Cryptocurrency attracts traders with high volatility of the exchange rate. It can fluctuate by tens or even hundreds of percent per day. Users trade cryptocurrency in order to extract quick profits. The most convenient place for this is the crypto exchanges. Each of them has its own set of advantages and disadvantages. We have prepared a basic guide to find the best crypto exchange.
What should you to pay attention to?
Of course, newcomers want to start trading cryptocurrency on exchanges as soon as possible. However, in this case, there is no need to rush; otherwise the probability of losses is very high. The right choice of a crypto exchange is half the success, or at least a guaranteed reduction of losses in case of slippage.
Many cryptocurrency exchanges are available to both new and experienced traders when entering the market. To make a choice, it is most convenient to use the ratings of crypto exchanges compiled by various industry platforms. What should you base your choice on? Of course, you can trust the reviews or advice of other traders, but it is best and most reliable to look at the liquidity indicators.
Liquidity as one of the main indicators
Liquidity is an indicator that allows you to understand how actively trading is conducted and how many traders are interested in maintaining the turnover of cryptocurrency. It is thanks to the liquidity that traders are able to create trading strategies on the cryptocurrency exchange.
Liquidity is one of the main indicators of the crypto exchange, and the higher this indicator, the more profitable your trades will be. When you trade on an exchange, the final price you get depends on other traders in the market willing to trade with you. On an exchange with low liquidity, it will be difficult to find a suitable offer due to the small number of market participants. In a liquid market, there are many participants competing with each other to give you the best prices. Therefore, trading in a liquid market allows you to get the best prices for your buy or sell orders.
How to use the liquidity indicator to find the best crypto exchange?
The main rule when searching for the best crypto exchange using the liquidity indicator is as follows:
The higher the liquidity ratio, the better.
Most often, the liquidity indicator consists of several factors:
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Trading volume;
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Geographical location and jurisdiction of the crypto exchange;
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Trading pairs;
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Exchange’s order book depth.
The liquidity indicator allows traders to compare the difference in the liquidity of different markets. The liquidity of each exchange can be calculated by comparing the order books of exchanges or other certain fixed parameters. However, this process can be very long and tedious. Given that the parameters change on average every 2-3 hours, the effectiveness of such manual analysis will be significantly reduced. Another simple and convenient way is to use the ratings of exchanges with a liquidity indicator on various platforms (for example, CoinMarketCap). These ratings allow you to quickly find the most liquid exchanges, trading pairs and profitable trading orders.
