The role of crypto exchange in a cryptocurrency trading

There are people interested in cryptocurrency trading and buying bitcoins worldwide. People are curious and looking for options to invest in these currencies. The crypto exchange connects the traders and gives them the platform to do the trading.

The crypto exchange is the website on which one can buy, sell and exchange the cryptocurrencies. One can choose from different exchanges as per their requirements. If someone is looking to do only occasional trading, then they can opt for a platform that does not require them to open an account.

However, if you want to trade professionally and want to use various trading tools, then you must open an account with the exchange by verifying your id.

To start trading with the exchange, the investor can buy bitcoins by depositing the dollars or other currencies with the exchange and then uses the balance to buy bitcoins from the seller.

Similarly, a seller can deposit the bitcoins with the exchange and sell it to the buyers who will provide dollars or their fiat in return.

The exchange acts as the medium between buyer and sellers. While trading, buyer and seller can set limit orders to buy or sell currencies for a certain price. The exchange matches their conditions, and once matches and the buyer and seller are on the same terms, then they can do their trading.

Different types of crypto exchanges

Trading exchange: The buyer and sellers can do their trading. However, the platform charges a fee for each transaction.

Direct trading exchange: Here, trading occurs directly between person to person from different countries. They exchange currencies. In direct trading, there is no fixed market price, and these platforms give traders the freedom to choose their exchange rate.

Brokers: They are very much similar to foreign exchange dealers. Here, brokers set the prices and anyone can buy cryptocurrencies at a rate set by the brokers.

The considerations before using any exchange

Research the market reputation of the exchange – One can do so by asking questions on forums like Reddit and Bitcoin talk. One must also read its reviews on popular industry websites’ or by individual users.

Consider the fees – This can vary hugely depending on the platform you are using. Before one joins an exchange, it is essential to know about its deposit, transactions and withdrawal fees. The fee-related information is usually available on the exchange. One must read them and carefully understand them before using these platforms.

Research about the payment methods – Always verify the payment method options available on the exchange, if they are limited, then it can be inconvenient for you to transfer the funds. The various methods of payment could be a credit card, debit card, wire transfer, and PayPal.

If you are using credit cards to purchase cryptocurrencies, then the risk of fraud is more for the exchange. Hence, you will have to pay a premium price to do so. Also, transaction and processing fee will be higher.

If you plan to buy cryptocurrency using wire transfer then also it will take longer as the banks will take a long time to process.

Hence, it is always advisable to research thoroughly in advance and plan your transactions accordingly.