Crypto Trading Pair

A trading pair refers to the exchange rate between two different cryptocurrencies in the cryptocurrency market. In other words, a trading pair refers to the use of one cryptocurrency to represent the value of another cryptocurrency. For example, if the Bitcoin to Ethereum quote is 0.05, it means that one Bitcoin can be exchanged for 0.05 Ethereum.

Type of Trading Pair

Trading pairs in cryptocurrencies can be divided into two broad categories: fiat-based trading pairs and cryptocurrency-based trading pairs.

Fiat Currency Based Trading Pairs

Fiat-based trading pairs refer to using a fiat currency (such as the US dollar, euro, yen, etc.) to express the value of a cryptocurrency. This type of trading pair is often used to enter or exit the cryptocurrency market, as they can be easily connected to traditional financial systems. For example, if Bitcoin is quoted at 30,000 USD, it means that one Bitcoin can be exchanged for 30,000 USD.

Cryptocurrency Based Trading Pairs

Cryptocurrency-based trading pairs refer to using one cryptocurrency (such as Bitcoin, Ethereum, Litecoin, etc.) to represent the value of another cryptocurrency. This type of trading pairs are often used for trading within the cryptocurrency market as they offer more options and flexibility. For example, if the quote for Ethereum to Litecoin is 100, it means that one Ethereum can be exchanged for 100 Litecoins.

In a trading pair in cryptocurrency, the first cryptocurrency is called the base currency and the second cryptocurrency is called the quote currency. The base currency is the unit used to measure the value of the denominated currency. The quote currency is the unit used to express the price of the base currency. For example, in a Bitcoin-Ethereum trading pair, Bitcoin is the base currency and Ethereum is the quote currency.

How to Trade Trading Pairs?

In cryptocurrency trading pairs, each trading pair has a bid price and an ask price. The ask price refers to the highest price at which a seller is willing to sell the base currency and buy the quote currency. The bid price refers to the lowest price at which a buyer is willing to sell the quote currency and buy the base currency. The difference between the ask price and the bid price is called the spread, which reflects the liquidity and transaction costs of the trading pair. The smaller the spread, the more active the trading pair, and the lower the transaction costs; the larger the spread, the more deserted the trading pair, and the higher the transaction costs. Spreads are usually expressed in points (pip) or basis points (pipette). One pip is equal to 0.0001, and one basis point is equal to 0.00001. For example, if Bitcoin/Ethereum is quoted at 0.05/0.051, that means the sell price is 0.05 and the buy price is 0.051, the spread is 1 basis point or 0.1 pip.

In a trading pair, traders can make long or short positions by predicting changes in exchange rates to make profits. Long position refers to the operation of buying the base currency and selling the quotation currency, and short position refers to the operation of selling the base currency and buying the quotation currency. Generally speaking, if traders expect a certain trading pair to appreciate, they can take a long position when the ask price is lower, and then close the position when the ask price is higher, thereby capturing the price difference; if traders expect a certain trading pair to appreciate, depreciation, they can take a short position when the selling price is higher and then close the position when the selling price is lower, thereby capturing the difference. Of course, this operation requires consideration of transaction costs and risk management.