Trading pair – what is it in trading?
Cryptocurrency Trading Pairs
When trading on an exchange, any asset is bought and sold in exchange for fiat or virtual currency. The concept of a trading pair works as follows: the first element is the asset being purchased, and the pair consists of the currency that the trader pays to buy it. The absence of either of these elements would mean giving away or conducting a transaction without consideration. Such scenarios are almost impossible in the market, as assets are always exchanged for other assets. This is how the principle of pairing can be described in simple terms.
Understanding Trading Pairs and Their Mechanism
Cryptocurrency pair refers to two assets that can be traded against each other on a cryptocurrency exchange. A pair allows the comparison of the value of one coin relative to another. Exchanges offer multiple pairs with one cryptocurrency to make trading more convenient for traders.
There is a concept of a base cryptocurrency, which is the most widely accepted asset and is often used as a means of payment by the majority of traders. Additionally, some pairs may include a combination of a cryptocurrency and a fiat currency.
Benefits of Cryptocurrency Trading Pairs
A deep understanding of cryptocurrencies and the pairs in which they are traded allows traders to perform the following operations:
- Some cryptocurrencies can only be purchased using other cryptocurrencies. Knowing different pairs expands the list of coins that can be acquired.
- Profit from arbitrage: Price differences of the same asset on different exchanges can lead to profitable opportunities. It is important to consider the necessary trading pairs for arbitrage.
- Profit from price differences within a pair: The difference in prices between cryptocurrencies within the same pair can also be exploited for profit.