Let's take a look at trading on Coinbase, since they are the largest US exchange for buying and trading with USD. While they offer two separate products, Coinbase and Coinbase Pro, people often refer to them both as simply "Coinbase", which can cause some confusion for potential users. So let's take a quick look at the platforms:
Below are the homepages for each platform. The main difference is that Coinbase appears to be very simple, while Coinbase Pro can appear fairly intimidating. But all trades take place on the Coinbase Pro engine, with Coinbase offering significantly higher fees for that simplistic interface.
Once you go to actually place a trade, you'll find that the mechanics behind the two platforms are basically the same. Clicking "buy" or "trade" on Coinbase will bring up the following interface. You need to make the following selections:
On Coinbase Pro, it's basically the same. As with Coinbase, you need to select an Asset (e.g. Bitcoin), Buy or Sell, and an Amount. However, the one difference is that you can specify an order type, which defaults to Market. Leaving the default of Market will make your order behave the same as with Coinbase, it will just fill you at the best available market price. However, as we'll see later, you'll pay a lot less. If you want to consider order types beyond Market, you can read about them here.
Say I want to buy $500 of BTC right now. The displayed price is $8761.38/BTC. However, I can easily see the price of BTC being quoted outside of Coinbase is roughly $8718. So the price has been marked up by 0.50%.
The default option is to pay with credit card, where you will be charged a "Coinbase fee" of $19.18, which is 4.0%(!). Let's say you buy, the price of Bitcoin goes up 10%, and then you sell. You end up paying 9% round-trip, locking in at most 1%. Coinbase gets 90% of your profit and you take 100% of the risk. Not optimal.
A better option is to fund from your US bank account, but you will still pay 1.5%. So in the example above, Coinbase keeps 40% of your profit.
All of this is disclosed in the fine print on their website, but not always obvious to the average trader.
This is just as easy as using Coinbase, just with more data and charts that you can just ignore if you want. In the previous example, you would pay $8718.00 (instead of $8761.38) and the spread between bids and asks is $0.01. The quoted fee is $2.50, which is 0.50%. Cheaper than 4.5% or 2% and a hell of a lot more transparent. On both platforms, all you need to do is fund the account, choose buy/sell, and specify an investment amount. Now if Bitcoin goes up 10% and you sell, Coinbase has taken 10% of your profits instead of 90%. Better, but still not ideal.
Coinbase Pro is a great platform, but it's only one source of liquidity. Sometimes different exchanges can have better prices. And most other exchanges have fees lower than 0.50%. Exchanges sometimes advertise a low fee, but you'll note in the fine print that the fee is much higher for small traders, so be careful.
Fees matter and price can vary. It's really easy to get a better deal with just a little research and effort. Most traders, even novices, will be much better off trading on Coinbase Pro and avoiding high fees. As traders become more comfortable, they should consider opening up multiple exchange accounts so that they can source the best liquidity at an point. Or at the very least have a backup for busy days in case one exchange becomes unavailable or has system issues.