[Trading Cryptocurrencies] - Crypto Academy / S4W6 - Homework Post for @reminiscence01

Hello steemian ...

This is my new post in the Steemit Crypto Academy community, on this season 4 week 6, I will be working on a homework from professor @reminiscence01 with the theme "Trading Cryptocurrencies”.

we will discuss it through the homework below:

1. Explain the following by mentioning their advantages and disadvantages:

Spot trading
Margin trading
Future trading

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spot trading

Spot trading is trading with an immediate delivery method, or it can also be said that trading is carried out through transactions that take place on the spot. In the trading world, spot trading is often called OTC (over-the-counter) trading, which means that the transaction directly involves buyers and sellers. Although the method is said to be direct and immediate, transactions usually last 24 hours and even up to 2x24 working hours.

spot trading advantages

• Liquid fast movement so that the trading volume becomes large. This will lure investors because investors are attracted by large trading volumes.
• Buyers get the assets they buy directly (real-time). The desired asset at that time he could immediately get.

spot trading disadvantages

• The buyer must immediately take the goods he bought from the market so that he can suffer losses if the price of the purchased asset drops in the future.
• Spot trading tends to make the price of an asset insecure.

Margin trading

Margin trading is a type of trading that uses borrowed funds as capital provided by a securities company or exchange platform on which traders make trades. This is a facility provided by a securities company or exchange platform that allows traders to be able to buy assets in large quantities according to the capital that has been ordered, which is based on the concept of the leverage ratio, namely the ratio of loans to the amount of capital. Suppose I use a leverage of 100: 1, with the money I currently have, which is one million. So by using a leverage of 100:1, I can open trade of 100 million.

margin trading advantages

• Traders have the opportunity to get bigger profits because they have large loan capital.
  -. By having a lot of capital, traders can open several positions by dividing the amount of capital.
• Traders can open positions quickly without having to have a lot of money and it doesn't take long to transfer large amounts of money into their account because it has provided a securities company or an exchange platform.

margin trading disadvantages

• With a large capital, when the trader has a loss then it will be multiplied. This means that a doubled profit will have the risk of experiencing a doubled loss as well.
• Traders who do not understand the application of risk management will find it difficult to use the leverage facility.

futures trading

Futures trading is a trading method in which transactions in an asset are based on futures contracts, where you can buy and your purchases will be given according to your contract. It's easy to understand how you on a buy or sell order, you can buy and sell at the price you want that will happen in the future. Buy and sell orders are one of the facilities provided in the futures market.

the advantages of futures trading

• Traders can minimize losses in case of a price drop that goes against their predictions, they can set it up in advance.
• Trader can still make a profit in both directions, even if the market is down he can buy at a low price and when the price is high he can get maximum profit.

futures market disadvantages

• The assets you own are not real, meaning you do not hold the assets for real.
• Futures market price movements tend to be gambling and difficult to predict. If you experience a loss, it is usually a big loss.
• Cannot be done by novice traders, traders in futures trading must master analytical techniques.

2. a) Describe the different types of orders in trading.

b) How do traders manage risk using OCO orders? (technical example required).

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order types in trading

Market Order

A market order is a type of order that uses a buy or sell order at the best price available in the market. For example an asset ADA/USD, the current bid is $2.2 and the asking price is $2.3. If you make a purchase today, then the price the market will give you is $2.3. this is an instant purchase, where the price you get is the best instant price at this time.

Limited entry orders

A limit entry order is a type of order where the trader sells above the market price and buys below the market price. For example, the current price of ADA/USD is $2 and you set a sell order at $2.1 or if you want to place a buy order at $1.9, you set it on the exchange platform. if later the price you set is touched, then your transaction will immediately occur automatically.

Stop Entry Order

A stop entry order is a type of order where the trader will buy above the market price and sell below the market price, this does not mean a loss. This is an event when a trader feels the price will move in one direction so if you believe an asset will move up then you will buy it at a higher price it depends on you where the price target you want is reached and you can place a stop order there.

stop-loss orders

A stop-loss order is a type of order that aims to stop ongoing losses. If you are in a buy position then you have to place a sell stop if the purchase price is not what you want. And if you are in a sell position then you have to place a buy stop if the selling price is not what you want. Stop loss is needed for those of you who do not have time to pay attention to price movements at any time so that you do not experience unexpected losses, then you should install a stop loss.

Trailing Stop

A trailing stop is a type of order whose goal is to create a stop loss when the price is fluctuating. The difference with the stop loss, the trailing stop loss will stop automatically according to the trailing stop range that we set. For example, on the ADA/USD coin, the trader sets the stop loss distance with the purchase price of 10 pips, so if you get more profit, the trailing stop will automatically go up, but if you lose and fall, the trailing stop will automatically cut to a distance of 10 pips. This command is much safer than the soup loss command.

One-cancels-other (OCO)

OCO order type involving two stop-loss orders. It aims to anticipate an increase or decrease in prices. For example, traders set a stop limit at a higher price to make a profit. at the same time, he also anticipates losses by applying a stop loss below the purchase price so as not to experience big losses. If one of the two occurs then one of them is canceled, meaning that if the price goes up and the stop limit price at the high price is reached, then the stop loss at the low price is automatically canceled. This type of order minimizes losses as much as possible.

How do traders manage risk using OCO orders?

The way to manage risk using OCO orders is as I said before, namely setting a stop limit at a higher price to make a profit. at the same time, he also anticipates losses by applying a stop loss below the purchase price so as not to experience big losses. If one of the two occurs then one of them is canceled, meaning that if the price goes up and the stop limit price at the high price is reached, then the stop loss at the low price is automatically canceled.

The above is an example of a demo account, but because I haven't registered yet, the features are very lacking. The point is if you want to place an OCO order on the Binance platform then you have to open the Spot menu, then in the sell menu select OCO. For this case, I use the ADA/USDT coin, make sure you set a stop value above the current price, and set a limit value below the current price. For the amount you can fill it as you wish, here I only bought 20 ADA (DEMO).

3. a) Open a limit order on any crypto asset with a minimum of 5 USDT and explain the steps to follow. (Screenshot is required from any cryptocurrency exchange).

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I will do this step using the Upbit platform and will experiment with the Dkargo coin (XRP/USDT).

It is known that the current price of DKA is 1.173 IDR. So I will purchase 10 USDT. To set a limit, you have to scroll down and select the buy option then check the limit menu.

Then you just set the limit price and the total you want to buy, in my case, I will use 10 USDT. Then make sure the buying limit you are using is lower than the current one, I set the limit at 1.13 USDT. With the automatic calculation of the purchase at 1.13 USDT and with 10 USDT, I will get 8,84956 USDT. When this price is reached, the XRP asset will be automatically purchased at the desired purchase order price. If you have set the limit and total you want to buy, then immediately press buy and you just have to wait.

If you have set the limit and total you want to buy, then immediately press buy and you just have to wait.

4. Using a demo account of any trading platform, perform technical analysis using any indicators and open buy/sell positions on any crypto asset. The following is expected.

i) Why did you choose crypto assets?
ii) Why did you choose the indicator and how does it suit your trading style.
iii) Show the exit command. (Screenshots required).

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Why I chose this crypto asset

The crypto asset I will choose is the ADA coin (Cardano), the reason is that it has good fundamentals. Based on data taken on the coinmarketcap website, currently, the ADA coin is ranked 4th as the best coin. That means that ADA has had a huge impact on the cryptocurrency world, it is a third-generation coin and is a very futuristic project in the cryptocurrency world.

Apart from the project side, the reason I chose there is also because the price of this coin is relatively cheap to reach and buy in large quantities, the current ADA coin price is only $2.21, this is very cheap compared to coins ranked 1,2 and 3, namely Bitcoin, Ethereum and Binance Coins. ADA supply circulation has now reached 73%, which is 32,908 Billion ADA out of a total of 45 Billion ADA.

Why I chose this indicator

The wrong indicator in this question is the Bollinger Bands indicator. The reason I chose the Bollinger Bands indicator is because of the ease it provides in signaling when to enter and exit properly.

Based on the upper band and lower band and also the middle band which is the SMA-20 line, we can determine our trading plan. My trading style using this indicator is to enter when the price breaks the lower band and exit or take profit when the price breaks the upper band.

show exit command

The way I trade using the Bollinger Bands indicator is like most people. I did a simple analysis by setting an entry/buy when the candle broke the lower band, in the ADA/USD chart below I made an entry at around 07:20. Then to set an exit/take profit order, you can do it at 2 times, first at 08:50 and 11:30.

The reason I did an exit was that at that time the candle broke through the upper band. At the time of the first exit, of course, for people who do not want to take risks, they will immediately exit with a profit of 1.36%, but for people who think that the profit opportunity is more optimal, they will exit the second with a profit of 2.18%, this is based on the psychology of each person.

Conclusion

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In the world of cryptocurrency trading, we finally know that there are many types of trades and orders. Orders have an excellent role in risk management when trading. Then, traders must also determine indicators in their daily trading. Then the selection of the right assets also greatly affects the success in trading.

Reference

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https://cerdasco.com/pasar-spot/
https://kamus.tokopedia.com/p/pasar-spot
https://coinmarketcap.com/id/
https://www.tradingview.com/
https://www.binance.com/
https://id.upbit.com/
https://www.avatrade.id/education/order-types/one-cancels-the-other-orders
https://www.hsb.co.id/learn/forex/types-of-orders.html