Crypto Trading and Exchanges Flashcards
7 cards from real CCE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Crypto Trading and Exchanges flashcards as text
What is the primary risk of using high leverage on a crypto derivatives exchange?
Answer: Liquidation of the entire position if the price moves against you
High leverage amplifies both gains and losses, and if the market moves against a leveraged position sufficiently, the exchange will liquidate it to cover the debt.
Which metric best measures how easily a cryptocurrency can be bought or sold without moving its price?
Answer: Liquidity
Liquidity measures how readily an asset can be traded at stable prices; high liquidity means large orders have minimal price impact.
What is a 'perpetual swap' in crypto trading?
Answer: A leveraged derivative contract with no expiration date
A perpetual swap is a derivative contract similar to futures but with no expiry date, using a funding rate mechanism to track the spot price.
What does 'TWAP' stand for and why is it used in large crypto trades?
Answer: Time-Weighted Average Price; to execute large orders gradually and minimize market impact
TWAP (Time-Weighted Average Price) is an execution algorithm that splits large orders over time to minimize slippage and reduce market impact.
On a decentralized exchange (DEX) using an AMM model, what determines the price of a token?
Answer: A mathematical formula based on the ratio of tokens in a liquidity pool
AMM DEXs use formulas like x*y=k to price tokens based on the current ratio of assets in the liquidity pool, without a traditional order book.
What is 'wash trading' in cryptocurrency markets?
Answer: Artificially inflating trading volume by simultaneously buying and selling the same asset
Wash trading is a form of market manipulation where a trader buys and sells the same asset to artificially inflate reported volume and create misleading activity.
What is the function of an 'OCO' (One-Cancels-the-Other) order on a crypto exchange?
Answer: Places two linked orders where the execution of one cancels the other
An OCO order pairs a take-profit limit order and a stop-loss order so that when one triggers and fills, the other is automatically cancelled.