Tips for Trading on Uniswap

Posted on 3/23/2021 by Andras

Uniswap has revolutionized on-chain trading. It’s a liquidity protocol on Ethereum that pioneered the automated market maker (AMM) model. With Uniswap, anyone can become a market maker and instantly create a market for any token.

Whereas centralized exchange (CEX) listings have been all the rage in the past, these days, most tokens get listed on DEXes first. Why? It’s much easier to bootstrap liquidity, it doesn’t require any costly partnerships, and can be done relatively quickly.

But what are some of the best practices when it comes to flipping coins on Uniswap? We’ll go through them here.

What wallet to use

First, you’ll, of course, need an Ethereum wallet. Since Uniswap lets you trade ERC-20 tokens, you’ll need a wallet that both supports ERC-20 tokens and can talk to Uniswap. The most popular choice is MetaMask. The great thing about it is that you can hook it up to your hardware wallets like Trezor or Ledger. In such a case, your private keys never leave your wallet.

Why is this important? There have been some nasty exploits where hackers could access users’ private keys through MetaMask. So if you want to be on the safe side, connecting a hardware wallet to MetaMask may be among the best options.

How to check your activity in a block explorer

The Uniswap website is basically a frontend for the Uniswap smart contracts. The machinations that happen in the background are, well, in the background. If you want to check what’s happening under the hood, you’ll need to know how to use a block explorer. The most popular one is etherscan.

Etherscan is one of the most useful tools on your Ethereum shitcoin flipper belt. You can track what big holders are doing or what activity is happening with your token. It may take a lot of time to dig through all the information, but it’s there, and it can provide you an edge over other traders. But back to your Uniswap trades.

All you need to do is look up your address on etherscan, and you’ll be able to see your trades. This is especially handy when it comes to unconfirmed transactions. During times of increased activity, you may need to increase your gas bid to get them through. Oh, by the way, let’s talk about gas optimization.

How to pay less gas on Ethereum

If you’ve been around the crypto space for a while, you know that Ethereum fees can get pretty outrageous sometimes, especially if you want to transact with smaller amounts.

So how do you make sure you pay the smallest fees possible? You have tools like EThGasStation, etherscan's gas tracker, and GasNow. These will tell you the most optimal gas to pay at any given moment. You can also monitor the times when gas is the cheapest.

On most wallets, you can manually enter the gas price you want to pay – they usually tend to get their estimations wrong. Just be very careful not to accidentally fat-finger an outrageously high gas price. Due to the way the gas bidding system works, miners will be more than happy to process your transaction for a big premium. You probably don’t want to be the poor soul who paid almost 25 ETH just to approve USDC on Uniswap!

How to chart Uniswap pairs

But sir, how can I do technical analysis (TA) on the latest scam coin? There are a few options out there that take the data from Uniswap and print it on a candlestick chart.

Some examples are ChartEX, DEXTools, and DEX.Vision. This isn’t an exhaustive list – there are many other sites like these, but these can already get you pretty far.

You can also check out Uniswap Info, which is maintained by the Uniswap team. It provides you all sorts of data on how the protocol is doing in terms of value locked, volume, tokens, and token pairs.

How to avoid fake tokens

As you may already know, the Uniswap protocol is permissionless. This means that there’s no listing process as there would be on a CEX. Any ERC-20 token can be launched as long as someone provides liquidity for an underlying token pair. How can this affect you?

Well, you could think of a CEX as a relatively safe space (the key word here is “relatively”). Sure, bad projects are listed on CEXs all the time, but you can be somewhat sure that even if the coin can dump pretty hard, it probably won’t go to zero from one minute to the next. That’s not the case when it comes to Uniswap.

Remember how we said that anyone could create a market by adding tokens into a pool? They can just as well remove that liquidity. If they do that, there’s a good chance that there’s no market left for your coin anymore, as the liquidity provider just ran away with all the funds in the pool. In other words, you’ve been pwned. Rekt. Rugpulled.

So what can you do to protect yourself against this? Well, a bit of a non-answer is, DYOR. The majority of ERC-20 tokens that exist will go to zero, and it’s up to you how much risk you take on. The fact that the protocol is permissionless has done a lot to democratize access to trading, but it also means the responsibility is in your hands.

On a more practical level, though, you can make sure that you’re interacting with the right token. Let’s say some amazing new token launched that you think is going to change the world. However, while it’s launching on Uniswap, scammers create fake tokens with the same ticker. Are you searching for the token by looking up the name? Well, as it turns out, you may have bought a fake token that’s completely worthless.

There are two simple things you can do to avoid this. The first is Token Lists. If you import a token list that was curated by a trusted entity, such as Uniswap, CoinGecko, DeFiPulse, or many others, you can avoid buying fake tokens.

Another neat feature is also provided by CoinGecko. If the token you want to ape into is listed on CoinGecko, just copy the token contract address and paste it into Uniswap, and you can be sure that you’re buying the real thing. Many projects that first list on a DEX will also provide you the contract address on their website or social media accounts – that’s also a good place to start.

So, these are some basic guidelines for using Uniswap. Now you’re better equipped to trade, will pay less fees, and hopefully will get rugpulled less. Happy trading!