Exchange transactions in P2P trading
In this article, we will recall how, in general, the process of trading on cryptocurrency exchanges is arranged: what are the transactions, what and how much the exchanges earn, what is a glass, an order. And then we will smoothly move on to the main types of transactions in P2P trading.
So, you have registered on conditional Binance and want to start trading cryptocurrency.
You have 3 ways to trade:
1. Spot Trading - is when you sell/buy cryptocurrency, interact directly with the exchange. In fact, there are sellers and buyers who put out purchase/sale orders, but the exchange automatically brings these applications together. A specific buyer does not know which seller he bought the cryptocurrency from.
2. Margin Trading - is trading with leverage, similar to spot trading, but here you take a loan from the exchange and enter into a transaction for the amount of funds that you do not have. All your funds on the exchange become collateral at the same time. And if the price does not go in your direction, then at the moment when the loss on the transaction becomes equal to your collateral, the exchange automatically closes your transaction at a loss. The loss is covered by your collateral. This is called liquidation.
It is difficult to understand, so we strongly do not recommend trying to get into trading with shoulders. For inexperienced traders (the one who trades on the stock exchange), in 99% of cases, this leads to a loss of funds.
3. P2P trading - is peer-to–peer trading, that is, directly between users, the exchange in this case is an escrow agent and a guarantor of a secure transaction, for which it takes a small commission (usually 0.1-0.3% from each participant)
Basic concepts
An order - is a buy/sell order.
A limit order - is an order to buy/sell cryptocurrency at a specific price. For example, a limit order to buy bitcoin at $20,000 will be executed automatically as soon as someone places an order to sell bitcoin at $20,000, or executes your order. Limit orders are placed by Makers.
A market order - is an order to buy/sell cryptocurrencies at a market price. Market orders are placed by Takers (they also execute limit orders of Makers).
A stock glass - is a list of orders to buy or sell cryptocurrencies.
On the left (red) is an exchange glass for the sale of ETH for USDT.
On the right (green) is an exchange glass for the purchase of ETH for USDT.
Let's say you have placed a market order to buy 10 ETH.
We look at who is selling ether for what – that is, in a glass for sale (red).
It turns out that you will buy 9.24351 ETH at a price = 1638.4 USDT,
And also 0.75649 ETH at a price = 1638.4 USDT.
You will also pay a commission to the exchange of 0.2% of the transaction amount. By the way, sellers who placed these limit orders for sale will also pay a commission to the exchange when you execute their orders, but only the commission will be 0.15% for them, since they placed limit orders.
If there are not enough funds for the commission, the exchange will point this out to you and offer to buy a smaller volume.
As you can see, market orders are executed at the best prices in the glass.
One of the main rules of P2P trading is to always try to be a Maker. Makers wait longer for their orders to be executed, but they pay less commission and, accordingly, earn more than Takers.
In P2P, orders are placed in the same way, but each transaction takes place manually with the participation of two users - the Maker (who placed the order) and the Taker (who executes this order). The exchange acts as a guarantor of a safe transaction for both parties.
Another important rule of P2P arbitrageurs is ALWAYS take into account when calculating the exchange commission.
In addition to commissions for trading operations, there are also commissions for input/output.
And in order not to make offensive mistakes in calculations, as well as to better understand the field of P2P trading, subscribe to our telegram channel.