What is a trading pair and how do they work is one of the most important facts that we must understand well, in order to trade our cryptos efficiently. Initially, it all started with Bitcoin for most of us when we first stepped into cryptocurrency. As the flavor starts to hit us, we get immersed in more and more and start liking experimentation with other cryptocurrencies too. Altcoin and Ethereum are the then next in line choices for the majority of us before other crypto tokens fall on the scene. But sooner or later they do, and we are perplexed with unlimited cryptocurrency tokens each at a different rate and at unstoppable price fluctuations continuously. This is where trading pairs fall. We shall understand what the trading pairs are and how they work in the sections to follow.
What Are Trading Pairs
Trading pairs are when two cryptocurrencies are taken, and the prices of them are quoted with respect to each other. That is, the value of one cryptocurrency is quoted against the other. There is a base cryptocurrency and there is a quote cryptocurrency. The first listed one is the base cryptocurrency against which the other one, that is, the quote cryptocurrency is quoted. So to put it in the simplest of languages a trade pair would specify how much of the quote crypto shall be required to purchase one unit of the base crypto on some crypto platform.
How Do Trading Pairs Work
Trading Pairs are very useful not only in traditional fiats, but in cryptocurrencies too. They let us know something or a lot on the following aspects of cryptocurrency trading at a given point in time.
Trade Pairs first of all inform the trader as to what all crypto pairs are allowed to be traded at some particular cryptocurrency exchange. So the trader has his boundaries defined and must look into trading only for these pairs that are available. Also, for traders trying to expand their horizons, they get a know how into which trading pairs are more popular in the market and can be explored further.
A value can be established for any given token based on the trading pair it falls in. This perceived value is very important for cryptocurrency traders to make some significant speculations on their trade.
Even if some cryptocurrency is listed on an exchange, but does not fall as your targeted trade pair directly, you can go in for multiple transactions to reach it ultimately. For example, if you own a Bitcoin and would like to trade it for Ethereum when the Bitcoin/Ethereum pair is non-existent. You could find a Bitcoin/Litecoin pair and a Litecoin/Ethereum pair on the same exchange and this would let you reach your ultimate goal, exchanging Bitcoin for Ethereum. Now there can be many trade pairs to reach the final conversion of Bitcoin to Ethereum. Always choose a trade pair that works best for you because every trade pair has its own order book. Companies like executium.com are out there that can help us make such decisions more easily.