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Ethereum: A Beginner’s Guide to Trading on Exchanges
As a growing number of investors and traders turn to digital assets, the world of cryptocurrency trading has become increasingly popular. Two of the best exchanges for trading Ethereum stand out – MtGOX and Binance Coin Exchange (BTCE). In this article, we’ll explain how trading on these exchanges works, including key concepts like buy and sell orders, market orders, and leverage.
What is a trading platform?
A trading platform is an online interface that allows users to buy, sell, or trade various assets, including cryptocurrencies like Ethereum. Exchanges act as intermediaries between buyers and sellers, facilitating transactions in real time. The main components of a trading platform are:
- Order book: A list of available trades in ascending (bid) or descending (ask) order.
- Market Data: Real-time market data such as prices, charts, and news.
- User Interface: Intuitive interface for placing orders and managing accounts.
How Trading on the Exchange Works
Here is a step-by-step explanation of the trading process on MtGOX and BTCE:
- Registration: Users create an account on the Exchange platform by providing basic information such as name, email address, and password.
- Deposit Funds: Users deposit Ethereum (ETH) or other cryptocurrencies into their trading account using a variety of payment methods including credit/debit cards, bank transfers, or the cryptocurrencies themselves.
- Asset Selection: Users select the Ethereum asset they wish to trade by selecting it from the list of coins available on the exchange.
- Trading: Users can place trades in two ways:
- Bid: Buy Ethereum at or below the current market price. The user sets the minimum and maximum amount they are willing to buy, i.e. the stop-loss level.
- Ask: Sell Ethereum at or above the current market price. Users set their desired profit margin and target price.
- Deliveries: The exchange’s algorithms automatically match buy and sell orders based on current market conditions, ensuring fair prices for both parties.
- Fill Orders
: When a buyer places an order to buy Ethereum at the bid price, MTGOX or BTCE fills the order with the corresponding number of shares (or tokens) at the prevailing bid price.
Common Trading Concepts
To make trading on these exchanges easier to understand:
- Bid vs. Ask: The bid price is the price at which a buyer is willing to buy Ethereum, while the ask price is the price at which a seller is willing to sell it.
- Market Order: A market order corresponds to an existing trade (e.g., buying 1 ETH for $50) when the market dictates prices. Users can place market orders through their account or manually using the “Place Market Order” feature.
- Stop-Loss: Set a stop-loss level to limit losses if the price of Ethereum falls below a certain level, protecting users from potential losses.
Risk Management
Trading on exchanges involves risks, including:
- Market Volatility: Prices can fluctuate rapidly due to imbalances in supply and demand.
- Leverage
: Trading with leverage can increase profits or losses, requiring users to manage risk effectively.
- Position Sizing: Users should set realistic stop-loss levels and limit their overall exposure to avoid significant losses.
Conclusion
Trading on MtGOX and BTCE is a straightforward process that includes registering an account, depositing funds, selecting assets, placing trades with buy or sell orders, matching orders, and managing risk through position sizing. By understanding the fundamentals of trading on these exchanges, users can make informed decisions and trade Ethereum and other digital assets.