CRYPTO ACADEMY: SEASON 3 - WEEK 1 - HOMEWORK POST FOR PROFESSOR @lenonmc21.
WHAT IS TRADING?
In very simple terms, trading is the act of exchanging one asset for the other. But in real sense, it looks more complex than it may sound because it does not only end in going to the market to purchase goods or sell it. In some aspects, people buy assets from others with the aim of selling it in the nearest future for a higher amount, this is what I always term as real trading.
In the cryptocurrency world, trading is a very interesting sector because this is where you get to monitor how a particular digital asset or cryptocurrency is performing in the market. Here, people buy the coins when it's price is not so high with the aim of selling it for a better price and thereby making profit. The amount in which the cryptocurrency trader buys the cryptocurrency can be referred to as the Entry point while the time he intend selling it or the time the currency was sold can be termed as the exit point.
In cryptocurrency, we also have what we call the margin trading, here, the trader does his trade by predicting the close-future direction of a cryptocurrency with his own asset at stake, and then he makes profit if his prediction turn out to be correct, but he could also lose his asset if the price of such currency, usually Called Leveraged tokens does not move in the direction he predicted.
Functions of trading and how they relate to the cryptocurrency market.
Circulation of assets: Assets are circulated by trading, for instance, if a man manufactures a phone, that particular brand of phone will only be circulated by those traders who purchase it and sell it to others, who then might decide to use it or Maybe resale it again. This is the same with cryptocurrency market, cryptocurrencies go into circulation through the trading process, when a person was holding such a digital asset decides to sell it, that is trading, when the buyer buys it, that is trading too. When the price of the cryptocurrency has risen to a good point and the trader decides to exit the investment by selling the coins, he is also trading.
Determining the true value of an asset: Another function of trading is that it makes us to know the real value of an asset at a particular time. When many people are sorting after a particular product in the market, then the price of such product will increase and people were probably sorting after this product because it was good. This also applies in the cryptocurrency market, when more traders are interested in trading with a particular cryptocurrency, then the price of such cryptocurrency will soon increase. But if the prices of these cryptocurrencies were to be fixed, then the prices given to them might not have been their true worth.
2 - TOOLS USED FOR TRADING
People enter into cryptocurrency trading with the aim of making profits, but cryptocurrency trading is rather a two-edged sword, either you make profit or you lose your assets. So in order to reduce the risk of losing, people actually make use of some tools to perform their trading with a resuced risk, here are some of those tools.
FUNDAMENTAL ANALYSIS
Here, the analyser takes a close look at the domestic political conditions surrounding such cryptocurrency, how the industries using it have performed, and other related factors.
In this type of analysis, the analyser also makes use of the events happening concerning such cryptocurrency to decide what could happen with it in future. It also includes the used of the updates done by the developers of such cryptocurrency to their technology.
Sometimes, the whitepaper of such cryptocurrency can also be considered when doing this type of analysis.
An example of a fundamental analysis
fundamental analysis of Helium
The Concept of Helium Project
Helium is a Decentralized project of a Wireless Network which got initiated about two years ago (in 2019 to be specific). This wireless network allows devices to access the internet in the absence of a high-power satellite or any hardware of that magnitude. It uses the blockchain technology to link coverage providers together with the consumers of such coverage.
Social Reach:
When a new miner joins helium, he is assigned to a block known as a consensus group where such minner will begin to take part in some verifications. After the miner joins the consensus group, he/she will be awarded tokens for all the new blocks created thereafter. This makes such project to be very attractive to many people.
Project Purpose
The purpose of Helium is to enable those low power devices that does not have the necessary high power for Internet access to give out data to the internet and also receive from it. It also reward the miners with the Helium HNT token.
TECHNICAL ANALYSIS
This is the type of analysis were the price of a cryptocurrency is closely monitored and represented in a graph. Here, various features of such a graph or chart is deligently analysed in order to predict the future price of that cryptocurrency, the time were where a cryptotrader should buy such cryptocurrency (Entry point) and the time where the holders of such cryptocurrencies should be selling them in order to make optimum profit (Exit point).
While the aim of fundamental analysis might be for the determination of the cryptocurrency that an investor should invest in, or a cryptotrader should trade in. The main aim of the technical analysis is always for the development of a good trading plan in a particular cryptocurrency.
Example of Technical analysis
Technical analysis of BTC/USDT.
Price: Looking at the screenshot of the monthly chart of the BTC/USDT pair above, the current price of the pair is $37053.69. This is shown by the last red candle stick which signifies a downward trend.
Resistant Point: The Resistance point in the chart above is $64000, this is represented by the arrow above at the highest point in the chart. This feature shows the point where the price started going down after it could not exceed that price for that month.
Support Point: The support point for the cryptocurrency in the period under review is likely to be the $37000 mark as it could begin to go up for an upward correctional trend.
EXCHANGES WITH HIGHEST TRADING VOLUME WHERE WE CAN BUY OUR CRYPTOCURRENCY
Many people are only bery familiar with the Binance exchange alone, but there are a lot of other exchanges that also have very high trade volumes. Here are some of them;
HUOBI GLOBAL: This particular is ranked as the exchange with the second highest trading volume and it has a 24-hour trading volume of $4,653,278,307.
COINBASE: This is another exchange that has a very high 24-hour trading volume of $2,309,702,377. As a matter of fact, it is ranked as the third top cryptocurrency exchange for spot trading by COINMARKETCAP
Poloniex: This particular exchange is ranked twelfth by COINMARKETCAP and it has a 24-hour trading volume of $189,643,758. But one thing about it is that you can easily trade your STEEM tokens using the exchange.
HOW TO BUY CRYPTOCURRENCIES WITH POLONIEX
As a newbie who wants to buy a cryptocurrency for the first time or your first cryptocurrency, it is very easy for you to do that on the poloniex exchange. Before doing this, you need to sign up on that exchange and then you take the following steps.
Step 1: After loging into the poloniex exchange, you are provided with a lot of options at the top of the page, locate the "buy with fiat" tab and click on it. This will take you to the payment page.
Step 2: On the payment page, fill in the details required like the denomination (the fiat currency you intend using) and the asset amount (the digital currency you want to purchase).
Step 3: After that, click in the little box at the end of the details page which means that you agree to their disclaimer. After that, click on the "buy now" button to proceed.
Step 4: You will be checked out to the page were you will fill the details of your card and make the payment.
