Module 02 — Markets, exchanges and order types¶
Goal: understand how the market works under the hood: how price is formed, how an order book functions, what types of orders exist and what fees you pay. This is the "how to drive" part before you hit the road.
🔊 Listen to this module (Spanish audio, 10 min 52 s)
Narrated version of the full module — perfect for reviewing while you do something else.
1. Types of exchange¶
| Type | Examples | Pros | Cons |
|---|---|---|---|
| CEX (centralized) | Binance, Coinbase, Kraken, Bybit | High liquidity, easy, fiat on-ramp | Custodial, KYC, bankruptcy risk |
| DEX (decentralized) | Uniswap, Curve, Jupiter | Self-custody, permissionless, any token | Gas fees, slippage, more complex, scam tokens |
To get started: a regulated CEX in your jurisdiction (in Spain/EU: Kraken, Coinbase, Bitvavo, Binance with registration). DEXs are covered in module 6.
2. The order book¶
Nobody sets the price: it emerges from the meeting point between buyers and sellers.
ASKS (sellers)
price amount
50.120 ──── 0.8 BTC
50.110 ──── 1.2 BTC
50.100 ──── 2.5 BTC ← best ask
───────────────────── ← spread (ask-bid difference)
50.090 ──── 1.9 BTC ← best bid
50.080 ──── 3.1 BTC
50.070 ──── 0.5 BTC
BIDS (buyers)
- Bid: the highest price someone is paying right now. Ask: the lowest price someone is selling at right now.
- Spread: the distance between the two. Narrow = liquid market (BTC/USDT). Wide = illiquid (small altcoin) → it costs you money to get in and out.
- Depth: how much volume there is at each level. Low depth = your own order moves the price (slippage).
3. Order types¶
| Order | What it does | When to use it |
|---|---|---|
| Market | Buys/sells RIGHT NOW at the best available price | When you're in a hurry. You pay spread + slippage |
| Limit | Only executes at your price or better | Recommended default. You control the price, not the execution |
| Stop-loss | Sells if the price drops to X | Mandatory protection in trading (module 5) |
| Stop-limit | Like a stop-loss but with a limit price | More control, risk of not executing during violent drops |
| Take-profit | Sells if the price rises to X | Locking in gains without staring at the screen |
| OCO (one-cancels-other) | Stop-loss + take-profit together; one executes, the other cancels | Managing a complete position |
Maker vs taker: a limit order that waits in the book = maker (lower fee). An order that executes against the book = taker (higher fee). Typical CEX fees: 0.1-0.4% per operation. It seems small; with 100 trades a year it adds up to a lot.
4. Trading pairs¶
Everything is priced against something: BTC/USDT (BTC in stablecoin-dollars), ETH/BTC (ETH in bitcoins).
- Pairs against a stablecoin (USDT/USDC) are the main ones.
- ETH/BTC tells you whether ETH is doing better or worse than BTC — a key metric for deciding between the two.
5. Spot vs derivatives¶
| Market | What you buy | Risk |
|---|---|---|
| Spot | The real asset | At most you lose what you invested |
| Perpetual futures | A leveraged contract (2x-125x) | Liquidation: you lose ALL your margin with a small move against you |
| Options | The right to buy/sell at a fixed price | Complex; sold options carry unlimited risk |
Rule for this course: SPOT ONLY during the first year. Leverage is the retail-account shredder: with 10x, a 10% drop (a normal Tuesday in crypto) liquidates you 100%. Exchange data shows that the vast majority of retail futures accounts lose money.
Concepts you'll come across even if you never trade derivatives (they move the market): - Funding rate: a periodic payment between longs and shorts in perpetuals. Very positive = market over-leveraged to the upside = risk of a correction. - Open interest: the total capital in open derivatives. - Liquidation cascade: violent drops amplified by forced liquidations chaining together. This explains why crypto can fall 15% in an hour.
6. How an asset is measured¶
- Market cap = price × circulating supply. Compares real size (a $0.001 token is NOT "cheap"; look at its market cap).
- FDV (fully diluted valuation) = price × maximum supply. If FDV >> market cap, token unlocks are coming that will dilute (module 3).
- 24h volume: real liquidity. Low volume vs market cap = illiquid or fake volume.
Exercises¶
- Open the BTC/USDT order book on any CEX (without registering; it's usually visible on the website). Identify the spread, best bid, best ask. Compare it with the order book of an altcoin ranked around #200 on CoinGecko.
- On CoinGecko, find 2 tokens with an FDV ≥ 3× market cap. What does that imply for current holders?
- Calculate: with taker fees of 0.1%, how much do you pay in a year doing 2 trades a week of 500 EUR (entry+exit)? (Spoiler: ~104 EUR — more than 10% of a 1,000 EUR account.)
- Look up a "BTC liquidation cascade" chart from any crash and observe the relationship between liquidations and violent red candles.
Checkpoint ✅¶
- What's the difference between a market order and a limit order, and when is each one better?
- What is slippage and in which markets is it worse?
- Why is a token at $0.0001 not necessarily "cheap"?
- What happens to a 10x position if the price moves 10% against you?
- What signal does a very positive funding rate give?
→ Next: Module 03 — Fundamental analysis