Exchanges are the places where sellers and buyers meet together. This online sites are dedicated to the trading of various cryptocurrencies.
There are various types of exchanges, from the largest and most established with users from all over the world to the smallest ones that have a predominantly regional audience, as it happens in Japan and Korea.
The main features that interest us in an exchange are which coins are traded, the volumes and costs of the exchange and the safety of the sites.
Security as you well know is the fundamental factor of this world, and it weighs on your shoulders.
Exchanges work just like the stock exchange and manage your money. There is an order and sales book, you will have your own personal wallet but owned by the exchange. With some of these wallets you can even make loans to other users and get paid.
Now, there is no 100 percent secure exchange and these entities are in the hands of companies that obviously have profit as their reason for existence. Exchanges can be attacked by hackers or they can scam users, blocking funds and running away with money. For this reason you will have to leave as few coin or currency as possible on the exchange.
The largest exchanges are structured to resist to attacks and attempted robberies, but the provision is never too much. Each exchange takes care to put you in a position to protect your account, so don’t be lazy and take the necessary actions to protect yourself
Moving on to coins, here we have another difference. In almost all exchanges bitcoin is traded but some small coins, with very low volumes and illiquid, are traded only on one or two exchanges in the world. This forces us, if we want to betray them, to rely on these actors who are unknown to most. In this case we will have to read the rules of these exchanges because they may not allow the exit of funds below or above a certain value, or forcing us to go through the kyc procedures and this may take a long time to be resolved.
The volumes of an exchange are an important signal, meaning that that data coin on that given market is very or little sold and in demand. Many volumes equate to many buyers and sellers, therefore a market rich in money that is defined as liquid. Small exchanges with low volumes are therefore illiquid.
Each exchange has usage costs, check them before deciding on which exchange to operate more often.
Also remember that although bitcoins are all the same, on different exchanges they are sold at different prices, giving rise to arbitrage phenomena.
When you go to trade on exchanges, you will have different types of orders to buy or sell. Let’s see some of them.
Let’s start with the simpler than the market order or market order. In this specific order, the purchase takes place at the sale price of the lowest asset and the order is not stopped until the requested quantity is reached.
Let’s take an example. I purchase 20 ethereum with a market order. At that moment on the book, the first lots on sale at the lowest price will be 10 ethereum at $ 200 and another 20 at $ 210.
With this order I will buy 10 ethereums for $ 200 and another 10 ethereums for $ 210. With this order, the price does not matter, but the quantity indicated.
In the case of a sales order of this type, the behavior is the same.
Another kind of order is the limited order. In this case, when we go to create the purchase order, we enter the quantity and the decided price. In this case we can put a price slightly below that of the moment or much lower, it all depends on how we see the situation on the market. This type of order could be either unfulfilled or partially filled.
Again using the example above, if we placed an order for 20 ethereum at $ 200, with a current price of $ 210, we would have to wait for a descent to ensure that the order is executed. It could happen that only 5 ethereums on the market sell for $ 200, so our order would be partial.
Also in this case when the behavior of the order in the event of a sale is the same. Price and quantity will be fixed and may not be reached.
A more complicated type of order is the stop loss order. This kind of order incorporates a sales strategy that wants to cut losses, a stop loss in fact. When the trend is uncertain you can use this order to protect yourself.
In case we still have an order like this for 10 ethereum at $ 200, with a stop loss at $ 190. If our long view is right, from our purchase at $ 200 ethereum it will go up in price and at the right time we will take profit. However, if we made a mistake and ethereum starts a negative trend, our order will automatically sell the position at 190 dollars, saving our account.
Viewed from the point of sale, this type of order can be changed with a higher price which turns into a take profit. If ethereum begins a slight positive trend we will be able to move the stop loss in equal to $ 200 or if the rise is more pronounced the figure could be even $ 210 and beyond. In this case we would continue to have a position within an uptrend that would be sold for a gain in the event of a reversal of the trend.