How to Trade Bitcoin on CEX.IO Exchange
Over 2018, CEX has become a very popular Bitcoin exchange as it supports a wide range of countries, offers normal & margin trading against fiat, and if used correctly has competetive fees.
Although this exchange has many good features it does have several drawbacks, such as high fees if you're not careful. This guide will go through how to get started on CEX, and which negative aspects you need to be aware of/how to avoid them.
How to Create a CEX Account?
You'll now likely be sent an email prompting you to verify that you used a real email address, go and click the link in this email now. Next you may be prompted to fill in personal information and/or set up Two-Factor Authentication.
A few things to note when filling in personal information:
- You're potentially depositing large amounts of real money on this exchange, so make sure you use your real name and personal information. If your account is audited at any point and you used fake information, you might find your money taken away and/or frozen.
- Generally it's a bad idea to upload personal information to many different exchanges, as if one is hacked your information may be used for things like identity theft, and the more you add this information to the more likely for a leak. So although you shouldn't use fake information, only put in the data required (keep in mind that in some cases after audits, exchanges have frozen accounts until they complete all verification; so although submitting less information can avoid the risk of a data leak, it introduces this risk of your account being frozen randomly).
A few things to note when setting up two-factor authentication:
- You might not be prompted or required to set up two-factor, but it's a very good idea to have it enabled - in particular smartphone app-based 2FA (make sure you backup your recovery code if using this though, as although it's very secure, if you lose your phone and don't have that recovery code you might be locked out for a long time/indefinitely).
- When backing up two-factor recovery codes, don't store them on your computer/on the internet anywhere, make sure they're backed up offline (e.g. in a book/safe, perhaps in multiple places in-case you lose a copy).
- Many people consider SMS-based two-factor worse than just leaving it disabled, as there have been cases of malicious people phoning mobile phone companies and taking control of phone numbers - allowing them to control two-factor codes, and in some cases bypassing passwords with them.
How to Deposit/Withdraw Money on CEX?
Depositing money on CEX is fairly easy. First you need to login and go to the 'FINANCE' tab in the top menu. Now you'll see your fiat and crypto balance (if you don't see this, click the 'Balance' tab at the top). To deposit fiat or crypto, click the 'Deposit' button next to whatever you want to deposit.
There are several important things to be aware of though:
- You can't always withdraw in the same way you deposit money on CEX. For example right now you can deposit USD via bank transfer, but you can't withdraw it via bank transfer, you have to withdraw via either card or CryptoCapital. This is one aspect of CEX that many people dislike. They seem to have a warning about this on the deposit page, where you have to tick a box to confirm you're aware of it (perhaps people haven't read this warning, or it was only added after complaints).
- Each deposit/withdrawal method has different fees, make sure you check both the withdrawal method and the associated fee before depositing, if you're not careful withdrawal fees may be much higher than deposits.
- Fiat deposits can sometimes take a very long time, as much as 60 days in a worst-case-scenario. This isn't just a problem on CEX though, other fiat exchanges like Kraken also occasionally have significant delays on deposits/withdrawals.
Once you've decided how you want to deposit money, follow the steps on-screen to finish. Follow the same steps above to withdraw money, just click 'Withdraw' on the 'FINANCE' page instead of 'Deposit'
How to Trade on CEX?
This is an area many people don't like about CEX, leading to many negative reviews. When you're logged in, if you load the homepage, you're forward to the 'BUY/SELL' page of CEX, not the 'TRADE' page. This buy/sell page allows you to buy/sell crypto for fiat very easily, as CEX guarantees you'll get a certain amount for a certain price; but this convenience comes at a very high fee of 7%. So if you want to buy $1000 of crypto, you'll be hit with a $70 fee.
The real problem here isn't really that they offer this functionality, but rather that the fee isn't immediately obvious and is very high. Coinbase for example allows you to buy/sell crypto for a higher fee compare to GDAX in exchange for a very simple UI, but Coinbase both charges a much lower fee and displays it very obviously.
Now that you're aware of this problem, you can buy it at a much better price. To do this first navigate to the 'TRADE' tab at the top, then click on a pair to trade with in the sidebar on the left or at the top (e.g. select BTC/EUR if you want to buy some Bitcoin with Euro). Now although this page looks complex, it's fairly easy to buy/sell. Scroll down the page until you see 3 horizontal tabs for 'Limit', 'Market' and 'Margin trading'; then click the 'Market' tab. What you see now is essentially the same as the 'TRADE' page, but at a much lower fee (see this page for CEX fees, initially a market order would have a fee of 0.25%, which decreases if you trade lots). Use the inputs just below the 'Market' tab to buy or sell crypto, the one on the left is for buying crypto and the one on the right is for selling crypto.
Be Careful Margin Trading on CEX
Before reading this part, if you're not sure what margin trading is, see this guide.
So limit and market orders on CEX seem to work as you'd expect. Margin orders however have a mechanic that you need to be aware of. When opening a margin order, you set various fields, one of which is a stop loss price. This is the price where a margin order would close if a trade goes the wrong way; so if you think Bitcoin's price will go up, you can set a stop loss say 5% below its current price in-case it drops.
The problem with CEX is that although they offer this, they also have a mechanic where if a coin's price changes very fast they automatically close a trade regardless of the stop loss value. In a test we opened a margin trade with a stop loss at -20%, but there was a significant drop in Bitcoin's price triggering this automatic closure at around -13%. So although our margin trade didn't hit the stop loss, our trade was closed automatically.
Now although this can be annoying, many argue that it's necessary. Without a fail-safe like this in a worst-case-scenario crash of say 30% in a few hours, a stop loss might not be triggered due to lack of liquidity. Platforms like eToro have disabled stop losses for crypto completely because of similar issues. Now that you're aware of this mechanic you can make a more informed decision as to whether you should use CEX for margin trading or not.
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September 16th, 2018
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