What is the Best Cryptocurrency Exchange for Traders?

When it comes to buying a cryptocurrency, many beginners struggle to understand the procedure and worry about the security of the transactions. This short guide will help take some of the mystery out of it.

While any two users with cryptocurrency wallets can exchange coins directly, you will need to begin with a third-party exchange service where you can change your fiat currency (USD, EUR etc.) into a cryptocurrency (Bitcoin or Ethereum, Ripple etc.) These are three of the most widely accepted cryptocurrencies on the vast majority of exchanges.

You will usually find that if you can’t directly buy the cryptocurrency you want with fiat money, you will be able to trade previously purchased Bitcoin or Ethereum for your preferred n alternative coin (altcoin).

Cryptocurrency – To trade as a Commodity or Hold as an Asset?

It is very important to identify your purpose in investing in a cryptocurrency. Will you be day trading or making a long-term store of value? As new cryptocurrencies come out every month, most exchanges offer a narrowed selection of them for trading, based on their popularity and trading volumes. Prior to selecting your go-to exchange, you should verify that no restrictions are in place for your location.

If you are looking to buy a cryptocurrency and hold it as an investment, you’ll need to find a credible exchange that trades the coin of your choice and then we recommend finding a separate way to store it securely. Usually, this means storing your assets offline in a hardware wallet, or another wallet independent of the exchange. Since your money will be secured by a private key, you should NEVER disclose it to anyone and never use it.

If you are interested in day trading, you’ll need to research the trading platform that suits your needs the best. Cryptocurrency trading is pretty much identical to FOREX trading. As your money will be stored on the exchange and you’ll be making regular transactions, credibility is the first thing to consider when choosing a service. Make sure that the exchange is transparent and its history is easily traceable. Exchanges that operate in anonymity should be avoided.

To ensure the execution and speed of orders when trading cryptocurrencies, you should filter your choices to exchanges that have a high number of orders (which reflects liquidity and reputation) and coins that have high 24-hour trading volume.

Advanced Trading Tools and Platforms

The newness and unknown future of cryptocurrencies make them prone to extreme volatility. Rumors, public announcements, technological enhancements, and governmental regulations can have drastic and rapid influences on value. To mitigate potential losses and ensure higher gains, top exchanges offer advanced order tools (ie. stop and limit orders) on their trading platforms. To reduce fees and avoid slippage, as the time of execution determines applicable costs, exchanges provide investors with more options for placing market orders.

When trading on a daily basis, investors need prompt access to their assets. For this reason, top exchanges provide their platforms on desktop and mobile versions, to enable real-time monitoring of prices and the ability to place orders instantly while on the move.

Types of Wallets for Your Crypto Coins

You will need a wallet for your digital coins, preferably one that is distinct from the exchanges you use. When selecting a wallet there are several types, each with its pros and cons. Types of cryptocurrency wallets include:

Online (Hot Storage)

Mostly suitable for daily trading and payments, hot wallets provide fast access to your funds but have a higher potential of being hacked since they’re attached to the internet.

Wallets within the Exchange – Many exchanges offer secure storage either online or off. Users can then access funds directly from their exchange’s servers and the exchange handles security. Note whether they are online or off (cold storage is considered more secure) and whether they provide two-factor authentication or a PIN code requirement.

Desktop and Mobile App Wallets - Native or third-party applications are available, promising to securely store your digital coins and provide fast access via your desktop or mobile. These wallets are password protected and offer the ability to execute instant payments.

While online storage is more convenient for funding trading accounts and processing quick payments, we don’t recommend storing your coins in hot storage for long-term periods, as online wallets are vulnerable to hacker attacks - In the event of a thief gaining access to your online wallet, it is unlikely that you would be able to retrieve your funds.

Offline (Cold Storage)

The best way to keep your crypto coins in the long-term is in cold storage. Offline wallet options include:

  • Hardware Wallets – A USB device with a password lock (widely considered to be the most secure option.)
  • Offline PC or Hard Drive — If you keep the device disconnected from the internet, this can also be a particularly secure option
  • Paper Wallets – An official paper with the private key and a QR code printed out and kept in a safe or other secure location
  • Good Old Memory – An array of phrases to be memorized

While all of these options are offline and hack-proof, they are somewhat prone to physical damages, and if lost or forgotten are impossible to recover. Unfortunately, not all cryptocurrencies offer the ability for cold storage and can only be kept in an online wallet.

Is the Exchange Compliant with Regulations?

An indication of an exchange’s credibility is whether they follow KYC (Know Your Customer) and AML (Anti-money-laundering) protocols. There are multiple levels of customer verification. While low identity verification provides anonymity, the absence of any KYC measures should be considered a warning. To avoid future legal issues when trading cryptocurrencies, it is essential to research the exchange’s compliance with governmental regulations as they emerge. In the USA, all Money Service Businesses must be compliant with anti-money laundering (AML) and CFT (Combating the Financing of Terrorism) rules and to be registered with FinCEN and follow their guidelines.

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