Comeau Computing Tech Magazine 2024
Before starting to trade in the cryptocurrency market, a novice trader needs to choose a platform for trading cryptocurrencies. Such platforms are cryptocurrency exchanges. Conventionally, they can be divided into two types.
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Decentralized exchange
Trading on such exchanges is carried out as follows:
Sellers publish ads for the sale of a certain amount of digital money.
Buyers leave bids for their favorite offer of their desire to conclude a deal.
After agreeing on the terms, the buyer transfers the funds to the seller’s details.
After receiving the money, the seller transfers the digital currency.
Such cryptocurrency trading platforms comply with the basic principle of circulation of digital money – anonymity. Users do not indicate information about themselves, all transfers are made to external wallets, so there is no commission for deposit/withdrawal of funds in the system. But such exchangers have a disadvantage – a high risk of getting into the clutches of fraudsters. Therefore, they are suitable for experienced traders who can analyze the seller’s reputation for possible fraud.
Centralized Market
Such platforms represent an online platform where all transactions are carried out exclusively within the resource itself. Cryptocurrency trading on such platforms is carried out with the participation of an intermediary in the form of the exchange itself. The administration of the resource creates the conditions for transactions and ensures the security of trade. In turn, the platform provides a commission for deposit/withdrawal of funds from the wallet or for each transaction made.
Depending on the type of trade, there are two types of centralized exchanges:
- Fiat exchanges. The peculiarity of such exchanges is the possibility for users to buy cryptocurrency for real money. The activity of such exchanges is strictly controlled by the banks of the states where they are registered. For this reason, only verified electronic currencies, which are leaders in market capitalization, can be bought.
- Cryptocurrency exchanges. These exchanges host the usual cryptocurrency trades, where you can exchange one digital currency for another. Unlike fiat platforms, it is almost impossible to buy coins for rubles or foreign currency on cryptocurrency exchanges. At the same time, the list of coins presented for exchange is much higher than on fiat exchanges.
Centralized exchanges are suitable for traders of different levels, because the platforms must ensure security of operations, provide special tools to help traders. In addition, centralized exchanges offer margin trading in cryptocurrency, which consists in obtaining credit from the exchange for a transaction against a deposit.
Before you start trading cryptocurrency, you need to know the basic concepts that are used in this field. Here are some of them:
1. Buy and Sell orders
These terms refer to bidders’ orders to buy or sell a specific amount of cryptocurrency. The aggregate of all the supply and demand on an exchange over a certain period of time forms a “market”. One strategy for trading cryptocurrencies is to analyze the “stack”: the appearance of an offer to buy a large number of a particular coin indicates a possible increase in its value, and vice versa, the sale of a large number of coins reduces its value. Any position in “stack” contains three kinds of information: the amount of coins the user wants to buy or sell; the rate at which the user wants to make a deal; the amount of coins or fiat money the trader wants to get in return.
2. Market Analysis
The basics of cryptocurrency trading lie in sound analytics. The essence of any trade is to buy cheaper and sell dearer. Therefore, the first task of any trader is to predict further changes in the rate of the cryptocurrency. Forecasts can be made independently using technical or fundamental analysis, or you can use analytical data collected on thematic resources.
Passive and aggressive orders. Aggressive order is an offer to buy or sell the cryptocurrency at the current rate. They account for the bulk of transactions made on the trading floor. Such orders are also called instant orders, because they are concluded immediately after the appearance of a similar reverse offer. As already mentioned, the execution of an aggressive order for a large volume of currency can significantly reduce or increase the value of the coin. A passive order is placed with an over or under bid to the maximum level of the current rate. They allow you to evaluate the possibility of overcoming the current maximum or minimum rate.
3. Resistance and support levels for the price
They represent a notional line drawn along a series of highs or lows, respectively. These lines represent an obstacle, when reached, the rate goes in the opposite direction. Together, they form a conditional channel, which is called a trend. The basics of trading on a cryptocurrency exchange consist of determining the trend direction and making trades when the rate is on the border of a level or at the beginning of a new trend.
4. History of completed trades
It allows assessing the general interest of traders in trading a particular coin. In addition, when analyzing the history it is established at what maximum value trading activity is reduced.
5. Using the trading volume in the analysis
Trading volume means how much money was involved in total turnover over a certain period of time. The basics of cryptocurrency trading involve the analysis of this indicator, which helps to predict further changes in the value of the digital currency. High trading volume at a price that differs from the current trend can mean the end of the trend.
6. Volatility
Refers to the percentage of change in the rate of the digital currency over a given period. In simple words, it is the difference between the maximum and minimum value of the cryptocurrency as a percentage. This indicator allows assessing the risks for traders before they start trading.
