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What is a digital currency exchange and how does it work?


Digital currency exchanges are the most important part of this large market. In this short article, we have tried to explain to you without additional details and briefly how digital currency exchange offices work and operate.

How Do Digital Currency Exchanges Work?

What is a digital currency exchange and how does it work?

Digital currency exchanges are a virtual place to buy and sell digital currencies.

The rate and price of a digital currency are obtained by the same supply and demand in exchange offices. Obviously, the higher the demand for a currency, the higher its price, and vice versa. Of course, other artificial factors can also affect prices.

Digital currency exchanges can vary in features and performance. In most cases, digital currency exchanges are intermediaries for buyers and sellers. Their function is such that the exchange office is in charge of delivering sales orders between users and receives a commission from each transaction. These types of exchanges place wallets for supported currencies on their site so that the user can enter different digital currencies into the exchange or save it for future transactions.

There is another type of digital currency exchange that users trade with site owners. These exchanges are often local and serve users in a particular country or region.

What are digital currency trading pairs?

What is a digital currency exchange and how does it work?

Digital currency trading pairs allow you to take advantage of currency price changes.

The structure of a currency pair is as follows:

The second digital currency / The first digital currency

Keep in mind that the type of currency and the positions of a currency pair are always important. For example, if you predict that the price of Bitcoin will rise against the dollar, you should buy the BTC / USD pair with the bitcoin on the left and the dollar on the right, and if you want to sell the bitcoin. Be the opposite of the case.

Some popular digital currency exchanges do not offer currency trading pairs and only digital currency transactions with each other. Most currency exchange pairs in digital currency exchanges are BTC / LTC or LTC / BTC and ETH / BTC or BTC / ETH.

Why are prices slightly different in digital currency exchanges?

What is a digital currency exchange and how does it work?

Because digital currency exchanges operate separately, prices vary from supply to demand to purchase and sale in each exchange, and global prices are derived from the result of different prices in the exchanges. Of course, the price difference in exchange offices is very small because if there is a high price difference, many traders will go to that exchange to make a profit and the price will be balanced again.

As mentioned above, in each exchange, the price of bitcoins and digital currencies is calculated in relation to the volume of transactions and supply and demand. This means that the larger the exchange, the more reasonable and realistic the price of the world.

For Bitcoin and other similar digital currencies, a fixed price does not make sense and can change at any time.

Can I take advantage of the price difference in different exchanges?

What is a digital currency exchange and how does it work?

As we said, the price difference in digital currency exchanges is very small. So to make a very small profit you need to spend a lot of capital that a moment of price change can cause you a lot of losses.

The price of Bitcoin in different exchanges does not differ by more than 1 to 2 percent. Of course, sometimes due to technical problems, the price difference in an exchange office increases so much that in this case, the exchange managers suspend it and eliminate the possibility of withdrawal.

The commissions and commissions of an exchange must also be considered, which is a big risk.

In general, in discussing the profit from the price difference in different exchange offices, very sensitive conditions are needed, which are often not provided.

I want to start trading digital currencies, where do I start?

What is a digital currency exchange and how does it work?

First of all, you need to buy some digital currency, which is usually Bitcoin or Ethereum. Due to sanctions and purchasing problems with MasterCard and Visa accounts, users residing in Iran can buy bitcoins in Rials on Iranian global site localbitcoins.com. You can also buy bitcoins or other digital currencies from some local sites. Before buying bitcoins or other digital currencies, try to calculate the cost price and buy from the fairest seller.

After purchasing some digital currency, you must register on an international exchange site such as binance.com and top up your purchased digital currency in your account. You can then go to the exchange market prices and enter the trading page by selecting a currency pair (such as BTC / ETH). For more information, you can read the article “How to buy a train?” See because the trading process of all digital currencies is similar.

What is a StopLimit Order?

What is a digital currency exchange and how does it work?

This possibility is in the sites of buying and selling digital currencies for professional traders. With this feature, you can specify that when the price of a digital currency reaches x, it will automatically register a buy or sell order with a value of y for you.

Order to buy Stop Limit

For example, suppose you are an analyst and you predict that if the price of a currency crosses the $ 20 resistance line, its price will rise to $ 60. So you can create a stop order purchase order with this feature so that you do not miss trading.

STOP: 21

LIMIT: 22

According to this deal, if the price of the asset reaches $ 21 or higher, a purchase order will be registered for you at a price of $ 22.

Stop sale limit order

For sale, you specify that if the price of an asset reaches the value of X, the sale order will be recorded with the value of Y. This can help you avoid further losses in declining markets and help you sell and make a profit at the right time in bullish markets.

For example, you buy a digital currency and predict that the price will rise to $ 100 and then the market will fall, so you can place a stop limit order like this:

STOP: 97

LIMIT: 98

According to this deal, if the price of the asset reaches $ 97 or higher, the sale order will be registered for you at a price of $ 98.

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