Trading or investments in cryptocurrencies involves greater risks than traditional assets.
This series of blogs will help you become familiar with Bitso Alpha and teach you how to trade. If you are interested in starting cryptocurrency trading, but you don’t know where to start, you are in the right place.
Bitso has just launched Bitso Alpha, our platform designed 100% for cryptocurrency trading. While it is for traders, it is also an easy and intuitive platform where you can eventually master cryptocurrency trading.
Bitso Alpha was created to offer you speed, precision and liquidity through technical analysis and graphic tools to help you better understand the markets. The new tools will help you achieve more grounded and strategic trades.
First, you have to start with the basics of trading and the terms you need to know to get started.
Markets and Books
A market is a space where you can buy and sell goods and services. For this to happen, a price must be agreed between the participants of a transaction. Prices are defined by the law of supply and demand: when there is a shortage of a good and it has high demand, the price of that good increases. If good becomes abundant and demand is met, prices fall. This applies both to cryptocurrencies and to any other good or service in the world.
In Bitso, we have seventeen markets to choose from, each with its respective Order Book, with its buyers and sellers. Bitso does not determine the purchase and sale prices of cryptocurrencies, prices move according to the supply and demand that each one has.
The green side are the purchase orders. They are traders who want to buy bitcoin who generate these orders with the amount of bitcoin they want to buy, as well as the price they are willing to pay for it. This is also known as bid price. Looking closely, we notice that the book is ordered from the highest to the lowest bid. The best offer is in the first place, and it will be the first one to be executed when someone buys bitcoin at market price (we will talk about market orders in our next article).
If a new order is created, the order book is reorganized to put it in its correct place according to the bid price. If two or more orders use the same bid price, they are executed in the order in which they were added to the book, regardless of the amount to be purchased.
Example: the best bid in the table is 193,010.00 MXN. If someone else generates an order with a price of 193,011.00 MXN, it will be placed first and executed first.
On the red side of the table, we have the sales orders. They are traders who want to sell their bitcoin for MXN, they create them with the amount of bitcoin they want to sell and the price they request for it. This is also known as ask price. Similar rules apply: each new order reorganizes the book, and they are inserted according to your asking price.
The difference between the lowest sale price (best ask) and the highest purchase price ( best bid ) is known as spread. In our example, the lowest selling price is 193,100.00, and the highest purchase offer is 193,010.00, which makes the spread of MXN 90.00 (0.047%). A closed spread is typically an indicator of good liquidity in a market.