A nested exchange is a derivative of a direct exchange, where price levels and time limits are both specified in advance. If the trading level of the direct exchange exceeds these limits, then traded prices and volumes automatically enter into new exchanges until they reach their limit and stop. Only price and volume that do not exceed the limits of any nested exchanges go directly to the primary level.
Nested exchanges are used in most cryptocurrency markets because most of them have very small volumes and low liquidity, so it is difficult to implement dynamic pricing. Nested exchanges solve this problem by allowing traded prices to automatically adjust with time if they do not reach the initial goal.
One way you can think of nested exchanges is as a series of buckets where the first bucket contains the initial trades, and each subsequent bucket receives those trades that don’t fit into the first.
How do nested exchanges differ from normal indirect markets?
There are several differences:
1. Suppose we have a daily goal for a cryptocurrency market of $ 100K and we want to avoid traded volumes of more than $ 1M.
2. If we place an initial goal of M 5 (where M is the size of the marker) and a second-order, then it will be traded on this level if the first does not exceed $ 100K.
3. It would allow us to monitor both orders at once and use them as two separate goals, or treat them as one and make decisions based on the total sum of both orders.
4. If it reaches $ 100K in traded volume but does not reach M 5 , then all transactions will be executed at the primary level with a minimum price of 0 .
5. The more levels there are, the lower the stop price will be and the more likely it will be executed.
6. For every market, we must define a “Nominal Minimum Price” (RMP). This is the minimum transaction price of any order in the market and defines at which level. It is important to consider this number: if prices do not go lower than that, then all orders in the market below that price will never be executed (since they do not meet the minimum volume levels).
This is how nested exchanges work in cryptocurrency markets like Bitcoin prime. They can help you monitor your goals easily and let you use a series of levels to trade volumes without creating too many transactions.
Are Nested Exchanges Dangerous?
Yes, they are. If you do not know how to use nested exchanges correctly, they can quickly create more problems than they solve. They are more dangerous for novice traders because people often want to try their luck with the market and set too low prices – lower than the initial price on which they are placed.
Markers that have already been placed on the way up are difficult to get out, so they can quickly turn around and generate losses. If you keep buying at higher prices without success and keep buying, you can quickly create a snowball of losses and cause significant damage to your account.
A good way to avoid these problems is to place the marker only when the market has reached its initial goal and never buy it back without consulting another trader or advisor.
Nested exchanges are a good way to earn money in the markets, but they must be used carefully. You have to know when to use them and how much risk you’re willing to take before you start trading with them. They can help you set goals for your business easily and monitor trade volumes without creating too many transactions.