As a cryptocurrency trader, one of the most important things you can do to maximize your profits is to ensure you are trading on a platform that has your best interests at its core.
In the near-decade since the launch of the first cryptocurrency exchange platform, tremendous progress has been made in developing tools and features that make trading a safer, simpler, and more profitable experience.
However, not all cryptocurrency exchanges have implemented these innovations — leaving a huge number of traders missing out on features that could spell the difference between success and failure.
With that in mind, let’s examine some of the key characteristics of subpar exchange platforms. If your current exchange meets any of these criteria, you might want to consider a switch.
They Want You to Complete KYC
When you first created an account at your cryptocurrency exchange, you may have been asked to fork over several pieces of personal information — including your full address, date of birth, a scan of your passport or national ID card, and, potentially, even a selfie. This is known as enforcing know-your-customer KYC) requirements.
In recent years, an increasing number of exchanges have begun to request KYC information from users — which drastically reduces trader privacy while placing their identity information at risk of being compromised.
While this is a legal requirement when dealing with fiat currencies in many countries, there is no such requirement for pure cryptocurrency exchanges in some regions. Because of this, one might argue that any cryptocurrency exchange that completely lacks fiat support has no business asking for your identity information.
Fortunately, there are several highly capable platforms that offer a large range of trading features but don’t require any form of KYC, including StormGain, Deribit, and ByBit. In light of this, in 2019, there is typically no need for you to hand over your identity information when trading — unless of course, you wish to trade against fiat currencies.
You Can’t Trade Cryptocurrency on The Short Side
When it comes to cryptocurrency trading, there are two possible positions: long and short. Opening a long position indicates that you expect the cryptocurrency to increase in value over the duration of the position, whereas going short, or “shorting,” indicates that you expect it will decrease in value over the position duration.
Although the past several years have seen many cryptocurrencies explode in value, more recent times haven’t been so favorable. Since the turn of 2018, most cryptocurrencies have been on a stark downtrend — with even major digital assets like Bitcoin (BTC), Ethereum (ETH), XRP (XRP) and Litecoin (LTC) experiencing shattering losses in the past 23 months.
In fact, a large number of cryptocurrencies have had more losing days in 2019 than winning days. As such, many traders shorting Bitcoin and other cryptocurrencies across this time have netted a hefty profit, while those still holding onto their long positions are likely to be deeply in the red.
Because of this, it is important to trade on an exchange that maximizes your opportunity to profitably trade the market by allowing you to go either long or short — depending on the prevailing market conditions. This feature is typically only present on cryptocurrency derivatives trading platforms since futures and options are the most commonly used by traders looking to short.
The Cryptocurrency Trading Fees are Misleading
One of the ways cryptocurrency exchanges tend to market themselves to new customers is by claiming to have low fees — which most traders expect will improve their profitability in the long run.
Although many cryptocurrency exchanges do indeed offer low maker and taker fees, several have such a high spread that it makes trading on the platform more costly than people realize. After all, trading on a platform with a 0.2 percent spread means a trader loses $20 on every $10,000 traded, whereas a platform with zero spread will leave the trader with more of their profits.
Taker FeeThe exchange fee is shown for BTC/USD (T) as it the most popular instrument
BTCUSD(T) Spread Spread is a difference between the lowest ask price and the highest bid price, taken by the exchange. If there is no spread, or there is a zero spread, then it is included in the transaction fee.
Total exchange commission Total transaction fee, including spread.
|0.08%||0.00%||0.08%||Visit site >|
|0.10%||0.22%||0.32%||Visit site >|
|0.15%||0.00%||0.15%||Visit site >|
|0.20%||0.21%||0.41%||Visit site >|
|0.25%||0.04%||0.29%||Visit site >|
|0.26%||0.10%||0.36%||Visit site >|
Unfortunately, manually determining the typical spread on every exchange is a challenging process, since few exchange platforms are transparent enough to openly display this information. For this reason, BeInCrypto has produced a useful widget that compares the commission fees and spreads on a variety of popular platforms.
Overall, it’s important to ensure that the exchange platform you are using is open with the total fees you are likely to incur — otherwise, it can be difficult to track the profitability of trades. This is particularly important for high volume traders, who could be losing a significant chunk of their profits to hidden fees, like the spread.
There Are No Leverage Trading Options
Although spot trading cryptocurrencies can be highly profitable, the number of trades required to achieve substantial profitability can also be high — which can mean the amount of time investors need spend trading needs to be similarly high.
However, by trading on leverage, savvy traders can generate substantial returns from even small price movements, which — when compounded — can yield incredible results. This cuts down the number of trades required to achieve profitability, giving traders more time to focus on other things.
Unfortunately, only a handful of cryptocurrency exchanges actually allow traders to trade on margin and, among these, few actually make the process simple enough that even beginner traders can begin. Of these platforms, StormGain and ByBit stand out among the most beginner-friendly, since the exchange features helpful tooltips and simple stop loss/profit options to help limit risk.
They Don’t Help You Make Winning Trade Decisions
Whether you are a beginner or an experienced trader, you may already be accustomed to using tools that can help you better assess the market and identify potentially-profitable trading opportunities. You might also use external charting tools, like TradingView, to analyze market trends to help evaluate your current positions and make informed choices about potential trades.
Recently, more advanced platforms have made great strides in improving trader success by integrating both advanced charting tools and market indicators as standard. These exchanges enable traders to reduce their reliance on third-party platforms by providing them with the information and tools they need to stay ahead of the curve and trade smart.
If the platform you are trading on doesn’t have at least some form of market sentiment indicator and lacks advanced charting features, then it might be time to consider alternatives. After all, any exchange that doesn’t invest in the features necessary to help its customers succeed likely isn’t worth sticking with.
Full Disclosure: StormGain is an exchange partner of BeInCrypto.
Images courtesy of Shutterstock, Trading View and Twitter.