How to choose a centralized exchange: everything a trader needs to know about CEX

The cryptocurrency industry is developing rapidly, attracting new participants every day. But to start trading, you need to understand where and how to do it. Most people use centralized exchanges (CEX) — this is the easiest way to enter crypto. But what exactly are they and how do they work? Let’s figure it out.

CEX Exchange is — a platform with centralized management

Centralized exchange (CEX) — is an online platform for trading crypto assets, managed by a single company or organization. Unlike traditional financial systems, where the intermediary is a bank, here the intermediary is the CEX exchange itself.

When you register on such a platform, you need to go through identity verification (KYC). This didn’t happen immediately — when centralized exchanges first appeared, they were anonymous. But over time, global regulators required platforms to verify traders’ identities, and now this is standard.

After registration, you can deposit fiat money or cryptocurrency into your account. Funds are stored on the exchange until you start trading or withdraw them.

How trading on CEX is organized

The trading process on a centralized exchange is simple and intuitive. When you place a buy order for cryptocurrency, it goes into the platform’s order book. The system then searches for a matching sell order from another trader. When two orders match in price and volume, the transaction is executed automatically.

For example, you want to buy Bitcoin at $45 000. Your order waits in the queue until someone wants to sell Bitcoin exactly at this price. As soon as that happens — the deal is closed, and you become the owner of the cryptocurrency (in the exchange account).

For each transaction, the platform charges a fee — this is the main source of income. Fees come in two types:

• Maker fee — for creating an order that remains in the book
• Taker fee — for accepting an existing order

Most exchanges use margin trading and leverage for experienced traders, offering stop-losses and other advanced tools.

What services do centralized exchanges provide

Besides simple trading, CEX perform several important functions:

Order matching — the main function. The exchange connects buyers and sellers, creating a market.

Asset storage — this is a critically important service. Most of the exchange’s funds are kept in cold wallets (not connected to the internet), which protects against hackers. Only part of the funds used to ensure liquidity are in “hot” wallets — and this part can be stolen in a hack.

Privacy protection — when you trade on CEX, the transaction is formally made on behalf of the exchange, not in your name. This protects your anonymity from other traders.

Many centralized exchanges also offer additional services: crypto staking, NFT marketplaces, P2P exchanges, launchpads for new projects.

Pros of CEX: why they remain popular

Despite criticism from the crypto community, centralized exchanges remain the dominant choice. And there are reasons for that:

Ease of use — the interface of modern CEX platforms is designed so that even a beginner trader can use it. No complicated settings, everything is intuitive.

Support and protection — if the platform is hacked and you lose funds, most exchanges compensate for losses. This provides psychological comfort for beginners.

Liquidity — large trading volumes on major CEXs mean you can quickly find a buyer or seller at a fair price. On smaller platforms with low liquidity, spreads between prices can be huge.

Variety of tools — from standard spot trading to margin trading, futures, and many other tools for experienced traders.

Fiat integration — you can top up your account with regular money (rubles, dollars, euros) and start trading crypto immediately. Decentralized exchanges wouldn’t have this.

Disadvantages of centralized exchanges

But CEX have serious drawbacks that all traders should know:

Hacking risk — despite millions invested in security, exchanges are regularly targeted by hackers. Often this happens due to human error or system vulnerabilities. That’s why the number one rule is: never leave funds on the exchange after trading is finished. Withdraw them to your personal wallet, and better yet — to a hardware wallet (cold storage).

Fees — each transaction incurs a fee, and active trading over a month can add up to a significant amount. Although the percentages are small, it still reduces profitability.

Custodial storage — this is the main problem for crypto enthusiasts. When you keep cryptocurrency on an exchange, you do not own the private keys. The exchange owns them. This means that at any moment, the platform can freeze or confiscate your funds — by regulators’ orders, due to an error, or for other reasons. There is a well-known saying in crypto: “not your keys, not your coins.” On an exchange — not your keys, that’s a fact.

Dependence on regulations — centralized exchanges are obliged to comply with local laws, which can lead to restrictions or complete shutdown of the platform.

Alternative: decentralized exchanges (DEX)

Because people dislike trusting their funds to third parties, decentralized exchanges (DEX) have appeared. These are fully automated platforms built on smart contracts and operating on blockchain.

On DEXs, there is no order book in the traditional sense and no centralized storage. Instead, the automated market maker (AMM) technology is used. Users deposit their funds into liquidity pools, and the system automatically executes trades from these pools.

The main advantage of DEXs: you remain the owner of your keys. You don’t even need to create an account — just connect your wallet (MetaMask, for example). Tokens go directly into your wallet, without deposits or withdrawals from an account.

But DEXs have their own problems:

• Low liquidity — on many DEXs, it’s harder to find a trading pair with the desired volume
• Complex for beginners — the interface is often more confusing than on CEX
• No fiat support — you cannot top up your account with rubles or dollars directly
• Slippage — the price can change between sending the transaction and its confirmation

CEX or DEX: which to choose?

The answer depends on your goals and experience.

Choose CEX if you:

• Are a beginner and want to start with a simple platform
• Want to trade cryptocurrency for regular money
• Need high liquidity and fast transactions
• Value support and protection against hacks

Choose DEX if you:

• Are an experienced trader who understands the risks
• Want full control over your keys
• Are okay with lower liquidity for decentralization
• Are looking for alternative tokens not available on major CEXs

Currently, centralized exchanges remain the main way for most people to trade. As DEXs develop, their usability improves, but for now, CEXs still lead in terms of simplicity and functionality.

Safety rules when trading on CEX

If you decide to use a centralized exchange, remember:

1. Withdraw funds to your personal wallet after each trading session
2. Use two-factor authentication (2FA) — this significantly reduces the risk of account hacking
3. Don’t use simple passwords — create complex combinations
4. Don’t transfer everything at once — start with small amounts to understand the system
5. Check addresses before sending funds — address errors are irreversible
6. Review platform fees — they can vary greatly
7. Follow news about hacks — if your exchange is compromised, withdraw funds immediately

Centralized exchanges are the gateways to the world of cryptocurrencies for millions. They are convenient, reliable, and full of trading tools. But remember: convenience comes at a price — you trust your funds to a third party. So choose trusted platforms and always follow basic security rules.