<aside> 💡 This articles explaining commonly used trading terms in the spot market and essential trading metrics. These can help BuddyTrading users understand the key concepts needed to navigate and succeed in spot trading.
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The spot market is a public financial market where assets, such as cryptocurrencies, commodities, or securities, are traded for immediate delivery. Transactions in the spot market are settled "on the spot," meaning delivery occurs promptly, typically within two business days.
An order book is a digital ledger that lists all outstanding buy and sell orders for a specific asset in the spot market. It shows the interest of buyers and sellers at different price points, providing transparency and insight into market depth and liquidity.
The bid price is the highest price a buyer is willing to pay for an asset. It represents the demand for the asset and is listed in the order book.
The ask price is the lowest price a seller is willing to accept for an asset. It represents the supply of the asset and is also listed in the order book.
The spread is the difference between the bid price and the ask price in the order book. A narrow spread indicates high liquidity, while a wide spread suggests lower liquidity.
A market order is an order to buy or sell an asset immediately at the current market price. Market orders are executed quickly, but the final price can be affected by the market's liquidity and spread.
A limit order is an order to buy or sell an asset at a specific price or better. Limit orders are not executed immediately; instead, they are placed on the order book until the market price reaches the specified price.
A stop-loss order is an order to sell an asset when its price reaches a certain level, known as the stop price. This type of order helps traders limit losses by exiting a position before the market moves further against them.
A take-profit order is an order to sell an asset when its price reaches a specific level, known as the take-profit price. This type of order helps traders lock in profits by automatically closing a position when a favorable price target is achieved.