Crypto markets are becoming more profitable, so new traders enter them every day. Just as regular stocks or bonds, cryptocurrencies are traded via exchanges. The point is really simple: one buys and sells the preferred cryptocurrency against fiat or a more popular crypto coin like BTC or ETH at the most profitable rate. This article will be useful for both traders and investors as it describes basic exchange tools, as well as main exchange features and functionalities. Let’s start.
Key exchange tools
Simply put, the exchange websites or apps help people buy and sell cryptocurrencies by matching their orders. To succeed in trading, it’s better to start with exploring the interface of each specific exchange, and locate main tabs and tools. Our list includes the most common options which facilitate making deals and tracking market changes.
Stats and charts
Exchanges provide simplified statistical data about the market. It may feature the daily trade volume of a certain pair, the highest and lowest price for 24 hours, recent price, and so on. When it comes to day trading, highs and lows are the most essential parameters to watch out for. Usually, basic market stats are presented on the main page of the exchange website.
Charts and graphs are presented in two common ways: regular candlesticks and Heikin Ashi. The latter display type is more informative as it shows highs, lows, opens and closes simultaneously.
Candlesticks chart © CEX.IO
Charts also feature various indicators for technical analysis. They help to predict future changes by reviewing the coin’s bounces in the past. Advanced trading platforms offer a lot of indicators, just like specific tracking websites and apps do.
- Support and Resistance levels – horizontal lines with specific prices. The coin has the most chances to bounce within these price levels. As a rule, the price starts growing near the support level and falling near the resistance one.
- Trading Volume – the indicator looks like a line with several vertical green or red columns. The higher the column – the more coins are traded at that time. Volume defines the power of a trend, either upward or downward.
- Moving Average (MA) – average closing prices over 7, 25 or 99 days. The stats are presented in the form of trend lines which show whether the coin is going up or down.
- Moving Average Convergence Divergence (MACD) – the trend line which is the difference between two Moving Averages. It is useful for prediction of future trends.
Professional view with the list of available indices © CEX.IO
The order book reveals all offers for the chosen trading pair. Traders make a deal when the system automatically fulfills buy and sell orders with the matching price. Apart from these stats, order books highlight the total amount of trades and the price of a coin.
Almost all websites have the visual representation of a market depth. The green part here is for buy orders and the red part is for sell ones. The main rule is clear: if the green chart is larger than the red one, then the price will go up. Here we have an example of the basic economic law because the green part stands for demand and the red – for supply.
Market depth © Hacker Noon
Trade history shows the most recent closed deals with the exact time of fulfillment and amount of coins traded. Trade history is an auxiliary tool which supplements the price movement charts and trading volume graphs for technical analysts.
Finally, this is the main tool for traders that can be found in every exchange with no exceptions. Through this tab, users place their buy and sell orders for coin pairs. Basically, there are three types of orders:
- Simple market order. A trader buys or sells crypto for the current market price. These orders are executed immediately.
- Limit order. A trader defines a certain price at which he/she wants to buy/sell crypto. These orders take more time to succeed.
- Stop-loss order. A trader hedges against potential losses setting the minimum price, at which he/she is prepared to sell out the coins.
Order book © GDAX
Apart from these basic tools which are available through all major exchanges, there are more sophisticated options as well.
- Margin trading.
Simply put, this involves trading with borrowed funds. It’s called leverage. Normally, it works as 1:1, meaning that a trader can deposit $100 and receive extra $100 as a leverage, for instance. Funds may be provided by an exchange itself or by other traders. It’s essential to remember that margin traders must return the borrowed money in full. We don’t recommend that novice users try margin trading without a detailed research as it is risky and can entail losses!
Popular exchanges that offer margin trading as an option are Kraken, Bitfinex, Poloniex.
- API tools for automated trading.
So far as the crypto market never sleeps, traders use pre-programmed software or so-called trading bots to automate their operations. These tools can track all key statistics like prices and their changes, trading volume, available orders, etc.
Some exchanges offer API tools and protocols that can be used to access remote applications (like bots) and facilitate automated trading. One of the few exchanges providing their customers with such solutions is CEX.IO. Giving a brief outlook of CEX.IO tools, it should be noted that there are three APIs available: WebSocket, FIX and REST. They are designed for both individual and institutional traders to watch the market and manage their trades.
Explore the listed tools but don’t forget about self-education. Never trust only one source – always make your own research!