Exchanges

An exchange is a place where sellers and buyers meet and trade cryptocurrencies based on the current market price. The seller offers a certain amount of cryptocurrency for some price. Buyers see offers of all sellers and pick which one they want to buy. And with that the buyers become holders of digital coins. The exchange takes care of transferring the digital coins from the sellers to the buyers wallet upon finishing the trade. First of all, a user must select a pair of digital coins which they want to trade. For example, when the user has BTC coins and they want to buy NEO coins then the BTC/NEO pair must be selected. The same pair is selected when the user wants to sell NEO coins to get BTC coins. Not all possible pairs are supported by exchanges. The first item of the pair is usually BTC or ETH. The second item is every other coin supported by a particular exchange. Once a user selects a pair, an exchange displays an image where there is a so-called candle graph with a current price (in most cases in BTC). Besides the graph, there are other informations and tables. Let's have a look at the most important ones that are for trading. Usually, there are two columns on exchanging so-called order books. The first one is a bid column and it contains all the bids of the buyers. The topmost bid is the one which offers the highest price per unit. Sellers struggle to sell for the highest price so they pick the bids that are on the top. The second one is an ask column and it contains all asks of sellers. The topmost ask is the one which offers the lowest price per unit. Buyers struggle to buy for the lowest price so they pick the asks which are on the top. During trading, users can see all their open orders. An order can be canceled in order to try to set a better price.

Stock market is not a wallet. Once you send your coins to the stock market, its provider becomes the owner of your coins. That´s why you should choose your stock market wisely and use only the trustworthy ones. It is strongly recommended to have your coins on the stock market only when necessary for a short time and not leave them there for a long time. Even if you trust the provider, there is always the risk of losing your coins due to stock market´s technical vulnerability.

So far I‘ve described traditional cryptocurrency exchanges. There is also another option on how to trade with digital coins. It is a direct trading exchange. This kind of exchange offers direct peer-to-peer trading between buyers and sellers. Sellers set the price and the exchange might take some fee for the service. The advantage is that the registration process is much simpler and the digital coins are transferred from and to user wallets and thus cannot be stored in the exchange wallet.