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7 Step-Guide to Choosing an Exchange

Abhishek Yadav by Abhishek Yadav
February 21, 2019
in Investing
7 Step-Guide to Choosing an Exchange

Choosing which cryptocurrency exchange you should start an account with and trade from is far from easy. There are many different aspects to consider. Some of them are no surprises, but others might surprise you. This 7-Step Guide goes through all you need to know before choosing an exchange.

Contents

  • 1 Step 1 – Check the Cryptos Traded
  • 2 Step 2 – Check that you are eligible
  • 3 Step 3 – Check the trading fees
  • 4 Step 4 – Check the withdrawal fees
  • 5 Step 5 – Check Deposit Methods
  • 6 Step 6 – Check Trading Chart
  • 7 Step 7 – Check for “Red Flags”

Step 1 – Check the Cryptos Traded

The first step to check is what cryptos that you can trade at the relevant exchange. If you are just looking to buy some Bitcoin, then you are in luck – most exchanges offer that possibility. If you’re looking for a bit more exotic altcoin, or don’t even know what cryptocurrency to invest in, then you must ensure that your exotic altcoin is at all traded at the relevant exchange or that the exchange has a wide range of available cryptocurrencies. Many exchanges offer only one trading pair (BTC against USD or similar), whereas others have hundreds of trading pairs.

Step 2 – Check that you are eligible

Step 2 is to check if you are at all eligible to trade at the relevant exchange. The best crypto trading platform for you might not even be available to you. Most exchanges have an on-boarding process where you need to state which country you are from, and if you state that you are from a country whose citizens/residents are not eligible to trade at the exchange, the exchange will stop you from becoming a customer. The most common jurisdiction to exclude is the USA. To determine whether you are allowed or not, check the relevant exchange’s FAQ. Normally you can find the answer to which countries the exchange supports there.

Step 3 – Check the trading fees

A small fee might seem insignificant at first but remember that due to the phenomenon of compound return it can add up to great losses/winnings in the long-term. The trading fees usually consist of the maker fees and the taker fees. To summarize, a trade gets the taker fee if the trade order is matched immediately against an order already on the order book. The effect of such a trade is removal of liquidity from the order book. A trade gets the  maker fee if the trade order is not matched immediately against an order already on the order book. The effect of such a trade is addition of liquidity to the order book. When a fee is flat it is equally high or low irrespective of whether you are a taker or a maker.

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The industry average is arguably around 0.25% for takers and slightly less for makers, meaning that if you are a taker in an order worth USD 10,000 the exchange takes USD 25 as its fee for executing the trade. But there are also exchanges offering substantially higher or lower fees.

Step 4 – Check the withdrawal fees

So you have checked the trading fees in detail and think you have a good grip on the fees. Well, you are not out of the woods yet. There is one remaining but very important fee to consider – the withdrawal fee. The withdrawal fee is charged when you want to take out your balance from the account you have at the exchange. Some exchanges offer competitively low trading fees, but then hits you on your way out with their withdrawal fees. The industry average for BTC-withdrawals is 0.000812 BTC per withdrawal. Sure, this might seem like a small amount. And it is. However, in the long run, it can add up to something important.

Step 5 – Check Deposit Methods

Step 5: The exchange has the cryptos you want to trade, you are eligible to trade, and the fees are competitive. Now the only thing remaining is to start trading, right? Wrong. You also need to check whether the exchange supports the deposit method that you want to use. Many exchanges do not accept any deposit with “fiat currencies”, meaning that you have to be a previous owner of cryptocurrency to be eligible to trade at the exchange. Some only accept deposits through specific payment service providers, such as Perfect Money. Others do not accept credit card deposits. If you need to pay by credit card, you will have to choose another exchange.

Also Checkout  7 tips to invest like Warren Buffet

Step 6 – Check Trading Chart

Step 6: Different people have different preferences when it comes to the trading chart (i.e., how they want price movements of different cryptocurrencies to display, how the order books should look etc.). If you are into technical analysis, you might have a strong preference on what information that shall be easily obtained through the charts etc. And even if you are not into technical analysis, you might have strong preferences. There are numerous different opinions here on what the “right setup” is so we strongly suggest you do your own research based on your very own preferences.

Step 7 – Check for “Red Flags”

The last step is a more general one, which we would like to call “check for red flags”. Many things can be red flags but – generally speaking – the absence of info is the biggest one. Is there no info on trading fees? No info on withdrawal fees? No info on the home country of the exchange? Then we would recommend you to go with another exchange. No info equals risks and you should always avoid unnecessary risks.

The best place to get an overview of all the cryptocurrency exchanges in the world is through Cryptowisser.com’s Cryptocurrency Exchange List. A massive list including more than 360 different exchanges with individual reviews on all of them. In their Cryptocurrency Exchange List, they also show information on the fees (trading fees and withdrawal fees), supported cryptocurrencies, deposit methods, security scores and user scores etc.

 

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Abhishek Yadav

Abhishek Yadav

Hello, I am Abhishek Yadav, I am an Internet Marketer and a Blogger. along with blogging I also have some Programming and content marketing skills. Connect with me on Twitter @Abhinemm to know more about me :)

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