How to Use a Crypto Exchange
To use a crypto exchange, read the jurisdiction section of its terms before funding anything and learn its maker and taker fees. Then place orders as limits wherever the price is the reason for the trade, and move anything you intend to hold for the long term off the venue.
An exchange does three jobs at once — it matches orders, it holds your assets and it is your counterparty for withdrawals. Most of the difficulty comes from the second and third being invisible while the first is working.
Before you start
The venue’s terms of use, read for the jurisdiction section before funding anything. Several large venues exclude residents of particular countries in their own terms, and the clause is usually short.
Its fee schedule, including the maker and taker figures and the withdrawal fee. Three separate numbers, and only the first two appear on the trading screen.
Somewhere to store the assets that is not the exchange, for anything held long. Holding on a venue is a decision about custody, and it is worth making deliberately rather than by inertia.
The steps
1. Read the jurisdiction clause before depositing
Find the section naming excluded territories. If your residency is on it, nothing else about the venue matters and a deposit will be difficult to reverse.
2. Complete the identity checks fully before funding
Withdrawal limits are usually tied to verification level. Completing it first avoids discovering at withdrawal time that the money cannot leave at the size you need.
3. Learn which fee your orders will pay
A market order takes liquidity and pays the taker fee. A resting limit order provides it and pays the maker fee, which is usually lower and sometimes zero.
4. Place orders as limits wherever the price is the reason
You control the price and give up certainty of execution. In a thin book that trade is usually worth making, because a market order there can fill far from the quote.
5. Compute the breakeven before you enter
The fee is charged on the buy and again on the sell. At 0.5% a side, a purchase at 30,000 breaks even at 30,301.51 rather than at 30,000.
6. Withdraw anything you intend to hold
Send a small test amount first, confirm it arrives, then send the rest. The withdrawal fee is per transfer, so one large transfer costs the same as one small one.
7. Record every trade for tax as you go
In most places a sale is a taxable disposal, including a swap of one coin for another. Reconstructing a year of that later is far harder than recording it as it happens.
How to tell it worked
You can state your taker fee as a percentage without checking. If not, the cost of every market order is unknown to you.
Breakeven was computed before entry, so no position was opened believing the entry price was the level to beat.
A test withdrawal arrived and was confirmed within 60 minutes before any large amount was moved.
And every disposal is in a record, including coin-to-coin swaps, rather than needing reconstruction later.
What the fees actually cost
A 0.5% fee each side is 1% of the position before price has moved. A strategy turning over weekly at that rate pays roughly 52% of the position in fees over a year, which is before any trade is judged right or wrong.
On this site’s shared series the round trip measures about 2% of the median bar range of 0.493,
and it exceeds 10 percent of the bar on 15 of 576 bars. In a thin crypto book at an illiquid hour that
share is larger. The figures are in research/series-measurements.json.
The spread is a second cost and it is on no schedule. It is widest exactly where the fee schedule looks most attractive — on the pairs nobody is trading.
The original data
Of the 24,971 unique videos in research/search-study-corpus.jsonl, 217 have an instruction-shaped
title about crypto, at a median of 30,027 views across 156 channels. Crypto profit specifically
appears in 6 videos at 155,946 and crypto tax in 8 at 34,984. The counts come from
site/rank_howto.py and site/rank_tools2.py, both deduplicating by video id.
217 instruction-shaped videos on crypto and 6 on what a trade actually returned. The gap between how much is taught and how little of it is arithmetic is wider here than in any other category measured on this site.
The answer to the question on that chart is that a fee discount paid for in the venue’s own token is a position in that token. It reduces one cost and creates an exposure that moves independently of everything you were trying to do. Price the discount against the size of the holding required — and if the holding is large relative to your trading, the discount is not the main thing you bought.
Where to check the numbers
Fee schedules, jurisdiction terms and withdrawal costs are published by each venue and they change. Read the current page rather than any figure written down here or anywhere else.
Read the jurisdiction terms before funding, because finding out afterwards is expensive and slow.
When it fails
The failure is custody, and it is the one the interface hides completely. Assets held on a venue are a claim against that venue rather than something you hold, and the balance shown on screen looks identical either way. Everything works normally for years, and the risk only becomes visible in the one situation where it matters — which is also the situation in which withdrawals are usually the first thing suspended.
The second failure is not reading the jurisdiction clause. It is short and it is decisive.
A third is paying taker fees by habit. Limit orders pay the lower number.
A fourth is forgetting the withdrawal fee. It is per transfer, not per unit.
A fifth is treating a coin-to-coin swap as untaxed. It is generally two trades and a disposal.
And a sixth is quoting the gross price move as the result. Two fees come out before it is yours.
Related
Crypto covers the asset class itself. Wallet is what holding it yourself means. And cold wallet is the version that removes the venue from custody entirely.
The clause I read before anything else is the one about who is allowed to use the venue. It is usually one paragraph, it is usually easy to find, and discovering afterwards that your residency was excluded is an expensive way to learn that a deposit was a mistake.
— Michael Whitman
This page is educational, not financial advice. Test every idea on your own charts before risking money. Some links on this page earn a commission if you buy through them. It costs you nothing and it does not decide what appears here or in what order — how these pages are made is set out in our methodology.