How do exchanges work when trading cryptocurrency?

When trading cryptocurrency on an exchange, traders must first deposit their tokens or coins into the exchange’s digital wallet. Once the tokens/coins are deposited, traders can make orders that will be filled by other traders on the platform. Traders can buy and sell cryptocurrencies at the prices set by other traders on the platform, creating a decentralized market. When buyers and sellers match on the order book, the trade is executed and both parties receive the funds. The exchange then takes a fee for facilitating the trade.