Crypto Trading Explained

A market with no closing bell

Crypto trades continuously. There is no overnight gap because there is no overnight; price discovery simply continues. The practical implication is that risk cannot be parked at the end of a session. A position left unattended over a weekend is exposed to a full liquidity cycle, and weekend liquidity is thinner than weekday liquidity, which magnifies the effect of large orders.

Continuous trading also changes the meaning of a daily candle. Where an equity chart summarises a defined auction, a crypto daily candle is an arbitrary slice of an unbroken stream. Traders who rely heavily on session-based patterns need to adapt their reference points.

Fragmented liquidity

The same asset trades on dozens of venues simultaneously, each with its own order book. Prices converge through arbitrage but never perfectly, and depth varies enormously between venues. A position that is easy to enter on a deep venue may be expensive to exit on a shallow one.

This fragmentation is why slippage deserves explicit attention in crypto. Model your expected fill, not just your intended price, and prefer limit orders when depth is uncertain.

Custody and exposure models

There are two broad ways to hold exposure. Direct custody means owning the asset and controlling — or delegating — the keys. Derivative exposure means holding a contract whose value references the asset without owning it. The distinction matters for risk: direct custody introduces operational and security considerations, while derivative exposure introduces counterparty, funding and margin considerations.

Neither model is inherently safer. What matters is that you can articulate which one you hold and what would have to go wrong for you to lose access to it.

• Direct custody: key management, backup discipline, withdrawal controls
• Derivative exposure: margin rules, funding costs, liquidation mechanics
• Either way: written procedures beat improvisation during volatility

Volatility as a design constraint

Double-digit daily ranges are routine in this asset class. That is neither good nor bad in itself, but it means position sizes calibrated for FX are dangerously large in crypto. Size to volatility, typically using a measure such as average true range, rather than to a fixed notional.

Volatility also compresses time. Strategies with wide stops and long holding periods experience in weeks what an equity strategy might experience in years. Expect your emotional response to be tested faster than you anticipated, and pre-commit to your exit rules in writing.

Research discipline

Because crypto narratives move quickly, research quality varies widely. Prefer primary sources: protocol documentation, on-chain data and published exchange statistics. Our library applies the same standard to platform coverage, which is why the PaltusTrade review documents what can be observed rather than what is claimed.

Pair this article with our guide on market volatility to build a sizing framework you can apply consistently across asset classes.