We all know those good old stock, foreign, commodity and other exchanges. Generally speaking, there are places, where people, which can be representatives of institutions or independent individuals, trade their financial assets. For example, if I have dollars and I want to buy euros, I go to forex market and trade them. If I have Apple stocks but I believe that their value is going to decline soon, I go to stock exchange and trade they for fiat money or other stocks.
The principal is virtually the same for crypto exchanges. However, they do not merely serve as places to speculate on. These cryptomarkets set exchange rates, based on the demand and supply. Investors are likely to pursue e-currency because of the technological advancements it offers, the likelihood of it getting more valuable, or even exchange money we know.
What Is Going On At Crypto Exchanges?
Crypto trading blossoms due to high volatility of cryptocurrencies. All traders use the traditional “buy low and sell high” tactics, to be better off in the end. Basically, they profit from temporary price differences, if simply put. So, how does the trading magic happen?
- Trading may happen with the use of trader’s money or money he or she borrows from exchange. The latter is called margin trading.
- To become eligible to trade crypto exchanges, one has got to have tokens or coins, since fiat money are not accepted. In order to do this, a beginning trader needs to acquire a wallet and only after that buy at least several cryptocurrencies.
- When starting trading, one need to know what are trading pairs, i.e. one currency that is likely to go up in price, and another, which is likely to go down. Traders log in to their accounts and check charts. They bet on one currency, against the other. For example, if a trader believes that Ethereum will go up in price against bitcoin, the pair you buy will look like this, ETH/BTC. If, however, you sure it to be the other way around then, BTC/ETH.
Being a trader is not as easy as it may seem. You will be unlikely to fit in any other job so trading should become your primary source of income. It requires lots of time and attention. Virtually all traders say they spend immense amounts of time analyzing charts, looking for particular technical indicators, while considering the global economic condition as well. That’s why many investors choose to have brokers who do this job for them. They mainly operate from OTC exchanges and reach their clients over the phone or online.