What Is an Exchange?
An exchange is the market where buyers and sellers meet to trade crypto. A centralized exchange (CEX) usually holds customer assets and matches orders on an off-chain book. A decentralized exchange (DEX) settles trades on-chain through a liquidity pool or an on-chain order book, and users typically keep custody until the trade occurs.
How Exchanges Work
Centralized venues list spot pairs and, often, perpetual futures, with maker and taker fees, margin, and an internal matching engine. Decentralized venues replace the custodian with smart contracts. Liquidity, fee schedules, custody risk, and downtime differ by venue, so the same asset can trade at slightly different prices across exchanges.
Deposits and withdrawals between wallets and a CEX show up as exchange flows. Those flows do not by themselves tell you what traders will do next, but they change how much supply sits on the venue.
Why It Matters for Traders
Your fills, fees, funding, liquidation engine, and counterparty risk all depend on the exchange you use. Journaling should record the venue, because a strategy that works on a deep book can fail on a thin one.
How Perps Traders Use This
Pick a venue for depth, fee tier, margin mode, and reliability, then stick to measured size relative to the book. If you trade the same pair in more than one place, watch basis and transfer times, not just the last print.
Common Mistakes
- Treating every exchange as equivalent, including custody, downtime, and liquidation rules.
- Sizing a trade off a global last price instead of the local book.
- Leaving assets on an exchange longer than the trade requires without a reason.
