CEXs vs DEXs & Spot vs Future - Tips and Suggestions (V2)

[Hamza2424]

Centralized vs Decentralized trading platform & Spot vs Future

Hi, dear Community so here in this part I will cover the things related to trading such as trading platforms and types. Based on my experience I will try to cover it as easily as possible.

Next part Links

1. New to Trading - Tips and Suggestions (V1) Getting Started Full Guide
2. CEXs vs DEXs & Spot vs Future - Tips and Suggestions (V2)
3. Analysis & its Types - Importance of Analysis in Trading (V3)
4. Tips for Descriptive and Sentimental Analysis (V4)


Table of Content

► Introduction of Trading Platforms Centralized & Decentralized  
► Which is preferred for New ones and Why?
► Introduction of Spot Trading & Future Trading
► Which is preferred for Newones

Introduction of Trading Platforms Centralized & Decentralized

Centralized Trading platforms are the type of trading platform which are controlled by a particular organization and the user's funds are in the custody of the organization. Centralized platforms provide a vast range of features. The centralized trading platforms provide the marketplace, security, and registered assets for trading. In centralized trading platforms, the central authority of the platform had control over the Order book, Users' assets, Users' private information, and complete trade execution.

Binance is the top crypto market leading centralized trading platform, which allows its users to trade securely between the registered assets and provides the best environment and several other features. Binance allows both Spot and Future trading. Binance provides the nonself custodial hot wallet to its users where they can store their funds.

Decentralized Trading platforms are the digital marketplace where no central authority is in control and the trading is executed between the person to person, This type of trading is based on the open source automated blockchain smart contracts where AMMs, DAO, and liquidity providers create an environment for easy, secure and decentralized trading. Decentralized trading platforms have many upper hands on the centralized trading platforms major one is funds as self-custody.

Uniswap, Panckeswap, and 1inchswap are some leading decentralized trading platforms that are open-source automated blockchain-based smart contracts. These decentralized trading platforms provide all the similar features to the centralized trading platforms even some better DeFi services such as lending borrowing, yield farming, and high APY Staking. Decentralized platforms cost a little higher in trading fees and funds are in your custody.


Which is preferred for New ones and Why?

I would recommend using a centralized trading platform there are a few reasons behind preferring the centralized platform for trading peruse. Centralized trading platforms provide high security to the funds and if the user manages well on his end the security is enough to block serious hacker attacks. On the decentralized end, you are responsible for the security of your funds and I think as we are to trading and crypto we are currently not able to secure our funds. Centralized trading platforms provide verified assets to trade but on the decentralized end, anyone can add trading pairs which are not good for new users as they can get spammed by the spam pair and fake tokens which will be worth nothing.

Centralized trading platforms cost low trading fees even sometimes negligible but on the decentralized, as you are directly interacting with the blockchain it will cost accordingly to the traffic on the blockchain and it will be always much higher than centralized trading. So as I am preffring a centralized trading platform for the new users the only reason is security and trading fees, our capital on initial time is small so will try our best to reduce the costs. Decentralized Finance and Trading platforms have much much to offer to the community but we can do it after getting some experience.

Introduction of Spot Trading & Future Trading

Spot Trading is the type of trading in which the user buy and sell his assets at the market price on any trading platform. In this type of being and selling the buyer or seller sell the assets on the market value and in order book simentneiously trade is executed. In the spot, there is a real-time exchange of assets. Spot trading is available on both Centralized and Decentralized trading platforms. Only 1-way trading is possible on the market value.

Future Trading is the type of trading in which the user can go with the Long and Short trading call where the user goes with a trade on the future contract price. In future trade in the crypto market user can take leverage on the funds and trade with high risk on future contracts. In this type of trading the trade is executed on the future time of some asset and predetermined price. In this type of trading, you can go with 2-way trading.

Major Differences are as follow;

► Time in spot trading trade is executed in real-time and in the future as per name the trade is executed in future time.
► Value, In-spot trade is executed on the current market value, and in the Future the trade is executed on the predetermined   future value of the asset
► Spot trading involves low risk as trade is executed with the own assets and current market value it involves low risk of loss because there is no liquidation of the funds but on another hand when you trade on leveraged funds and the futures contract there is a high chance of trade liquation of funds if it goes wrong, also future market value prediction in crypto is not efficient at all.
Which is preferred for Newones

I will prefer Spot trading for the newcomers as they don't know much about technical analysis and they have minor experience with trading in the crypto market also they are short In funds so we can't risk the funds. In spots as we trade on the market value and there is no liquidation on the assets. I know in future trades you can make fast money and easy money but it's highly risky and we can't afford the major losses at the start of the journey. In some spots we can go with any type of trade with our small funds and in the future is not possible we can't hold our trade in the volatile market for a long time due to the liquidation price.

Also, there is the concept of the Halal and Haram involved in the future trade so I will prefer my Muslim friends to research it as there is interest involved in long-time-frame future trade. Our first step is earning good and risk management and currently, both are not possible with the future trade on the being level.

Upcoming Topic: Analysis & its Types - Tips and Suggestions (V3)

[1714662904]

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[1714662904]

1714662904

[Oshosondy]

The centralized trading platforms provide the marketplace, security, and registered assets for trading.

They provide the security, but what if a user of the exchange is careless with account security? I know the security comes from the exchange, protecting customers funds, but individual needs to protect their account too. While using centralized exchanges like Kucoin, Huobi global, OKX, Binance and any other reputed ones, you need to use 2FA on another device.

We should also not be fooled about the security of a thing, an exchange can be hacked and the hack might steal coins on the exchange which are owned by the exchange users.

We should also know that it is not our key, it is not our coins on centralized exchanges.

This type of trading is based on the open source automated blockchain smart contracts where AMMs, DAO, and liquidity providers create an environment for easy, secure and decentralized trading. Decentralized trading platforms have many upper hands on the centralized trading platforms major one is funds as self-custody.

This is one of the type of decentralized exchange, but there are decentralized exchanges that do not make use of smart contract and only what they offer are exchanging of coins to fiat ad fiat to coins in a more decentralized way, what no smart contract decentralized exchange can do now. Example is Bisq.

Decentralized platforms cost a little higher in trading fees and funds are in your custody.

I have not traded on a smart contract decentralized exchange before. But except ERC20, I do not think others should be that expensive in fee. Although trading on centralized exchanges are cheap, but the trading is based on percentage, and the higher your money used to trade, the higher the fee. I do not know how the fee in decentralized exchanges are charged. Is it also based on percentage? Or based on blockchain fee? Or both?

Time in spot trading trade is executed in real-time and in the future as per name the trade is executed in future time.

I do not understand this. I have never heard of real and future time before. All that I have known before is spot and future price. Time is just time, nothing like real or future. What if I go for perpetual future. You can also close any position opened at any time, even in traditional future.

[dzungmobile]

To understand biggest difference between centralized exchanges and decentralized exchanges, read this Reminder: do not keep your money in online accounts

It's good to understand biggest risk with centralized exchanges in order to keep your capital safely.

With decentralized exchanges, it's safe if you are trading and swapping but it becomes unsafe if you provide liquidity for them. Your coins will be locked to add liquidity and you will face risk like with centralized exchanges.
About your coloring style, would you mind changing the Red color to something less brightly such as brown, purple, please.

Note
Note
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[Maus0728]

Binance provides the nonself custodial hot wallet to its users where they can store their funds.

You could use the term "custodial" instead of nonself custodial to avoid confusion.

Centralized trading platforms provide high security to the funds and if the user manages well on his end the security is enough to block serious hacker attacks.

No! Not your keys, not your coins.
- https://chainsec.io/exchange-hacks/

Time in spot trading trade is executed in real-time and in the future as per name the trade is executed in future time.

I do not understand this. I have never heard of real and future time before. All that I have known before is spot and future price. Time is just time, nothing like real or future. What if I go for perpetual future. You can also close any position opened at any time, even in traditional future.

Perhaps he just meant that "futures trading" is a bet on the future price of a specific asset, such as bitcoin. This is why we have the concepts of "shorting" and going "long." When we say "short," we are betting that the price will go down, while going "long" is betting that a specific stock will go up.

Additionally, the term "future" refers to the date in the future when a price has been agreed upon to buy/sell something, hence it is called a "contract. And binance also offers that service too!

The "perpetual future" you are referring to is a bit different. In perp trading, it does not have any expiry date, and that's the reason why you can close any open position at anytime.

[touseefahmad1999]

Binance provides the nonself custodial hot wallet to its users where they can store their funds.

You could use the term "custodial" instead of nonself custodial to avoid confusion.

Centralized trading platforms provide high security to the funds and if the user manages well on his end the security is enough to block serious hacker attacks.

No! Not your keys, not your coins.
- https://chainsec.io/exchange-hacks/

Time in spot trading trade is executed in real-time and in the future as per name the trade is executed in future time.

I do not understand this. I have never heard of real and future time before. All that I have known before is spot and future price. Time is just time, nothing like real or future. What if I go for perpetual future. You can also close any position opened at any time, even in traditional future.

Perhaps he just meant that "futures trading" is a bet on the future price of a specific asset, such as bitcoin. This is why we have the concepts of "shorting" and going "long." When we say "short," we are betting that the price will go down, while going "long" is betting that a specific stock will go up.

Additionally, the term "future" refers to the date in the future when a price has been agreed upon to buy/sell something, hence it is called a "contract. And binance also offers that service too!

The "perpetual future" you are referring to is a bit different. In perp trading, it does not have any expiry date, and that's the reason why you can close any open position at anytime.

Yes, that's a good explanation. Futures trading involves speculating on the future price of an asset by entering into a contract to buy or sell that asset at a predetermined price and date in the future. Traders can go long or short on a futures contract depending on their market expectations. Perpetual futures are similar to traditional futures contracts, but they have no expiration date, allowing traders to hold their positions indefinitely. This type of contract is often used in crypto trading to provide traders with more flexibility and liquidity. Binance, along with many other exchanges, offers perpetual futures trading for various cryptocurrencies

[Hamza2424]

__Snip__

Feedback matter a lot.. So I will try to answer all you have mentioned above..

For security, I know exchanges can get hacked and privacy can be compromised... I am not sure if you followed the first part or not I am talking about trading for new ones so they are not gonna hold many funds, now you can say why they don't use hot wallet already mentioned fees issues.

Not your key Not your Coins I think OP knows well hahaha it's for trading not for storing and for starting I recommended it accordingly..

Bisq got it...
For fees take idle case BSC is cheap but it's not good still costing 0.5$ to 0.9$ per transaction means per trade now if he has only 100$ to 150$ .9$ nad .5$ matters a lot..

Next to it Future time sir I know I'm not a native English speaker but trying my best so in the future yes you can close the position anytime. But I am trying to clear things up here future is not recommended for new users due to risk.. If you consider liquidity in the Future marketplace is always quite low and due to this market stays a bit more volatile in the future and as I am here guiding new ones haha its not good for them... Hope so you've got it..

__SNIP__

Looks like you haven't read the whole post recommend so I think better..
+
For color dear I can't as I want to highlight things in the post and red is best you know I can give technical information about it as well Red color has the highest wavelength in the rainbow colors of around 700nm which means you can pick a red color from long distance and red color shows the emotions and attraction within it. Hope so Junior got it.

_SNIP_

Thanks for you guidance Senior, Junior is grateful and already explained these terms above..
For Not your Key Not you wallet Junior got it and also answered it well above...

[Faisal2202]

I will prefer Spot trading for the newcomers...

Totally agreed, i think you should give them the idea of demo account too, because a newbie is always ready to make profits but does not think about losses that they could face. Therefore, a short introduction to demo accounts will give them an idea of using this feature because most of the newbies do not even know about it and its usage. So i think you could use the following mentioned exchanges and relative article to help them to understand about demo accounts.

• 10 Best Crypto Demo Accounts
• 8 Best Crypto Demo Accounts

Which is preferred for New ones and Why?

The concept of Future trading was quite difficult for me to understand back then well I think I still don't understand how really these future contract actually works and you also raised a considerable concern about halal and haram, of which I am highly precautionary. You said the price of selling and buying is predetermined in the future so that's the main reason for considering it haram but that's another level of discussion I do not know whether it is allowed on this forum to talk about or not.

[Hamza2424]

The concept of Future trading was quite difficult for me to understand back then well I think I still don't understand how really these future contract actually works and you also raised a considerable concern about halal and haram, of which I am highly precautionary. You said the price of selling and buying is predetermined in the future so that's the main reason for considering it haram but that's another level of discussion I do not know whether it is allowed on this forum to talk about or not.

For the forum, I think it's open for everyone to speak anything you have total freedom of speech in referring to that even if you want to say something and want to present some sort of opinion which you can with your main account theymos even allow you to create alt for that and this just because of the distribution of power in the hands of the community. So don't be afraid with discussing any sort of case you are open to saying anything.

I also circumvent discussing future trading just because of these reasons because personally, I have educated myself recently with the future trading from the halal haram concept and I found it wrong so I will never recommend such a thing to the community which I don't practice.

[adaseb]

Anyone know what the lowest trading fees are for some of these dexs. I mean something like Uniswap is like 0.3% sometimes and with big Ethereum transfer fees it can get expensive. Basically cheaper to use a CEX.

I went to the dex and tried to find the fees but went nowhere. All they say the fees vary but they don’t actually post any fees.

[Hamza2424]

Anyone know what the lowest trading fees are for some of these dexs. I mean something like Uniswap is like 0.3% sometimes and with big Ethereum transfer fees it can get expensive. Basically cheaper to use a CEX.

I went to the dex and tried to find the fees but went nowhere. All they say the fees vary but they don’t actually post any fees.

Basically, the Fees on the DEXs are not that much but the problem is when we execute the exchange the network fees are a big problem I can recommend the other chains as TRX but the point is some people use them to trade with specific tokens which are not available on all chains but for top 50 or Top 30 I am sure there pegged tokens available to trade. Trading varies from chain to chain and Dex to Dex so it is hard to find the exact cost but the range is 0.2% to 0.3% + gas fees.

Some Dexs even offer on-time cashback from fees you've spent, but they are likey their strategy to attract users, so my recommendation is to not fall for small edges and choose reliable ones.

[Fivestar4everMVP]

Anyone know what the lowest trading fees are for some of these dexs. I mean something like Uniswap is like 0.3% sometimes and with big Ethereum transfer fees it can get expensive. Basically cheaper to use a CEX.

I went to the dex and tried to find the fees but went nowhere. All they say the fees vary but they don’t actually post any fees.

This is one of the downsides of dexs, for most of them, the fee structure is sometimes confusing.
And aside the exchange fees, the blockchain fees to have each transaction processed and confirmed is another expense altogether, most especially, when it comes to blockchains with high transaction fees like Ethereum for example..

But then for Cexs, the only time it becomes expensive to trade on cex is during withdrawal, as some coin or tokens have withdrawal fees that are so high and unreasonable.

[adaseb]

Yes I have noticed this. Polygon or Arbitium have lower fees but there is less liquidity on those. The most liquid seems to be stable coins, ETH and WBtC.

Also how do you estimate fees. When I use Uniswap it shows some estimated fee. However when I go to etherscan and use the fee guide it’s usually much higher.
I think it said $7 for Uniswap v3 but on etherscan it said something like $17 for a uniswap v3 transaction. Only way to find out is to do a test but it’s expensive to even do that.