How to trade on a decentralized exchange? Master these tips and you'll never feel lost again!

Decentralized exchanges (DEXs) offer a new model for cryptocurrency trading, allowing users to trade directly without the intervention of centralized institutions. This model brings many benefits, such as greater privacy and fewer regulatory restrictions. However, despite the increasing popularity of decentralized exchanges, many beginners still face challenges during the trading process. This article will provide you with a series of practical tips to help you become proficient in using decentralized exchanges and complete your trades with ease.

1. Understand the basic concepts of decentralized exchanges.

The core purpose of decentralized exchanges is to eliminate intermediaries, enabling buyers and sellers to trade directly. These platforms are based on blockchain technology and use smart contracts to execute transactions, with users connecting through their own wallets. Unlike centralized exchanges, users’ assets always remain under their own control, greatly reducing the risk of being hacked.

The difference between DEX and CEX

Asset ControlOn decentralized exchanges, users have full control over their crypto assets; whereas on centralized exchanges, users need to store their assets in wallets provided by the exchange.

PrivacyDecentralized exchanges usually do not require users to provide identity information, thereby protecting users' privacy; whereas centralized exchanges often require users to undergo KYC (identity verification).

Transaction fee rateThe fee structure of decentralized exchanges is usually more transparent and may feature lower transaction fees.

Choose a suitable centralized exchange

Choosing the right decentralized exchange is the first step to successful trading. There are many DEXs on the market, and you need to consider the following factors:

Trading volume and liquidityThe higher the liquidity, the smoother the trading and the smaller the slippage. Make sure the exchange you choose has sufficient liquidity.

Multi-asset supportDifferent decentralized exchanges support different types of crypto assets, so make sure the exchange you choose supports the asset you want to trade.

User InterfaceA simple and user-friendly interface can help you get started more quickly and avoid operational errors.

High securityCheck whether the exchange has been audited to ensure the security of the platform.

Recommend several mainstream decentralized exchanges.

UniswapSupports ERC-20 tokens and has a wide variety of liquidity pools.

SushiSwapA Uniswap-based derivative offering a variety of additional features.

PancakeSwapRuns on Binance Smart Chain, with low transaction fees, making it suitable for users of the BNB ecosystem.

Step 1: Prepare your wallet and funds

Before using a decentralized exchange, you need a compatible crypto wallet. Common wallets include MetaMask, Trust Wallet, and Coinbase Wallet.

Create a wallet and acquire assets

Download new walletDownload the appropriate wallet application from the official website.

Create New WalletCreate a new wallet as instructed and securely save your recovery mnemonic phrase.

Top-up AssetsTransfer the cryptocurrency assets you own into your wallet to ensure you have sufficient funds before making any transactions.

How to connect a wallet to a decentralized exchange

On the homepage of a decentralized exchange, there is usually a "Connect Wallet" button. Click it, select your wallet type, and follow the prompts to complete authorization. Once successfully connected, you will be able to see your wallet balance and the available trading pairs.

Step 2: Confirm the trading pair and price

Before making a trade, you need to determine the asset you want to buy or sell and its trading pair. Decentralized exchanges usually display real-time market prices and chart information.

How to determine if a trading pair has potential

View price fluctuationsAnalyze past price trends to determine whether the price is stable.

Market sentimentUnderstand the market sentiment toward the asset through social media and community forums.

Fundamental informationResearch the background of the project, learn about its team, vision, and development progress.

Set price alert

Some decentralized exchanges offer price alert features to help you trade promptly when the price reaches preset conditions.

Step 3: Adjust the trading parameters

After determining the trading pair and funds, you need to set the trading parameters. These parameters include trading volume, slippage tolerance, and so on.

Set trading volume

Make sure to set the trading volume reasonably according to the current market liquidity to avoid excessive slippage caused by large trade sizes. Also, pay attention to the minimum and maximum limits for each transaction.

Adjust slippage tolerance

Slippage refers to the difference between the expected transaction price and the actual transaction price. Typically, decentralized exchanges allow users to set a slippage tolerance. Setting it too low may result in transaction failure, while setting it too high may lead to unnecessary losses.

Step 4: Confirm the transaction and execute

After confirming that all parameters are set correctly, you can proceed with the transaction. At this point, you will need to sign the transaction in your wallet.

Sign and confirm the transaction

After signing with your wallet, the transaction will be submitted to the blockchain. During this process, please pay attention to the following points:

Confirm the handling feeMake sure you understand and accept the amount of transaction fees.

Waiting for transaction confirmationPlease wait patiently for the transaction to be confirmed on the network; it is usually completed within a few blocks.

4. Monitoring Transaction Status

You can monitor the status of the transaction on a decentralized exchange or wallet to check whether it was successful. If the transaction fails, the system usually provides the reason for the failure.

Step 5: Carry out subsequent transaction management

After a successful transaction, you need to carry out subsequent asset management, including take-profit and stop-loss strategies.

Stop-loss and take-profit strategies

To reduce risk, you need to set take-profit and stop-loss levels to help protect your funds when there are sharp market fluctuations.

Take-profit strategySet an ideal price point, and automatically sell when the market reaches that price.

Stop-loss strategySet a minimum price point to prevent excessive potential losses and automatically stop losses to protect your assets.

Regular assessment and adjustment

Regularly evaluate your investment portfolio and adjust your strategy in a timely manner to ensure it aligns with market changes and your own financial goals.

Combine these techniques to improve trading efficiency.

With the techniques introduced above, you will be able to trade on decentralized exchanges with greater confidence. By staying attuned to the market and keeping a close eye on market trends and changes, you will be able to significantly improve your trading efficiency amidst the wave of decentralized trading.

Frequently Asked Questions

Are decentralized exchanges safe?

The security of decentralized exchanges mainly depends on users' own wallet management. Since users always control their own assets, the security is higher compared to centralized exchanges. However, users still need to ensure that they choose verified platforms and avoid using unknown DEXs.

How to choose a suitable decentralized exchange?

When choosing a decentralized exchange, factors such as liquidity, supported assets, user interface, and security need to be considered. Browsing the exchange's trading volume and user reviews can help you make a more informed decision.

What are the typical trading fees on decentralized exchanges?

The trading fees on decentralized exchanges are usually low, and the fee structure is transparent. Different exchanges have different fee settings, so be sure to check the relevant information before trading.

Is registration required to use a decentralized exchange?

Most decentralized exchanges do not require users to register or undergo identity verification; users can trade simply by connecting their wallets. This makes DEXs more convenient for users to conduct anonymous transactions.

Can I trade all crypto assets on decentralized exchanges?

Not all decentralized exchanges support the same number of crypto assets. It is recommended to confirm the types of assets supported by an exchange before choosing one to ensure smooth trading.

What should I do if the transaction fails?

If a decentralized transaction fails, check your network connection and wallet balance. In addition, incorrectly set slippage or trading parameters may also cause failure; you can try adjusting the parameters appropriately and retry the transaction.

By mastering these tips and information, you will be able to navigate decentralized exchanges with ease, opening up a new world for investing and trading crypto assets. I hope you achieve success in your trading journey and enjoy the excitement of decentralized trading!