Expert tips for choosing a crypto trading platform

Expert tips for choosing a crypto trading platform

By Allen Brown

Several investors are now delving into different means in an attempt to grow their money. While some concentrate on learning foolproof strategies that they can implement in the stock market, others are braver in taking the risk to trade cryptocurrencies. In terms of the latter, below are some of the expert tips that you need to keep in mind in choosing a crypto trading platform.

Know their KYC and AML practices

One of the primary things that you need to know when it comes to choosing a cryptocurrency trading platform is their know your customer (KYC) and anti-money laundering (AML) practices. According to the trading enthusiasts behind, you will know if an exchange implements these practices if they require you to submit your personal information during your account creation. Some of the vital information that you need to supply include copies of your identification cards or even proof of your residence. They will gather your data to comply with different rules and regulations depending on your jurisdiction. Some platforms even ban users coming from a specific country or region.

Check their reputation

Another thing that you need to carefully look into when choosing a cryptocurrency platform or exchange is their reputation. You need to be wary of sites and platforms that have been involved in nefarious activities as well as exit scams. These platforms left their users in a less than ideal situation, making them doubt investing in digital assets again.

For this reason, you need to take the time to research different exchanges. From there, you need to evaluate the results of your research carefully, deciphering which is a good review, as well as which are biased ones. You can also look into various social media forums to gain good insight into the reputation of the exchange that you are interested in. This is where you will most likely find any complaints posted about the site. It will also help to read through the terms and conditions of the exchange to verify that nothing is alarming or out of place about the platform.

Scrutinize the security of the platform

Different platforms implement varying security measures but it is ideal that they at least apply a two-factor authentication (2FA). In case they fail to do so, then they may not be adhering to the acceptable security standards in these modern times. In addition to this, you should also carefully evaluate the specific 2FA that the platform is implementing because there are various types of 2FA as well. For instance, Google authenticator, Authy, and Yubikey offer better security compared to mobile or text-based 2FA.

Verify the presence of an insurance fund

When you explore a crypto trading platform carefully, you will most likely determine whether they have an insurance fund. When they do, you will be guaranteed a certain compensation under specific circumstances. In the United States, some other exchanges are covered under the Federal Deposit Insurance Corporation (FDIC) to protect a certain amount of your investment.

Explore their fiat exchange options

There will come a point when you may need to transfer your profits into your national currency or deposit money in your account to be converted into digital assets for crypto trading use. For this reason, you may also want to explore a platform’s fiat exchange options. Some platforms have fiat options that are compatible with specific banks. It is a good idea then to check if your bank works well with the platform that you are interested in.

Look into their asset selection

Make sure that you look into the asset selection of the platform that you are interested in. Some of the top digital assets that you can trade include Bitcoin and Ethereum, as well as Litecoin. There are also other small-cap options and tokens, but these may not be readily available in certain exchanges. If you want to trade these small caps as well, make sure that you carefully inspect the asset selection of the platform.

Determine the purchase methods of the platform

When it comes to cryptocurrency trading, there are already various purchase methods that you can choose from. However, one purchase method may not be readily available in one exchange, which means that you also need to carefully assess the ones available in a platform before you create an account in the exchange. In doing so, you will find it convenient to fund your account and begin trading.

Consider whether they offer leverage trading

Leverage simply means that traders have the opportunity to borrow a certain amount of money that they can use to keep on investing. The basis of the amount that they can borrow is usually the number of funds that they hold on the exchange. However, not all platforms offer this option, but some do up to a hundred times.

For this reason, it is a good idea to check whether the exchange you are looking into offers leverage trading. This may prove to be beneficial for you in the future particularly if you will be looking to enter a short-term position with a larger size in the future. Just take note of the specific terms and conditions encompassed in the leverage because different platforms tend to have varying rules particularly in terms of liquidation levels as well as margin calls.

Identify the number of users of the platform

Some trading platforms are large while others are comparably smaller. The number of users of the platform at any given time generally affects its volume. Alongside this, the amount of assets being traded also affects the volume of the exchange. In the long run, you will figure out that the volume of the platform you choose to engage with can be an important aspect when it comes to how effortless it will be for you to enter or exit a position.

For instance, if you are looking into selling 100BTC, you may not be able to do so easily on a low-volume exchange. This can be attributed to the fact that there are not enough sellers at the current listed market price. This will in turn force you to sell at a lower price, negatively impacting your profit.

However, checking the volume of a certain platform may also prove to be challenging because some exchanges post fake volumes. In this case, what you can do is to look into the order book of different exchanges and keep a tab of the amount that each asset sits in. From there, compare how far the price levels are from each other. There is also the option for you to check third-party websites dedicated to offering this type of data.

Compare prices and fees

The prices of the assets in different exchanges also vary accordingly. For instance, the price of a digital asset may be higher on a certain platform, but it can also be lower on another. Some of the factors that can affect the price of the assets are the participant location, as well as the volume of the exchange. When you take note of these discrepancies, you may avoid the risk of engaging with a platform that may suffer from low liquidity or volume.

You should also consider the fees charged by the platform because this can affect the profit that you generate later on. The fees generally vary from one exchange to another but they are usually based on the percentage of the trade. In case you are a long-term investor, then you may not be as concerned about the fees of the platform as traders are. Since traders tend to buy or sell more frequently, then they also rake more fees often, which means that traders need to look into platforms that charge the smallest fees possible.

Assess the complexity of the platform

In case you are a beginner in cryptocurrency trading, then you should consider registering in a platform that is intuitive and user-friendly. When you attempt to trade on a platform that you cannot fully understand, then you are bound to make costly mistakes with your investment. Fortunately, most platforms offer a free trial. Take advantage of these demo accounts to assess your comfort in navigating through the exchange.

When it comes to trading digital currencies, you need to ensure that you are leveraging the right platform that will be able to foster positive yields. In this case, you have to carefully verify factors such as their KYC and AML practices, as well as their reputation. You should also look into the security of the platform and the presence of an insurance fund. As much as possible, explore their fiat exchange options and their asset selection.

You should also take the time to determine the purchase methods available in the platform that you are interested in, as well as whether they offer leverage trading. Make sure to familiarize yourself with the number of users of the platform and compare their prices and fees against others. You should also be comfortable with the level of complexity of the platform. All these are geared towards ensuring that you will get the most out of your investment in digital assets.

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