. It is like exchanging one valuable for another and is done generally, when traders want to diversify their holdings. Such a facility is also used when confidence in a particular asset, cryptocurrency in our case, we are buying is higher than the one we already hold.

Cryptocurrencies trading has grown so much popular among the traders due to their high profitability. They derive such profitability from the spectrum of investment instruments available at their disposal. While the right choice of the cryptocurrency has been emphasized already, new entrants in the crypto market have limited knowledge about the diverse instruments and their proper use. You can always indulge in spot trading as a beginner, but to progressively become an expert in crypto trading, one needs to understand the intricacies of the other instruments as well.