Trading & Exchanges FAQ

A crypto exchange is a platform where you buy, sell, and trade cryptocurrencies. Centralized exchanges like Binance or Coinbase hold your funds and match trades, while decentralized exchanges let you trade directly from your wallet, each with different trade-offs in ease and control.

A CEX, or centralized exchange, is a company that holds your funds and matches trades internally, usually easier and with support. A DEX, or decentralized exchange, lets you trade from your own wallet with no custodian, giving you control but full responsibility for security.

Spot trading is buying or selling crypto for immediate delivery at the current market price, where you actually own the coins afterward. It is the simplest form of trading, without leverage or expiry, making it the usual starting point for newcomers.

A market order buys or sells immediately at the best available price, prioritizing speed over precision. It fills right away but can suffer slippage on illiquid coins or large sizes, so the final price may differ slightly from what you saw when placing it.

A limit order sets the exact price at which you're willing to buy or sell, and it only fills at that price or better. It gives you control over price but may never execute if the market doesn't reach your level, so it trades certainty of fill for certainty of price.

A stop-loss order automatically sells once the price falls to a level you set, capping your loss on a position. It is a core risk-management tool, though in fast, volatile markets the actual fill can be worse than the trigger price due to slippage.

Leverage lets you trade a position larger than your deposit by borrowing from the exchange, multiplying both gains and losses. Ten-times leverage means a 10% move against you can wipe out your entire deposit, which is why leverage is high-risk and unsuitable for beginners.

Liquidation is when an exchange forcibly closes your leveraged position because losses have eaten through your margin. It caps the exchange's risk but means you lose the funds backing that trade, and it can happen suddenly during sharp price moves.

Margin trading is borrowing funds to open a larger position than your own capital allows, using your deposit as collateral. It amplifies both profits and losses, and if the trade moves against you enough, your collateral is liquidated to repay the loan.

Trading fees are charges an exchange takes on each trade, often split into maker fees for adding liquidity and taker fees for removing it. They vary by platform and volume, and frequent trading makes fees add up, quietly eroding returns over time.

The spread is the gap between the highest price buyers will pay and the lowest sellers will accept. A narrow spread signals a liquid, actively traded market, while a wide spread means poor liquidity and higher effective cost to enter or exit a position.

An order book is the live list of buy and sell orders for a market, showing the prices and quantities people are offering. It reveals where demand and supply sit, and its depth indicates how much a market can absorb before the price moves significantly.

Slippage is the difference between the price you expected and the price your trade actually filled at. It grows with large orders and thin liquidity, and most platforms let you set a maximum tolerance so a trade cancels if the price moves too far before filling.

Spot trading means buying the actual coin for immediate ownership, while futures are contracts to buy or sell at a future date or price, usually with leverage. Futures let you bet on price direction without holding the coin but carry liquidation and funding-rate risks.

A perpetual futures contract is a leveraged bet on a coin's price with no expiry date, kept in line with the spot price through periodic funding payments between traders. Perpetuals dominate crypto derivatives but concentrate the risks of leverage and liquidation.

A funding rate is a small periodic payment exchanged between long and short traders in perpetual futures to keep the contract price near spot. When it is positive, longs pay shorts; when negative, shorts pay longs, and it also hints at market sentiment.

Going long means betting a price will rise, profiting if it does, while going short means betting it will fall, profiting from a decline. Shorting usually involves borrowing or derivatives, and both can be amplified with leverage, increasing risk in either direction.

A trading pair is the two assets being exchanged, like BTC/USDT, showing which coin is priced in terms of the other. The quote asset — the second one — is what the price is denominated in, so BTC/USDT shows Bitcoin's price in Tether.

A maker places an order that sits on the book and adds liquidity, while a taker places an order that fills immediately against existing ones, removing liquidity. Exchanges often charge takers more, so limit orders that make liquidity can be cheaper to use.

Dollar-cost averaging is investing a fixed amount at regular intervals regardless of price, smoothing out volatility over time instead of trying to time the market. It is a common long-term approach, but it doesn't prevent losses and is not financial advice.

A taker fee is charged when you place an order that executes immediately against the order book, removing liquidity, such as a market order. It is usually higher than the maker fee, which rewards orders that add liquidity by resting on the book first.

KYC, or know your customer, is the identity verification regulated exchanges require before you can trade or withdraw, typically involving a government ID. It exists to fight fraud and money laundering, which is why fully anonymous trading is restricted on major platforms.

Keeping crypto on an exchange is convenient but means the exchange controls your keys, so a hack, freeze, or collapse can put your funds at risk. The phrase 'not your keys, not your coins' warns that self-custody is safer for holdings you don't actively trade.

A withdrawal fee is what an exchange charges to move crypto off the platform to your own wallet, often covering network gas plus a markup. Fees vary by coin and network, so checking them matters, especially for frequent or small withdrawals where they bite hardest.

An exchange hot wallet is an internet-connected wallet holding funds for quick withdrawals and trading. Its accessibility makes it a target for hackers, which is why reputable exchanges keep most customer funds in offline cold storage and only a fraction in hot wallets.

An OTC, or over-the-counter, trade is a large deal arranged directly between two parties or through a desk, rather than on the open order book. It lets big buyers and sellers transact without moving the market price, which a huge order on an exchange would do.

A stop-limit order combines a trigger price with a limit price: once the trigger is hit, it places a limit order rather than a market one. This gives more price control than a plain stop-loss, but the order may not fill if the market gaps past the limit.

A limit order won't fill if the market never reaches your chosen price, and even a triggered order can miss in fast markets that jump past your level. Low liquidity, an aggressive price, or a gap can all leave an order sitting unfilled.

A trading bot is software that executes trades automatically based on preset rules or strategies, running day and night. Bots remove emotion and react fast, but a poorly configured one can lose money quickly, and results depend entirely on the strategy behind it.

Arbitrage is profiting from the same asset's price difference across markets, buying where it is cheaper and selling where it is dearer. Opportunities are usually small and fleeting, since many traders and bots compete to close the gaps almost instantly.

A candlestick chart shows price over time using candles, each marking the open, close, high, and low for a period. Green or hollow candles typically mean the price rose, red or filled ones that it fell, making trends and momentum easy to read at a glance.

Volume is the total amount of an asset traded over a period, usually 24 hours, indicating how active and liquid a market is. High volume supports smoother entries and exits, while low volume warns that large trades can swing the price and exits may be hard.

A market maker continuously offers to buy and sell an asset, providing liquidity and earning the spread between the two prices. Their activity tightens spreads and keeps trading smooth, and both firms and automated systems perform this role in crypto markets.

Slippage tolerance is the maximum price movement you'll accept between placing and filling a trade, especially on DEXs. Setting it too low can cause trades to fail in volatile markets, while setting it too high exposes you to bad fills or front-running.

With isolated margin, only the collateral assigned to a position can be lost if it's liquidated, while cross margin uses your whole balance as backing. Isolated limits damage to one trade; cross reduces the chance of liquidation but risks more of your account.

FOMO, or fear of missing out, is the urge to buy because a price is rising fast and you don't want to miss gains. It often leads to buying near tops and selling in panic later, which is why disciplined traders treat FOMO as a warning sign, not a signal.

Timing the market is hard because prices react to countless unpredictable factors, and even professionals struggle to consistently buy low and sell high. Volatility and emotion compound the difficulty, which is why many favor steady approaches over frequent trading.

A whale is a trader or entity holding enough of an asset that its orders can move the market alone. Watching whale activity is popular because a single large sell can trigger a cascade, though a big position doesn't mean the holder is always right.

The bid is the highest price a buyer will currently pay, and the ask is the lowest price a seller will accept. The gap between them is the spread, and trades happen when a bid and ask meet or an order crosses the spread.

High-frequency trading uses fast algorithms to place and cancel huge numbers of orders in fractions of a second to capture tiny edges. It provides liquidity but competes on speed and infrastructure that ordinary traders can't match, so it mainly shapes very short-term price action.

Leverage is generally unsuitable for beginners because it magnifies losses and can liquidate a position from a small price move, often faster than newcomers expect. Most experienced traders advise learning with spot trading first. This is general information, not financial advice.

A limit buy sets the maximum price you'll pay and fills only at that price or lower, while a limit sell sets the minimum you'll accept and fills at that price or higher. Both let you target a price instead of trading immediately at market.

Exchange liquidity is how much trading activity and order depth a platform has for a given market. High liquidity means tighter spreads, less slippage, and easier large trades, while low liquidity makes prices jumpier and exits harder, so it is worth checking before trading a coin.

Trade more safely by starting small, avoiding leverage while learning, using limit orders and stop-losses, keeping long-term holdings in self-custody, and only using reputable exchanges. Managing risk and position size matters more than any single trade. This is general information, not advice.