Homework | Task 03 | Explain Spot Trading and Margin Trading | Professor @besticofinder
I hope you all are well. I meet you too today with another homework task. This is the homework recommended by professor @besticofinder for this week. I hope to complete this successfully too.
Homework Task 3
You need to do your own research and create an article discussing following topics,
(1) Explain Spot Trading and Margin Trading
(2) Discuss the advantages and disadvantages of Spot Trading and Margin Trading
Before I wrote this article, I was research for information on the Internet. I will present what I learned there in a simple and concise manner.
Margin trading is a process,
• That is, an easy way to create a fast charge.
• In the stock market, the process by which individual investors buy more shares than they can afford.
• The process of buying and selling securities in one session. (This process requires an investor to guess the movement of shares during a specific session.)
The process is quite simple. To trade here we must first open a margin account. It is more advantageous. For this we need to make a request to our broker. We need this to pay the broker a down payment called the minimum margin. Once the account is opened, we have to pay a starting margin pre-determined by the broker. It is a percentage of the total market value.
This marginal account gives us the resources to buy more shares than we can afford at any time. For this the broker will lend some money to buy the shares and hold them as collateral.
There are three important steps we need to keep in mind before starting margin trading. That is,
We must maintain a minimum margin throughout the session. This is because on a very volatile day, the share price may fall below the expected level.
At the end of each trading session we have to leave our place. If we have sold shares, we will have to buy them at the end of the session. And if we bought shares, they have to sell.
In the event that it is converted into a delivery order after margin trading, we must have some money ready to buy all the shares purchased during the session and pay the broker fees and surcharges. This is also an important step.
It is essential to remember the above three steps. It helps keep our marginal trade successful.
The biggest advantage of margin trading is the opportunity to increase our profits. That is to say, having the stimulus element of marginal trading allows us to trade on cryptocurrencies hundreds of times more than our capital. With margin trading, we can reap huge benefits by doing good trading at the right moment.
Spot trading is,
the buying or selling of foreign currency, financial instruments or commodities for immediate delivery at a specific location. This is also known as a spot transaction.
In many places contracts involve the physical delivery of goods, equipment, or money. There is a spot exchange rate here. That is, the exchange rate based on the foreign exchange transaction in a place trade.
Location trading involves the purchase or sale of a financial instrument, foreign currency, or commodity. Securities that are traded for instant delivery to the market on a specific date are called spot transaction. Most places have a settlement date for market transactions. The spot foreign exchange market trades electronics around the world. It is the largest market in the world and sells more than $ 5 trillion a day. Its size dwarfs both the interest rate and the trading market.
The current price of a financial instrument in this trade is called the spot price, which is the price at which an instrument can be sold or bought immediately. Buyers and sellers create these spot prices by placing their buy and sell orders. Spot prices vary from time to time.
The main advantage of spot trading is that we can only trade here with the balance we have so that we do not lose more than we already have in our account. Therefore, it is possible to manage the risks that may occur here.