
Cryptocurrency exchange is a platform for trading and exchanging one digital money for another or for various world currencies (USD, EUR, RUR, CNY). In addition to the cloud mining and mining on your own computer, which is the original way to create cryptocurrency, exchanges offer the only option to receive it. In addition, only with the help of stock markets you can exchange it for real money. The division of the entire list of stock exchanges can be made conditionally basing on one of the most important criteria:
Exchange operations and speculation on cryptocurrency exchanges are identical to any other. To get profits, you need to buy cheaper, to sell more expensive, i.e., just like when investing in a common currency. Naturally, the tool base and the principle of setting targets for trading are the same way as in the securities or forex markets. To make a profit by trading virtual money will not be a problem for those who know the basics of trading in the stock market, securities and national currencies. The main components with which a trader operates on a cryptocurrency exchange can be represented by the following list:
1. currency rate chart;
2. sell and buy orders;
3. transaction history;
4. trading volumes conducted on the exchange (s).
To understand the basics of a cryptocurrency exchange, it is worthwhile to consider all these elements one by one.
1. Cryptocurrency rate charts
The chart is a history of one cryptocurrency rate in relation to either another one or to fiat money. Most often, the chart is presented in the form of candlestick patterns, clearly demonstrates the development over time of the spread difference ratio.
Candlestick charts display more data than just the closing price: each 'candle' shows the opening price, the lowest and highest price of the given time-period as well as the closing price. In addition, the color of the candle body indicates whether the closing price was higher than the opening price (usually a green bar, called an 'up-bar') or lower than the opening price (usually with a red body, called a 'down-bar').
Spread is the difference between the current offers, the best values for sell (ask) and purchase (bid) of currencies that are relevant on the exchange. The presentation of the chart in the form of candlestick patterns is taken on the stock exchange, currency exchange, as it is considered the most informative in terms of trading. This especially concerns the issues of technical analysis.
Candlestick patterns indicate the price movement for a certain period of time. Figure 2 presents an example showing the main elements of the candle. Charts of the same pair of cryptocurrencies can be presented with different time axes, for example, an hourly chart or a 15-minute chart, on which, respectively, the unit of time is an hour or 15 minutes. One candlestick shows the values that were relevant for this period of time.
The candle body, i.e., a rectangle, is formed from the values at the beginning of the next time period and its end. If the opening level is below the closing level, then this candle is called bull candle, and colored red or black. In the opposite case, the bear candle is colored green or white. So visually it becomes clear that with the bull candle the rate grew, and with the bear candle it fell.
The lines extending from the candle are called shadows, and indicate the presence of highs and lows that were recorded during the formation of the candle. In the absence of the upper shadow, it is said that the top of the candle is cut off; in the absence of the lower shadow, the base is cut off.
Doji candlesticks are called candles which actually have no body, which means, the price at the beginning of the time period and at the end is equal. A spinning top is a candlestick pattern with a small body size. The ability to read candlestick patterns makes trading cryptocurrencies and other financial instruments much easier.
Bid / ask orders from trade participants in the cryptocurrency exchange form the so-called ‘Depth of Market', aka the Order Book. This is a list or table that contains orders from users to buy or sell one cryptocurrency for another or for fiat money and approximate in value to the current price at which the pair is being traded. Figure 3 shows an example of such a list presentation. The three positions show the bid rate, the total amount of cryptocurrency that traders want to buy or sell at this rate and the total amount of the second cryptocurrency or real money for which the operation is performed.
Market depth, a compilation of all buy and sell orders, reflects the desire to trade cryptocurrency at the specified rate. If there is a counter offer to sell or buy, the transaction is made, and the current price of the traded pair is adjusted in respect to the transaction made. It should be considered that, for example, if there is an ask order, the counter bid offers are searched at a price equal or greater. In the absence of response offers, the order remains on the call list, or until the command to cancel the order comes from the participant who placed it.
- Stock exchanges where bitcoins and some of the main forks can be exchanged for national, world currencies (fiat money).
- Stock exchanges which carry out trade exclusively between bitcoins and forks and exchange one cryptocurrency for another. Forks are digital money derived from the main bitcoin. Many forks can be exchanged only on certain stock exchanges.
Trade principles
Exchange operations and speculation on cryptocurrency exchanges are identical to any other. To get profits, you need to buy cheaper, to sell more expensive, i.e., just like when investing in a common currency. Naturally, the tool base and the principle of setting targets for trading are the same way as in the securities or forex markets. To make a profit by trading virtual money will not be a problem for those who know the basics of trading in the stock market, securities and national currencies. The main components with which a trader operates on a cryptocurrency exchange can be represented by the following list:
1. currency rate chart;
2. sell and buy orders;
3. transaction history;
4. trading volumes conducted on the exchange (s).
To understand the basics of a cryptocurrency exchange, it is worthwhile to consider all these elements one by one.
1. Cryptocurrency rate charts
The chart is a history of one cryptocurrency rate in relation to either another one or to fiat money. Most often, the chart is presented in the form of candlestick patterns, clearly demonstrates the development over time of the spread difference ratio.
Candlestick charts display more data than just the closing price: each 'candle' shows the opening price, the lowest and highest price of the given time-period as well as the closing price. In addition, the color of the candle body indicates whether the closing price was higher than the opening price (usually a green bar, called an 'up-bar') or lower than the opening price (usually with a red body, called a 'down-bar').
Spread is the difference between the current offers, the best values for sell (ask) and purchase (bid) of currencies that are relevant on the exchange. The presentation of the chart in the form of candlestick patterns is taken on the stock exchange, currency exchange, as it is considered the most informative in terms of trading. This especially concerns the issues of technical analysis.
Candlestick patterns indicate the price movement for a certain period of time. Figure 2 presents an example showing the main elements of the candle. Charts of the same pair of cryptocurrencies can be presented with different time axes, for example, an hourly chart or a 15-minute chart, on which, respectively, the unit of time is an hour or 15 minutes. One candlestick shows the values that were relevant for this period of time.
The candle body, i.e., a rectangle, is formed from the values at the beginning of the next time period and its end. If the opening level is below the closing level, then this candle is called bull candle, and colored red or black. In the opposite case, the bear candle is colored green or white. So visually it becomes clear that with the bull candle the rate grew, and with the bear candle it fell.
The lines extending from the candle are called shadows, and indicate the presence of highs and lows that were recorded during the formation of the candle. In the absence of the upper shadow, it is said that the top of the candle is cut off; in the absence of the lower shadow, the base is cut off.
Doji candlesticks are called candles which actually have no body, which means, the price at the beginning of the time period and at the end is equal. A spinning top is a candlestick pattern with a small body size. The ability to read candlestick patterns makes trading cryptocurrencies and other financial instruments much easier.
2. Bid and Ask Orders
Bid / ask orders from trade participants in the cryptocurrency exchange form the so-called ‘Depth of Market', aka the Order Book. This is a list or table that contains orders from users to buy or sell one cryptocurrency for another or for fiat money and approximate in value to the current price at which the pair is being traded. Figure 3 shows an example of such a list presentation. The three positions show the bid rate, the total amount of cryptocurrency that traders want to buy or sell at this rate and the total amount of the second cryptocurrency or real money for which the operation is performed.
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