This article is a continuation of an introduction to exchange trading that explains how fundamental market concepts can be applied to understand the dynamics of cryptocurrency exchanges. The first part of the series is Exchange Trading Fundamentals. In this second part, market and limit orders are explained.
Cryptocurrency markets are just like all other markets. There must be a buyer and a seller for a market to exist. The buyer and the seller must agree on a price for the transaction to occur. However, a buyer or seller in a hurry to make a trade is indifferent to price. Due to pressing need, they must trade the asset as soon as possible. Since they must make an asset exchange, they will take the best price offered to them. When this happens, the buyer or seller is called a taker. It doesn’t matter if they are selling or buying the asset. As they have no reservation price, they take the best price available to them so that they can speedily complete their transaction. Both buyers and sellers can be takers.
For example, a livestock market is a type of exchange and a horse is an asset. Actually, a horse is an animal. However, since people like to own them as property, and use them to move from place to place as an economic resource, a horse may also be classified an asset. Alice, a cowgirl from Wyoming, holds the utilitarian view of a horse. Alice needs a horse to get to the…
