BLOCKCHAIN ABC "Trading on cryptocurrency exchanges: rules and notions"
Trading on cryptocurrency exchanges is one of the ways to make money in the crypto world. They hardly differ from ordinary exchanges being the platforms where people buy and sell currencies to make a profit. At the same time, cryptocurrency exchanges have some special rules that users should understand.
Read further in the article about cryptocurrency trading methods, popular crypto exchanges, and the story of how Tether tokens attracted user attention.
Rules of working on a cryptocurrency exchange
At first, it may seem that all you need for trading is luck, but things are not that simple. To participate in trading, you should have a cold mind and analytical thinking, and at least a general idea of the operation principles of cryptocurrency exchanges.
To bear the strain on the exchange, you should:
- be able to get a grip on yourself. It may sound trivial, but seasoned market players that expect price reduction (bears) often crash the market by manipulating large sums of money;
- read forecasts, but draw conclusions based on your own observations. It is hard to verify the source of data offered on the Internet, so you need to analyze every new forecast;
- work with several currency pairs, otherwise you risk losing all of your capital if you make an unsuccessful investment.
Main options available to traders on cryptocurrency exchanges:
- sell and buy orders;
- access to the history of concluded deals;
- charts of cryptocurrency price surges;
- analysis of trade on the exchange.
Participants of cryptocurrency exchanges are called traders. They are dealers willing to make a profit through trading on the cryptocurrency market.
A glass (sell and buy orders)
Information on the current offers of purchase and sale of cryptocurrencies is the first thing that a trader sees on the website of the exchange. Participants of cryptocurrency exchanges call the list of offers a glass.
The glass shows the list of all orders for purchase and sale of assets. There are different types of orders including:
- a market order – placed for urgent purchase or sale of currency not depending on the current market price;
- a limit order – a trader specifies the price;
- a passive order – a trader sets a price that is different from the current rate;
- an aggressive order corresponds with the current rate. Such orders are executed straightaway and therefore provoke changes on the market.
Transaction history reflects data on all purchases and sales of cryptocurrencies on the exchange. Using this information, you can estimate the changes in currency rates, define the most popular currency, and make your own forecast concerning demand and supply.
Graphs that reflect the current and past prices of digital currencies. Images of graphs visually resemble long Japanese candles, so that is where the name takes its origin. The body of the candle (rectangle) shows the opening and closing prices, and shadows or wicks (thin lines) – minimum and maximum prices during the specified time.
That is the name of token developed by Tether Limited to run financial operations. Creators claimed that they would establish 1:1 parity between Tether and dollar, as every USDT would be backed by one dollar on the company’s accounts. It is unclear whether every token is backed by a dollar, but the exchange rate remains stable: one coin is equal to one dollar.
Creators of Tether and Bitfinex cryptocurrency exchange are accused of deliberate swinging of the market, but this information has not been officially confirmed yet.
The most popular cryptocurrency exchanges
Below you will find the most popular cryptocurrency exchanges in 2018.
Bitfinex – one of the largest exchanges by trade volumes (around $2.6 billion per day). It supports 65 cryptocurrency trading pairs and offers a possibility to cash out in 26 currencies. Bitfinex has a Russian-language version of the website.
Kraken – the US exchange that is the largest in the world by the volume of traded euros. It has become popular because it uses a big number of fiat currencies, including the US and Canadian dollar, euro, yen, pound, etc.
Poloniex – an exchange that offers 66 cryptocurrencies and 90 trading pairs. The main disadvantages are the interface in English language only and the lack of deals with fiat money. To trade on Poloniex, you have to buy digital currencies on another exchange.
Bithumb – the most popular exchange in South Korea. According to Korea Herald, 75.7% of Bitcoin trade and 50% of Ethereum trade account for this exchange in South Korea. The platform exchanges cryptocurrencies for one fiat currency only – South Korean won.
Bittrex – the US exchange was launched in 2015. The service offers 100 trading pairs. This new-generation platform uses two-factor authentication and cold storage of assets to protect users from possible system failures. The website and customer support service are in English only.
Binance – a new but rather popular exchange. It was founded in Hong Kong in 2017, but was relocated to Malta because of pressure from the government. It is on the list of top 5 exchanges by capitalization, offers low fees and a bonus system for loyal customers.
It should be taken into account that cryptocurrency exchanges are not regulated by the law, so nobody guarantees users protection against fraudsters. It is important to choose an exchange thoroughly and not to deal with little-known and suspicious organizations.