LESSON 8 · NOTES · LAST IN THE BASIC SERIES
How to choose an exchange and not lose money at the start
You don’t choose an exchange by its ranking; you choose it for the job. Five things an arbitrageur looks at, and what to check before you deposit any money.
Three takeaways
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Choose the exchange for the job, not by ranking. A trader needs one exchange with the right pair. An arbitrageur needs a pair of two or more exchanges, the same coin on both, and for spot-spot, a route between them too.
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Ranking volume can be inflated. Order book depth can’t. Check it with your own eyes: the order book and the trade feed on your pair, not the total 24-hour volume.
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Everything is checked before you deposit. Deposits and withdrawals, networks, limits, verification, and where your capital will sit.
1. Order book depth, not total volume
Total 24-hour trading volume is a number in a ranking. Order book depth on your pair is what will actually fill your order. The second one is what you look at. Volume can be inflated. An exchange hires a market maker, the market maker is obliged to keep turnover up, and a bot trades with itself. Volume in the ranking grows, but there may be no real counterparty interest behind it. How to check by eye: open the order book and the trade feed. Huge ranking volume, but the book shows lots of orders of the same size and the feed shows many trades of the same amount in a row: that’s inflated. A book like that won’t absorb your order (lessons 3 and 7, order book and slippage). The Arbiq scanner does this check for you: it calculates the spread not at the best price, but taking into account how your amount will move through the order book.
2. Deposits and withdrawals: networks, limits, suspensions
Which networks the exchange supports for your coin for deposits and for withdrawals (the lists don’t always match), what the daily withdrawal limit is, and whether anything is suspended right now. This takes two minutes per exchange in the “deposit” and “withdraw” sections, before you put money in. The withdrawal network and the deposit network must match (lesson 5). The Arbiq scanner also shows deposit and withdrawal status for every exchange right away, next to the spread.
3. Fees
Base trading fees on large exchanges are roughly the same; the difference is in discounts for the exchange token and in the fixed withdrawal fee. On small amounts, the withdrawal fee on your network matters more than the trading fee (lesson 7).
4. Verification and limits
Without verification, most exchanges cap withdrawals; document checks take anywhere from an hour to several days and don’t always pass the first time. Where people lose money: they deposit, see a spread, and can’t withdraw. What to do: documents first, money second.
5. Where your capital sits
Ideally, on both exchanges in advance, so you don’t have to transfer anything (lesson 7). But that’s not always possible: money is finite, and there are several exchanges.
Within a single exchange, money moves between spot and futures quickly. Between exchanges, only over a network. Why this matters: if a futures position is approaching liquidation (lesson 4), you can top it up from spot on the same exchange, quickly. The only question is whether there is money on spot. That is something you take care of in advance. If there isn’t any, the fallback is to reduce the position, which moves the liquidation point further away. More on this in separate lessons.
The five points above are for spot-spot. For spot-perp and perp-perp, what matters is whether there is a perp on the coin and what the funding is. For spot-margin and perp-margin, whether the coin can be borrowed and at what rate. This is covered in the practical track.
Checklist before depositing money
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Open the order book on your pair. Look at depth, not total volume.
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The “deposit” and “withdraw” sections: my coin, my network, the limit.
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Get verified before you need it.
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Decide in advance where the capital will sit: on which exchanges and in which wallet within each exchange.
Terms
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Arbitrage pair: two or more exchanges that trade the same coin and between which you can move funds.
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Market maker: a participant who, under an agreement with the exchange, keeps orders in the book and maintains turnover. Can create volume without real demand.
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Inflated volume: turnover created by a bot trading with itself. Visible in the ranking, not in the order book.
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Trade feed: the list of the latest executed trades on a pair. Identical trades in a row are a sign of inflation.
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Verification (KYC): the exchange’s document check. Without it, withdrawals are limited.
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Liquidation point: the price at which the exchange forcibly closes a position. It moves further away when you add funds or reduce the position.
Check yourself
An exchange ranks first by volume. Does that mean its order book is deep?
No. Volume can be inflated by a bot trading with itself. Depth can only be seen in the order book of a specific pair, so that’s what you open.
What should you check before depositing money on a new exchange?
The order book on your pair, the “deposit” and “withdraw” sections (coin, network, limit), verification, and where your capital will sit.
A futures position is approaching liquidation. Where is the fastest place to top it up from?
From the spot wallet on the same exchange: transfers within an exchange are fast. From another exchange it goes over a network and may not make it in time. If there is no money on spot, the position is reduced.
The basic series is complete. Next is the practical track: each strategy on real examples, with a calculation of what’s left. The Arbiq scanner: arbiq.io, currently in beta. The Telegram channel @arbiq_ai posts more often than the lessons come out: trade breakdowns, what is happening in the market, answers to questions. That’s also where the practical track will be announced first · t.me/arbiq_ai This material is for educational purposes only and is not investment advice. Any trading decisions are yours alone and at your own risk.