Module #6 - Advanced Investing
Lesson 1 - How to Use GDAX
GDAX is designed for experienced traders but is worth learning as their fees are much lower. Fees also differ per country but are available on their website so you can see the fees they charge in your country.
Just so you can compare, here are the fees for the UK:
- Coinbase instant buy with debit/credit cards: 3.99%
- Coinbase standard buy from GBP wallet: 1.49%
- GDAX: 0% - 0.3%
As you can see, the fees are much lower with GDAX which makes it worth learning.
There are a few key points with GDAX though, this may get a little complicated so don't worry if you don't understand just yet like with most things it will make sense as you start to use it:
- There is no option to buy with a debit or credit card
- You can buy with fiat deposits, but it also has trading pairs for Crypto to Crypto (we discussed trading pairs before if you can't remember, you can get a refresh back in Module #2 where I explained what an exchange is)
- The fee range of 0% - 0.3% is based on a couple of things. This is complicated so if you don't understand it then don't worry for now. GDAX operates with a maker-taker fee model with an order book, this is different from Coinbase, where you buy directly from Coinbase. With GDAX there is a market where buyers and sellers are trading with each other, setting prices they are willing to buy and sell at, these are orders, and when you create them, they are placed in the order book. You are NOT buying from GDAX. How you buy and sell affects the fee you pay, and there are two ways to buy:
- When you place an order which is immediately matched in the order book, you are considered a taker and pay a fee of between 0.1% and 0.3%
- When you place an order which is not matched and added to the order book, you are considered a maker, when someone matches your order they are the taker, and therefore you play 0%, and they pay between 0.1% and 0.3%
- The fee of between 0.1% and 0,3% is dependent upon the volume you trade, you can see the GDAX trading fees here
Again, if you do not understand at the moment, don't worry, by using GDAX you will become more comfortable with it, and it will start to make sense. The primary point here is the difference in fees which means GDAX is worth taking the time to learn.
So let's jump in.
Step 1: Let's Login to GDAX
Follow these steps:
- Go to GDAX; the address is www.gdax.com
- Click on the button for Sign In:
- If this is your first time using GDAX, you will be asked to accept the terms and conditions by clicking on I Accept
- You will be given the option to add a bank account; you can do this later so click on Start Trading to access the trading screen
Step 2: Understanding the Interface
The screen on the right is what you should see after you login to GDAX. I have added numbers for each of the principal sections to explain what they are.
Please follow these closely but as ever, don't worry if you do not understand everything when you start to use it, you will become more confident in time:
- The trading pair selected: mine is showing BTC/GBP thus I am set to trade between Bitcoin and the British Pound. The majority of the other panels all relate to this. If you click on this trading pair, you can see the other trading pairs available to you.
- Volumes: this is the current activity for the trading pair you have selected, it will show you the current price, what the price change has been in the last 24 hours and the total volume traded. On my screen, it says 182 BTC. Therefore 182 Bitcoins have been bought on GDAX for this pair in the last 24 hours.
- Menu and settings: here is where you can manage your settings and enter the menu, don't worry about this just for now.
- Balances: this shows how much you have in your wallet for each of the coins or fiat within the trading pair, so for mine, it shows 0 for both GBP and BTC as the balance for both is currently 0 on GDAX. I'll add some to here soon. You will also notice buttons for deposit and withdraw where you can add and remove funds from these wallets.
- Order: this is where you create orders, there are a few options here, we'll cover this later but keep it simple to begin with, and order from the order book.
- Order book: this shows all the current orders which exist in the order book from other traders. You will notice this is always changing; this is due to orders being added, removed or closed out.
- Red numbers: these are sell orders, therefore traders who want to sell Bitcoin, they contain two numbers, the left number is the volume for sale at a specific price, and the right number is the price of the order
- Green numbers: these are the opposite and are buy orders, therefore prices and volumes people for orders which traders are willing to buy at
- Spread: this is the difference in price between the highest priced buy order and the lowest priced sell order
- Price chart: this is the price chart for the trading pair and is always set to a specific period. Those green and red things are known as candles, we'll learn about these later on. My chart is currently set to 5 minutes. Therefore each candle represents a 5 minute period of trading:
- Green candle: the price went up in that 5-minute period
- Red candle: the price went down in that 5-minute period
- Open orders: these are any open orders you have made which have not been closed
- Trade history: this is a list of all closed orders from all traders
Have you got all that? Probably not but that is fine, we are going to do a few practical exercises now so you can understand how it all works. You may lose a small amount of money now for this, but it will help you learn how to use GDAX.
Step 3: Depositing Into GDAX
So the first thing we are going to do is deposit the Bitcoin we bought earlier into GDAX. Please follow these steps:
- Click on the Deposit button in the balance section
- You will see options for:
- Coinbase Account
- BTC Address
- Leave it on Coinbase Account; you will see it shows the balance of Bitcoin you had bought recently. You can transfer over as much of that Bitcoin as you want by entering the amount in the box provided. I transferred the entire balance.
- Click on the button for Deposit Funds
- You will see a confirmation and then see the balance in the top left has been updated to reflect this, though note your balance on Coinbase for Bitcoin will now be 0.
Step 4: Create a Market Sell Order
Now we are going to sell the Bitcoin we bought earlier. In this section, you will notice there are three types of sell order:
- Market: this is where you sell instantly into the order book from the list of current buy orders which exist. Please note that it will sell into the highest prices buy order, if the Bitcoin being bought is not enough to cover your sell, it will fill this order and then also sell into the next order in the book. Therefore, when creating a market sell order, you may sell parts of your Bitcoin at different prices.
- Limit: this is where you set the price you are willing to sell it for and thus create an order in the order book. This order will only close when someone buys it.
- Stop: a stop order is used to protect a position and will automatically trigger a sell if a price reaches a particular level.
We will cover the differences in these at another time, right now we will only use a market sell order. I have highlighted how I have done this with the three screens below:
- Pre-fill: I am going to sell the entire Bitcoin balance, I do this by clicking on the balance which pre-fills the amount
- Place sell order: you will notice that the Sell option has now highlighted red and the Place Sell Order button has also highlighted red, to create the sell order you click the Place Sell Order button
- Confirm: the sell order is activated and you will be able to now see the following:
- The balance for Bitcoin is now 0.00000000, and the balance for GBP is now £47.98 thus I sold my entire BTC balance for this
- In the Open Orders section you will see the order and a status of filled as the order is complete as well as the price it was sold for and the fee paid. Note there was a fee as this was a market order and therefore I was a taker.
Step 5: Create a Market Buy Order
Now, this is where I am potentially wasting a little money as I am now going to create a buy order. Still, I am not too worried as this is a good exercise in seeing how it all works.
So we are going to do the following:
- Prefill: I am going use the entire GBP balance to buy Bitcoin, again I click on the balance to pre-fill the amount
- Place buy order: you will notice that the Buy option has now highlighted green and the Place Buy Order button has also highlighted green, to create the buy order I click the Place Buy Order button
- Confirm: the buy order is activated and you will be able to now see the following:
- The balance for Bitcoin is now 0.00973584, and the balance for GBP is now £0.00
- In the Open Orders section, you will see the order and status of filled as the order is complete as well as the price it was bought for and the fee paid. Again, note there was a fee as this was a market order and therefore I was again a taker.
That is it, you now know how to buy and sell using GDAX
Module #6: Lesson 1 Summary
- Coinbase has a sister site called GDAX: where the fees are lower than Coinbase
- GDAX is integrated with Coinbase: so your login works for both and you can move money and Crypto between both sites
- GDAX has a more complicated interface than Coinbase: as it is designed for professional traders
- There are two types of order: these are known as buy and sell orders and you order straight from the order book
Now you understand how GDAX works, you can move onto Module #6: Lesson 2 and create an account on Bittrex where you can buy other coins.