Most trading happens on centralised venues running matching engines essentially similar to those in conventional markets.
The order book
Resting buy and sell orders at various prices.
Which is matched by price then by time, so the best price executes first and ties are broken by who arrived first.
The spread between best bid and best offer is the immediate cost of trading.
Order types
Market orders execute immediately at whatever price is available.
Limit orders specify a maximum or minimum and may not execute at all.
Which is the fundamental trade-off between certainty of execution and certainty of price.
Stop orders trigger when a price is reached and then behave as market or limit orders depending on type.
Depth
How much volume rests near the current price determines how far a large order will move it.
Which is visible on the order book and is frequently thin beyond the immediate levels.
Displayed depth can be withdrawn instantly, so it is an indication rather than a commitment.
Maker and taker
Adding liquidity to the book versus removing it.
Which is priced differently, with makers generally paying less and sometimes being paid.
This exists to encourage resting orders, which is what makes a market tradeable.
Slippage on stops
A stop order triggering in a fast market can execute far from the trigger price.
Which is a common and unpleasant surprise.
Stop-limit orders bound the execution price and may leave the position unclosed instead.
Liquidation on leveraged venues
Positions are closed automatically when margin is insufficient.
Which happens at the venue's determination using its own index price.
Insurance funds absorb shortfalls, and where they are exhausted, some venues socialise losses across profitable traders.
Funding rates
Perpetual contracts use periodic payments between long and short holders to keep the contract near the spot price.
Which means holding a position has a carrying cost that varies with market positioning.
Extended periods of high funding indicate crowded positioning and are watched for that reason.
Counterparty considerations
Assets on an exchange are held by the exchange.
Which is the risk that has produced the largest losses in the field's history.
This is description of mechanism and is not trading advice.
Market data feeds
Venues publish order book and trade data through interfaces used by trading systems.
Which differ in latency and in completeness between public and paid tiers.
Latency differences are consequential for automated strategies and irrelevant for most participants.
Circuit breakers
Some venues halt trading or limit price movement during extreme volatility.
Which prevents cascading liquidations and prevents people from exiting.
Policies differ substantially between venues and are worth knowing before they matter.
Order book manipulation
Placing orders with no intention of execution to influence perception.
Which is prohibited in regulated markets and is unevenly policed elsewhere.
Large resting orders that disappear as price approaches are a recognised pattern.
Internalisation and wash trading
Reported volume has been shown in academic studies to be substantially inflated on some venues.
Which affects rankings and the perception of liquidity.
Depth and spread are more reliable indicators than reported volume.
Withdrawal policies
Processing times, limits and suspension conditions vary and matter during stress.
Which is when people discover them.
Reading the terms before depositing is the obvious and rarely taken precaution.
Cross-venue arbitrage
Prices differ between venues and are pulled together by traders exploiting the gap.
Which requires capital on both sides and fast withdrawal, both of which have limits.
Persistent premiums between venues generally indicate a constraint on capital movement rather than a free opportunity.
Fee structures
Tiered by volume, with substantial differences between the top and bottom tiers.
Which materially affects strategies trading frequently.
Fee schedules are published and vary enough between venues to be worth comparing.
Derivatives and open interest
The total value of outstanding contracts indicates positioning.
Which combined with funding rates gives a picture of how crowded a direction is.
Sharp reductions in open interest generally indicate forced position closure rather than voluntary exit.
Order execution quality
Comparing achieved price against the price at order submission.
Which is measurable and is rarely measured by individual participants.
The difference between market and limit orders shows up clearly in this measure over many trades.
Custody reminder
Trading requires assets on the venue, which is exposure to that venue.
Which argues for holding only what is being actively used.
Regulatory obligations
Licensed venues face requirements regarding market integrity, client asset segregation and reporting.
Which differ substantially between jurisdictions and between licensed and unlicensed operators.
Checking what a venue is authorised to do, and by whom, is a reasonable step before depositing.
Closing
The mechanics are conventional, and the counterparty question is what distinguishes this market.
Withdrawal discipline
Moving assets off a venue after trading concludes limits exposure to that venue.
Which is straightforward and is not what most participants do.
Historical failures have consistently affected balances left on venues rather than assets held elsewhere.
Reading a venue
Licensing, reserve attestations, withdrawal history and how it handled past incidents.