Trading Cryptocurrency- Crypto Academy / S4W6- Homework Post for @reminiscence01


Greetings crypto enthusiast.

The professor @reminiscence dished out a full package and it really made an impact. We really appreciate your efforts Prof and based on the knowledge I gained I present my assignment.


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Explain the following stating its advantages and disadvantages:

  • Spot trading, Margin trading, Futures trading

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Spot trading.

Just as the name implies trades are carried out at the spot.
This type of trading refers to a buy and sell transactions between a buyer and a seller that is completed instantly. Buying and selling transactions under spot trading are carried out at once, that is to say transactions between buyers and sellers are completed instantly, once they both agree on the spot price.
Scalping takes place in spot trading, where traders buy and sell as many times as possible in a day to take little profit.
The spot trading comprises of the buyer, seller and an order book which carries the price a buyer is willing to pay and the price a seller is willing to sell off. A beginner is always advised to be conversant with spots trading before trying out other forms of trade.

Advantages of Spot Trading

  • Transactions are carried out immediately.
  • It is easy for a beginner to understand what it is all about
  • High level of liquidity exists on spot trade.
  • One can enter into trade with small capital and make huge profit.
  • The risk on spot trading is less.
  • Transparency: information of both the buyer and seller is displayed publicly so as to avoid fraudulent activities.

Disadvantages of Spot Trading

  • A trader can only trade owned coins or digital currencies
  • Low amount of profit.
  • To make huge profit a trader must hold asset for a long time.

Margin Trading.

Margin refers to a situation whereby a trader borrows money from a broker or a fellow trader to carry out trades, so as to make profits. The money invested does not belong to the trader. On the other hand Margin Trading is a form of trading where the capital to be invested is higher than the traders personal capital and the trader gets more capital by taking loans from a broker or fellow trader. Borrowing from a broker gives the trader high chances of making huge profits. In Margin Trading the capital invested does not belong to the trader.

Advantages of Margin trading.

  • if the trade goes the traders way huge amount of profit is realized after the trade.
  • Margin trade allows a trader to open quick position.
  • Margin trade promotes investors power.

Disadvantages of Margin Trading.

  • Poor management strategy may incur loss.
  • If the market does not go the traders way, very high loss is recorded.
  • It is not easy to understand.
  • Top levelled experience is needed to operate on the margin trade.

Futures trading.

As the name implies trades are not executed immediately but later on.
Futures trading is a type of trading where traders settle to either buy or sell a crypto asset ahead of time at a particular agreed price.
Futures trading comes with a lot profit and so a lot of losses. The agreement concerning the quantity, price and the date of delivery are made days or hours before the execution of the order.

Advantages of Futures Trading

  • Futures trading delivers a lot of profits to traders who trade using futures trading.
  • Gives traders the insight on there predictions.
  • The instability of cryptocurrencies has no effect on the price that was earlier agreed, this can either be in favor of the seller or the buyer.
  • Traders using the futures trading know when to enter and exit a trade.

Disadvantages of futures trading.

  • If the price does not go as predicted it can result to loss of capital.
  • Unlike spot trading, you need huge amount of money to start trading in futures trading.
  • It is difficult to understand how it works.

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a)Explain the different types of orders in trading. b) How can a trader manage risk using an OCO order? (technical example needed).
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The different types of trading orders
In the crypto market includes the following:

  • MARKET ORDER.
    A market order is a type of order whereby buying and selling takes place without trying to alter the current market price. Market orders are filled immediately. A trader who fills a market order is called a market taker.
  • PENDING ORDER.
    Just as the name implies, transactions are kept pending for sometime before they are executed. Under pending Order traders quotes the price at which they are willing to buy or sell off an asset. Traders quote the price they believe a particular asset will reach and once the price of the asset gets to that predicted price then will the order be executed. Pending order is further divided into:
  • a) Limit order.
    This is a type of pending order where the trader quotes the specific price they are willing to buy or sell off an asset. This limit order can either be a buy stop order where the order is executed when the price starts to drop or a sell order which executed when the price is high which is in favor of the seller.
  • b. Stop limit order.
    This type of pending order consist of the stop order and the limit order. In stop Limit order the trader quotes a stop price and a limit price where he wants his order to be executed.
  • c. OCO order
    OCO is an acronym for One cancel the Other Order. In OCO traders can open multiple orders and immediately one of the order is executed, the other order is cancelled automatically. The OCO helps reduce the level of losses recorded by traders.
  • EXIT ORDERS
    Exit orders are used to exit a particular trader, a trader either suffer losses or gain profits. Exit order is further divided into:

a) Stop loss order: This order is placed to take place automatically when the price of the asset goes in the opposite direction of the trader's prediction. As a trader you don't have to always be online to monitor your trades as this stop loss order will help you exit any trade that will incur loss.

b) Take profit order: This type of order quotes the specific price at which an open position should be closed so as to take profit. If the price of the asset does not attain the limit price, the take profit order cannot be executed.

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How can a trader manage risk using an OCO order? (technical example needed)

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One cancel the other order is used for management of risk while trading and can also come into play when trades is not ones favor. Immediately one order is executed the other becomes invalid. An OCO buy Stop order is placed above the ranging price while a sell stop order is placed below the ranging price this will be further explained in the illustration given below.

  • Here I will just give an illustration: For example if an asset's price is at the rate of $80-$95, a trader will go ahead and place a buy stop order above $95 which will be in the trader's favor while he place a sell stop order at exactly $80 or below $80 so as to stop the loss. The moment price reaches the stop limit or take profit limit placed by the trader, the order will be carried out while the other order becomes invalid.
    As seen in the example, a trader using the OCO is on a safer side and will not record losses.

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Open a limit order on any crypto asset with a minimum of 5USDT and explain the steps followed. (Screenshots needed from any cryptocurrency exchange).

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  • First I logged in to my Binance exchange account.
  • Secondly I went to Spot on my Trade interface
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  • And on the search bar I searched for TRX/USDT, and clicked on it.
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  • And on the drop-down menu, I selected Limit
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  • And I selected a bid price (0.9715), then I input amount and click Buy.
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  • my order was pending for sometime before it was filled.
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Using a demo account of any trading platform, carry out a technical analysis using any indicator and open a buy/sell position on any crypto asset. The following are expected.
i)Why you chose the crypto asset
ii)Why you chose the indicator and how it suits your trading style.
iii)Indicate the exit orders. (Screenshots required).
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For the sake of this lecture, I would be using my MetaTrader 5 Demo account to perform a buy order.

  • I selected a XRP/USD pair, using a 4 hour timeframe.
    The reason why I choosed to use the XRP crypto coin was because I discovered that the market is currently in a bullish run and that it's the best time for me to buy do as to make Profit.
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I will be using the Moving Average Indicator to confirm the current state of the market, so that I can place my order.
This Indicator suits my trading style because I will be using the Golden/Death Cross strategy.

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As you can see on the screenshot above, I have 2 Moving Averages (MA) lines, and they are the 50 day MA (blue line), and the 200 day MA (red line).
I discovered that a golden cross occurred because the 50 day MA has crossed the 200 day MA to top, which signifies a buy signal.

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So I placed a buy position, setting my Stop Loss at 1.1000, and my Take Profit at 1.1790.**

Conclusion.

Trading cryptocurrency is not as easy as it looks and it also comes with plenty of risk which is why a class such as this one is very important.

CC:
@reminiscence01
@steemitblog


Comments 4


Hello @offia66 , I’m glad you participated in the 6th week Season 4 of the Beginner’s class at the Steemit Crypto Academy.

Unfortunately, i observed that you have posted your work before the deadline and then hidden the tag. Then later edited your work and used the right tag. I can't find your post among my tags and i got a notification from this post yesterday morning.

This act is trying to cheat the system and violating the homework guidelines.

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Remark: Homework Task Disqualified

18.10.2021 16:26
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No prof
I did not post it after the deadline
I made a mistake in the tag which I discovered this morning 🤦🤦

18.10.2021 20:09
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I was supposed to get a notification of your post because you mentioned me even if you made a mistake in the tag. But i got the notification after the deadline. What are you trying to justify?

18.10.2021 21:00
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Maybe this is why you couldn't get the notification sir

19.10.2021 01:10
0