If you are looking to start day trading on Coinbase then I’m guessing you are rather new to crytocurrency trading and there is nothing wrong with that. Everyone has to start somewhere and after reading over what I have for you here today you are going to be able to start in a better spot.
In this post I’ll be going over why Coinbase is NOT a good option for daytrading. Coinbase is great, don’t get me wrong, but when it comes to daytrading it just isn’t a good choice. I’m not saying that you can’t do it, I’m just saying there are other options available that are 100x better.
The first thing that I’ll cover is what exactly Coinbase is and what it provides.
What Is Coinbase?
Coinbase is a cryptocurrency exchange that is one of the most popular out there, largely because of how simple it is to use and because they allow users to pay with fiat money, like USD and EUR. It is particularly popular among beginners and many people buy their very first Bitcoin, Litecoin, etc here.
Coinbase is a great easy way to get into the cryptocurrency space. There really aren’t all that many exchanges that allow users to pay with fiat money out there. It is one of the best and most trusted when it comes to this.
They are based in San Francisco, CA and are subject to US regulatory bodies which adds a sense of security and transparency. It also helps knowing that they have been operating since 2012 and have never been hacked.
Why Coinbase Is Not a Good Option for Daytraders
There are 2 main reasons why Coinbase is not a good place to daytrade: it has high fees & there aren’t many trading options.
The fees are high at Coinbase for a reason. They make the platform very user friendly and simple to use. This comes with a cost. They have to make their money somehow and they do so by charging fees. Every exchange does this but Coinbase’s fees are on the higher side, which if you are a daytrader making lots of trades is a huge problem.
The fees will vary depending on where you live but there are high no matter where you are. For example: If you live in the US or the UK you will get charged a 3.99% fee if you purchase cryptocurrency through them with a credit/debit card and a 1.49% fee if you use a bank transfer or the USD/EUR wallet on the exchange. On the other side of things you will have to pay fees for selling that are 1.49% if you sell into your USD/EUR wallet or into your bank account, or a 3.99% fee if you want to sell into your PayPal account.
Now if you are daytrading the most plausible way to pay would be with your USD/EUR wallet on the exchange. Basically this is a virtual wallet that is connected to your account and the reason this would be most plausible is because the money would already be in your account ready to make trades within seconds. But even with this best possibly choice you would be paying a 1.49% fee every time you buy as well as a 1.49% fee every time you sell.
This is going to cost you a killing trading back and forth between cryptocurrency and fiat money.
Not Many Trading Options
The trading options that you have on Coinbase are extremely limited. First off, they only have a handful of the most popular cryptocurrencies available for purchase. These include Bitcoin, Ethereum, Litecoin, and Bitcoin Cash. Second, you can only trade these cryptocurrencies back and forth with fiat money. You are not able to trade among the cryptocurrencies.
Take Bitcoin for example. You can only buy Bitcoin with fiat money and you can only sell Bitcoin back into fiat money. You cannot buy/sell Bitcoin for Litecoin, Ethereum etc.
The Best Low Fee Alternative to Coinbase
The best closest relative to the Coinbase exchange is GDAX. They offer everything that coinbase offers when it comes to trading and more, which isn’t a surprise considering that GDAX is actually owned by Coinbase.
GDAX is Coinbase’s more professional exchange. It isn’t quite as user friendly and is more geared for professional/institutional trading or investing. They also give users the ability to buy with cryptocurrency with fiat money as well as sell it back into fiat money, and have all the cryptocurrencies available that Coinbase has.
The big difference is that their fees are extremely low, nearly nonexistent, and they have more trading options.
I’m not going to get into all the details about GDAX’s fees, but basically what you need to know is that they charge a maximum of 0.3% on a transaction with many transactions having a fee of zero. This has to do with how the trade was matched up (the buyer and the seller). Compare 0.3% to Coinbase’s minimum 1.49% fee. That is around 5X less!
Coinbase also allows you to trade between cryptocurrencies. So instead of just being able to trade Bitcoin back and forth with fiat money like USD, you can also trade Bitcoin back and forth with Bitcoin Cash, Ethereum, and Litecoin.
Exchanges That Take It To Another Level
GDAX is a good safe place to start out daytrading to get the hang of it but at some point you are probably going to want more trading options. This is where exchanges like Binance, COSS, Bittrex, KuCoin, etc come into play. They offer hundreds of different trading pairs and cryptocurrencies that you have never heard of in your life. Many of them also have more advanced platforms when it comes to charting, the order book, and the overall ability to analyze what the market is doing.
These exchanges also have minimal fees, some even a bit lower than GDAX. If you want me to point you in the right direction I would say to go with Binance or Bittrex to start out. They are both great, have been around for a while and are well trusted.
The more trading pairs that are available means the more potential trading opportunities. This is what every daytrader wants and eventually if you stick with it you will likely have accounts on many of these exchanges.
The downside to exchanges like Binance, Bittrex, COSS, etc is that they don’t give you the ability to buy cryptocurrency with fiat money. So you must already have some to use these places.
What I Would Suggest Doing
I’ve been trading cryptos for a while now and I’d suggest doing what I do, which is this…
I use GDAX for all my initial cryptocurreny purchases. So if I have some extra USD in my bank account I will send it to GDAX and buy some crypto with minimal fees. I will also use GDAX to cash out my cryptocurrency back into fiat money, which I hardly ever do by the way.
Once I’ve bought my crypto on GDAX I’ll send it over to another larger exchange with more options like Binance or Bittrex. This is where the real trading happens.
Basically I only use GDAX to get in and out of crypto. Other than that I don’t use it. I might make a trade on the platform every once in a while if there is a really good opportunity but not very often.
Coinbase I almost never use. I might use it every so often when there is a really good deal because and I don’t have any cash in my GDAX account, because Coinbase give you the ability to purchase instantly with credit/debit cards, but this is once in a blue moon.
Some posts that you might like to read for more information on some things include:
And as always, leave any comments or questions below. I’ll get back to you soon 🙂