According to Odaily, trader Eugene Ng Ah Sio recently discussed the differences between centralized exchange (CEX) trading and on-chain speculation on social media platform X. He emphasized the fundamental distinctions between these two trading approaches, particularly in light of the recent AI Meme season that has drawn many cryptocurrency participants into on-chain activities.
Ng Ah Sio explained that CEX trading aims to identify well-defined setups to minimize downside risk. Each setup observed by traders will have a downside risk lower than the potential upside reward. This is why a good setup will have strict invalidation points but allow for ample take-profit levels, where gains are multiple times the losses. However, this also means that traders might face frequent stop-losses. Mastering the mitigation of downside risk is crucial for becoming a consistently successful CEX trader. Ng Ah Sio also advised against using leverage, as it increases volatility in both upward and downward directions.
In contrast, on-chain speculation involves accepting significant downside risk. The goal is to achieve profits of 10-100 times on-chain, compared to the 10-30% target for CEX perpetual contracts. On-chain markets often have poor liquidity, with liquidity pools typically below seven figures, making traditional technical analysis ineffective. Understanding the nuances between these two trading types can help investors make better decisions, a challenge many traders face. Ng Ah Sio noted that being a proficient CEX trader does not necessarily translate to being a successful on-chain trader, and vice versa.
