Everybody wants to maximize their gain when trading, the same is real with physical businesses, and this is the reason why some companies produce inferior goods. It is also the same with trading bitcoins; traders would do all they could to escape trading fees. On other bitcoins trading platforms or exchanges, you can’t trade without charges, so, however, this is one feature that makes luno unique. In this article, I have laid down some few rules to follow when trading on luno so you can escape trading fees.
In the previous lessons, I introduced luno as a bitcoin exchange, where traders meet online to trade or exchange their bitcoins for other currencies and vice versa. In case you missed the lesson you can check it
What is trading fees?
Trading fees is an amount a broker or an exchange charge on every trade executed. In most cases the fee is not fixed, it is always a fraction of your trading amount. For instance, on luno, your trading fee is 1% which means if you use 10000 naira on a trade, your fee will be 100 naira.
How to trade without fee on luno
Let’s delve right into the subject matter which is trading on luno without a trading fee. Below is an order book from luno mobile application.
On the order book, the part coloured green represent the buy orders while the part in red represents the sell orders. At the top, the red box enclosed what we call the spread. The spread is the difference between the highest buy order and the lowest sell order. As I have already said in previous lessons, the higher the spread, the bigger you profit and vice versa. Also, you can increase your profit by increasing your trading amount.
Notice that the spread in the picture above is 1 in some cases the spread can go as high as 100,000 plus.
Pay close attention now, don’t get distracted.
- Whenever the spread on the order book is one (1), don’t place a trade above the highest buyer when buying and when selling don’t put an order lower than the lowest sell order. If you do, you will be charged. Always remember that luno only charge a trading fee when you do what we call market execution.
- Ensure your trades or orders are below or in the same place with the highest buy order or lowest sell order.
This is what I always advice, always wait for the market to come to you and not chasing the market. Most traders who chase the market end up paying trading fees. What this means is that placing pending orders will help you escape trading fees. From the illustration I gave, someone might say, what is 100 naira trading fee? Well, the truth is, you won’t understand how painful it is until you use a significant amount to trade and a large trading fee is deducted from your account and still not make any reasonable gain. Do all you can to avoid paying trading fee by doing as I outlined.