Day 4 – Understanding Crypto Exchanges



Well done for setting up your wallet yesterday! Now that you can store and manage your cryptocurrency safely, it’s time to learn how to trade it.

This is where crypto exchanges come into play. An exchange is a platform where buyers and sellers come together to trade cryptocurrencies for other coins or for regular money like rupees or dollars.

🔹 What is a Crypto Exchange?

A crypto exchange is a website or app where you can:
✔ Buy cryptocurrency using your bank account, debit card, or other means.
✔ Sell cryptocurrency and convert it into cash.
✔ Trade one cryptocurrency for another (for example, BTC to ETH).

Think of it as a stock market, but for digital currencies.

🔹 Types of Exchanges

  1. Centralized Exchanges (CEX)
    ▶ Run by a company that manages the platform.
    ▶ Examples: Binance, Coinbase, WazirX, Kraken.
    ✅ Easy to use, fast transactions, high liquidity.

  2. Decentralized Exchanges (DEX)
    ▶ Peer-to-peer platforms where users trade directly.
    ▶ Examples: Uniswap, PancakeSwap.
    ✅ Offers more privacy, but complex and slower at times.

🔹 How Does an Exchange Work?

  1. You create an account and verify your identity.

  2. You deposit money or cryptocurrency into your account.

  3. You choose a trading pair (like BTC/USDT).

  4. You place an order to buy or sell at a certain price.

  5. The exchange matches your order with another user’s order.

  6. The trade is completed and your wallet is updated.

🔹 Trading Pairs Explained

A trading pair shows what you’re exchanging for what. For example:

  • BTC/USDT → Buy Bitcoin using Tether (a stablecoin pegged to USD).

  • ETH/INR → Buy Ethereum using Indian rupees.

Always check which pairs are available before trading.

🔹 Order Types

  1. Market Order: Buy or sell instantly at the current price.

  2. Limit Order: Buy or sell at a specific price you choose.

  3. Stop-Limit Order: Set both a stop price and limit price to control risk.

📝 Example Story

Anjali wants to buy Ethereum (ETH).

  1. She deposits ₹10,000 into her exchange account.

  2. She selects the ETH/INR pair.

  3. She places a market order to buy ETH at the current rate.

  4. The trade is completed instantly, and she now owns ETH in her wallet!

✅ Day 4 Task

  1. Sign in to your chosen exchange (Binance, WazirX, or another trusted platform).

  2. Complete your identity verification (KYC process).

  3. Explore how to deposit funds and look at the trading pairs.

  4. Place a mock order (or a real order if you’re ready) using a small amount.

  5. Observe how orders are matched and executed.

Tomorrow, Day 5, you’ll learn how to read market trends – a skill every trader needs to make informed decisions.