Top ways to trade crypto with low fees
The value of cryptocurrencies has grown enormously in recent years. From Bitcoin to Neo there are some very exciting currencies which can make you some serious profits if you know what you’re doing. The recent surge in the value of Bitcoin, for example, has seen the value of the currency triple in just the last three months. One important way to maximize the profits you can make from cryptocurrency is to reduce the amount of fees you pay when trading crypto. There are various ways to do this and over the course of your trading lifetime it can save you a serious amount of money.
To help everyone make as much money as possible through cryptocurrency trading, here are the top ways to trade crypto with low fees.
Understand the Costs Associated With Trading
Every type of trading has some inherent costs involved. These include fees and commissions, such as when you move money from your credit card to your coin account or the taker fee which is paid on market orders. In addition to these costs, there is also the money lost through the bid-ask spread. This is the difference between the price which you receive and the actual market price. When you buy crypto you will pay a fraction more than the market price, and when you sell crypto, you will receive a fraction less. You are also a contributing factor to the overall movements of the markets. When a lot of people buy one cryptocurrency, the price will go up, and when everyone starts to sell, the price goes down. Even relatively small orders can cause movements in the markets so you always need to take that into account when deciding when to buy or sell.
Look for Zero Free Crypto Exchanges
There are many different cryptocurrency exchanges available to you and they all have different benefits. One of the main things to look out for is the fee which the various crypto exchanges charge per trade. The folks at hedgewithcrypto explain that the best way to compare different exchanges is through online reviews. They will show you the applicable fees, how many kinds of coin the exchanges support, and other useful information. You don’t want to base your entire decision on the exchange fees as there are other factors which you will need to consider when choosing a crypto exchange, but low fees should be one of the main deciding factors.
Understand How Spreads Work
In the most simple terms, the more you trade, the more you will have to pay in fees and spreads. This is because you will pay these costs on each and every trade. As explained above, fees vary from exchange to exchange while spreads can be anywhere between 0.2 and 1.5% of the true market value. The size of the spread depends on which currency you are buying or selling, but as a general rule, the most popularly traded cryptocurrencies tend to have the lowest spreads. One positive note is that the size of spreads appears to be trending downwards with this year’s spreads being a lot lower than last year’s.
Trade Less Frequently
In order to understand how more frequent trading ends up costing you more money, we can look at an example using real coin prices and fees. If you imagine a five year period, if you bought cryptocurrency just once at the start of those five years and traded it out at the end of the period, you will have paid sixty times less in fees than if you traded in and out every month. If over that period, the currency increased in value by 20%, having just traded once you would have made around 18-19% after fees and spreads. If you had bought in and out every month, however, you would actually make a loss of around 75% due to the amount of fees you would have paid and the money lost through spreads. Because cryptocurrency profits are so high, many people have managed to make a lot of money despite the spreads, but their impact may become more obvious if crypto profits ever become more like traditional trading profits.
Make Use of Limit Orders
One way to reduce the amount of fees you need to pay is to make use of limit orders. This means that you place a purchase or sale order which is only executed when the price reaches a specific point. While many of the lower-cost crypto exchanges will accept limit orders, however, it is worth noting that the movement of the markets can seriously affect how your order will be filled. Using Coinbase or other similar services could mean that you actually end up paying more than 4% if the market moves against you and you buy crypto with a credit card. Market volatility is always a factor that needs to be considered when using limit orders, but if you can time it right then they can save you some money. It is hoped that with crypto becoming more mainstream the markets will become less volatile, but for now extra care needs to be taken.
Crypto trading fees are a very important subject because the future of the industry is so uncertain. Currently, crypto trading costs are markedly higher than the corresponding costs of trading stocks and shares, but this is to be expected due to the age of the crypto market. At the minute, the huge increases in crypto price mean that high fees and spreads can easily be absorbed in the profits with a long-term policy of holding onto currency. If the prices start to level in the future, however, it may become more difficult for people to make decent money with today’s costs. Fortunately, the size of the spreads has been going down year on year so hopefully this trend will continue. In order to keep down the fees you pay and the money lost through spreads, find the best exchange and try to trade as little as possible. There is a lot of money to be made from crypto so keep your ear to the ground and see if you can spot the next coin that is about to surge.
