Cryptocurrency Exchanges vs Crypto brokers - YouTube

Hello everyone, this is Petko Aleksandrov and  today I will explain what is the difference

between the Cryptocurrency exchange and the  brokers, when you should trade on the exchanges

and when you should trade with the brokers. So  welcome to our YouTube channel where we discuss

Crypto trading strategies, ideas, tips, reviews  about platforms, about individual Cryptos,

wallets, anything. OK? We want to improve  the experience of our followers because

we have a lot of experience and I'm very  pleased to share it with my students, traders,

followers. So even when traveling, I like to record  some videos. OK? So one of the most frequently

asked questions that we get is, should I trade on  the exchange or should I trade with the broker?

I will go straight away to the point. When you want  to keep your coins for a longer time, you need to

go for the exchange. If you want to speculate  and buy and sell quickly, for example, buy

in the morning selling the afternoon if there is  movement then you need to go for the Forex broker.

Why I say Forex broker? Because the brokers  that offer Cryptocurrencies nowadays,

they start all with Forex. OK? Most of  the brokers are Forex brokers because their

main business was the Forex before the Crypto came  out. OK? So what is the difference and why I say

that if you want to keep your coins longer you go for Coinbase, Binance, or any other

Crypto exchange? The difference is that on the  exchanges, when you buy coins, you actually get the

coin. OK? You get the token. You get the chance to  put this token or coin in your wallet.

And you don't have any fees for holding  them in your wallet, you can hold them

for months and years, nobody will charge  you for that. OK? While with the brokers,

if you buy Bitcoin, for example, you will be  charged every night a small fee called swap.

And this is a very small fee compared to the fee  you pay on Coinbase when you initially purchase.

OK? Let's take 1 Bitcoin, for example. If I buy  1 Bitcoin on Coinbase, I pay usually about €300

for the moment in 2020, I'm recording in  December 2020. OK? That's why it's a little bit

rainy in Bulgaria this time. Usually, it's snowing but  as you know, the climate changes unfortunately

and it's not snowing. So if I buy 1 Bitcoin, I pay  at the moment about €300 as a fee on Coinbase

for a complete Bitcoin. While with the Forex broker,  I will pay just the spread which is about, with the

different brokers it's different, but let's say  it's somewhere between $10 and $30.

You see the difference? Exchange €300,  broker $20 average. It's a huge

difference. OK? But what happens here with the  broker is that if I keep my Bitcoin overnight,

I will pay somewhere between  $6 and $10 as a fee.

OK? So every night $6, $6, $6, $6, $6. So you see what

happens, if I keep the Bitcoin long enough, it  will get more expensive compared to Coinbase.

So personally, I use the brokers for  automated trading where I trade with

Robots on Meta Trader and this is because the  Robots are buying and selling daily. So some of

the Robots will buy in the morning and will sell in the evening or in a few hours

time or others will just hold the  trade for a few days and they will sell it.

So I keep the low fee here. And the difference,  as well, here is that on Coinbase, or on the other

exchanges we cannot trade with Robots so that's  one of the differences that if you trade with

brokers, you can trade with Robots. That's what I  do. And if you buy coins on the exchange, you cannot

do automated trading. The other  difference between the 2 is that you

don't physically buy and this is something that  many beginners don't understand. When you trade on

the broker platform, you don't physically buy  the asset. Especially for the cryptos,

it's very hard to say it physically. Right?  But let's call it physically because I can

still put it in my Ledger. OK? I can put  actual Cryptos on my Ledger, on my device,

for example. Ledger is a hardware wallet  for Cryptos that I use and it's a very secured one.

So on the Forex brokers, what we have is not actual  coins that we buy and sell. There, we trade CFD

contracts, which is called so because it stands for  Contract For Difference. Contract For Difference

means that every time I buy a Bitcoin, I make a  contract with the broker that if the price goes

up, I will benefit that difference. OK? If the  price goes down, I will lose that difference.

This is called CFD trading. So I don't  actually purchase Bitcoins or any other coins,

I don't purchase EUR, I don't  purchase gold. It's CFD trading.

And this is a very popular method of trading and especially for the Bitcoin. After that in 2018

was the best time for me using brokers. You  know why? Because the Bitcoin was crashing.

It was just that stone falling down and  with the brokers, you have the option to sell

even if you haven't bought it previously.  OK? So how it works? I fund an account

with the broker. For example, I funded $10,000 account and I can use these

$10,000 to sell something on there, the Bitcoin, I'm talking about the Bitcoin in 2018.

And I can benefit the difference if the price  falls. OK? So if the price falls from $10,000

to $6,000, if I sell on $10,000, I will  benefit this difference of $4,000.

Even if I didn't buy anything previously,  even if I didn't have any coins previously.

OK? That's the difference of trading CFD and when trading on the Cryptos. So which method

I would suggest you? Depends what you want to do, I  do them both. On the exchanges, I invest in

Cryptocurrencies. OK? I buy and I hold them for a longer time. On the brokers, I trade personally with Robots

where I'm buying and selling daily and  I pay much lower fees. And, one more time,

on the brokers, with the Meta Trader platform,  it is allowed to do automated trading with

the Robots. OK? For the Bitcoin. And one of the other disadvantages here, it's just pros

and cons for both of them. Right? So one other is  that the brokers on Meta Trader will not offer

a lot of assets. Usually, they have just the Bitcoin,  the Ethereum, Litecoin, and Ripple, that's

what I've seen the most with most of the brokers.  OK? While on the exchanges you can buy so many.

And I think it's a matter of time until the  brokers start offering more Cryptos on Meta Trader

that we can trade with Robots or manually. But  something interesting I learned a few days ago

is actually that the FCA regulated brokers are  going to remove CFD trading from the Meta Trader

which was quite surprising. I personally don't know why they took that action. Even they lowered

since 2018, there was the ESMA restriction that lowered the leverage

to 1 to 2 for Cryptos in  Europe which is 1 to 2. OK?

We were used to do 1 to 100 1 to 200-500, and they lowered to 1

to 2 which means that we really need a lot  of capital to trade Bitcoin on the brokers.

And now, they just ask all the FCA regulated  brokers to remove coins from

their platforms. So I guess the only  solution from there will be to trade with

non-FCA regulated brokers which is  something I personally don't want to do.

But from January  2021, I think this will be the only way to go

for algorithmic trading with the Bitcoin. OK? Non-FCA regulated brokers and Meta Traders.

Still there are other regulations, of course,  but FCA for the moment is like the strictest

regulation for the Forex brokers. And if you're using Forex broker

with Meta Trader, make sure it's regulated. That's  super important, OK? Make sure to have FCA, CySEC,

on every region, it's different regulator.  So make sure you check which is the regulator

for your country and choose a regulated broker.  Same with the exchange, Coinbase is a regulated

and licensed exchange, for example. That's why I initially started using it and I saw it's super

friendly, super easy. And I record that's one of my  longest courses on Coinbase because it's very easy

even for beginners to start with Coinbase. OK?  So always go for the regulated brokers exchanges.

So these are the differences between the 2. If you  have any questions, drop them in the comments below.

If you found that video useful, thumbs up, and I will see you in another video, guys. Cheers. Bye.