Steemit Crypto Academy Contest / S7W3 - Understanding Crypto Trading

My dear Steemians, today I welcome you again to my post, @jasminemary. I am here to talk about crypto currency trading as part of my entry to the engagement challenge contest organized in the SteemitCryptoAcademy community.

---

Explain your understanding of crypto currency trading and tell us what you understand by the word "trading."

Pixaby

When talking about crypto currency trading, there are a lot of things that I understand because crypto currency is very large when trying to understand it. Having said that, my understanding of crypto currency trading is that it is the act of buying and selling cryptocurrencies on an exchange that is either centralized or decentralized for profit.

A particularly well-liked method of trading cryptocurrencies is through spot trading and CFDs (contracts for difference), which offer greater flexibility, the use of leverage, and the option to take both short and long positions.

Trading is the act of buying and selling cryptocurrencies, securities such as bonds and stocks, commodities, and currencies like the USDT and US dollar, as opposed to investing, which only deals with holding for a long period of time before selling. Also, the word "trading" means studying financial analysis very well before taking a trade.

---

What are the trading principles to always keep in mind as a crypto trader, and how can you build your own crypto trading strategy?

When it comes to trading principles as a crypto trader, there are some that I keep in mind and follow as a trader, some of which are mentioned and explained below.

• The principle of investing only what you can afford to lose
  Investing in what you can afford to lose is my number one principle that I keep in mind as a crypto trader. Following this principle, I only invest in crypto with an amount of money that, even if I should lose it, I would not get worried over it compared to using an amount that will give me a restless peace of mind when I lose it.

• The principle of knowing the market you’re trading
  With this principle, I do make sure that if I am trading Steem/USDT on a particular day, I do make sure that I pay more attention to trading the crypto pairs than opening another trade that will land me in trouble. If I am trading on BTC/USDT, I focus on it and vice versa.

• The principle of using a stop loss
  Each time I want to trade, I usually use a stop loss to avoid losing. This is what I usually have in mind as a crypto trader before opening my trade.

• Risk management principle:
  Understanding risk management is a very good principle that I usually keep in mind as a crypto trader. With this principle, I always maximize my risk as a trader.

• Never trade when I am sad.
  As a crypto trader, I usually trade only when I am happy, not when I am sad, because being sad is very bad and it isn't right to bring a negative mindset into business.

How do I build my own crypto trading strategy?

I build my crypto trading strategy by applying the following:

• Dollar-Cost-Average (DCA)
• Arbitrage
• Building a well-balanced crypto portfolio
• Trading as a scalping trader
• Doing research
• Avoiding making trading calls or chats based on hype

---

Explain how you can use fundamental analysis to generate your own crypto trading ideas.

As a crypto trader who wants to generate his own crypto trading ideas through the use of fundamental analysis, which is a tool used to study and evaluate the factors that tend to affect the value of cryptocurrencies.

As a trader, I use this two-pronged approach (micro analysis and macroeconomics analysis) to focus on less trade and higher trade. I also use the idea of the two approaches to know how demand and supply are affected in the market.

Fundamental analysis is very important to me as a crypto enthusiast since it helps me know the true value of my cryptocurrencies. In fact, there are several ways in which fundamental analysis is important to me as a crypto trader, since it helps me to have a better understanding of the value of my asset by allowing me to collect and analyze external information in relation to the reality of the internal markets.

---

Explain how you can use technical analysis when trading crypto.

Pixaby

As a crypto trader, technical analysis has helped me a lot, and it's still helping me trade crypto. When trading crypto, I use technical analysis to focus on the price and volume of the traded assets. In this, I used technical analysis in the following ways:

• I use technical analysis when trading crypto to identify a market trend before placing my order.

• Also, I use technical analysis to identify the level of support and resistance when trading crypto. By doing so, I get to know when the price of the asset that I have chosen to trade has reached its reserve or has formed a breakout.

As we all know, the level of an uptrend is the resistance level where the price of the asset has failed to move further, whereas the level of a downtrend is the support level where the asset has paused, thereby indicating a buying pressure.

Beside using technical analysis for what I have discussed above, I am still using technical analysis for the following reasons:

• Knowing the size of my position so as to minimize risk
• Identifying my entry band, exit price, etc.

---

Explain the three key concepts of risk management that every new crypto trader should know.

As a new crypto trader, the three concepts of risk management that you should know are:

• Stop losses.
• Position sizing.
• Scaling.

Stop losses

As a new trader, you should know what stop losses are and how to set them when trading. Having said that, "stop losses" is the part of your trading management plan where you agree to exit your trading position completely so as to avoid losing your entire asset.

Position Sizing

Position sizing, also referred to as "max risk," is the quantity of cryptocurrencies you will either hold in long or short positions on a crypto exchange. It is based on the maximum value that you are willing to lose in the event that a trade fails.

As a new crypto trader, your maximum risk should not exceed 1%–2% of your crypto portfolio for short-term transactions and 5% for longer-term positions if you decide to trade.

For illustration, let's assume that you wish to purchase a token with a market price of $20 per token and you have a cryptocurrency account with $2,000

Your analysis indicates that you should place a stop loss (i.e., close the trade) if the token's price drops below the $10 price level in order to adhere to your goal of keeping your maximum risk to 4% of your account, or $40. As a new crypto trader, knowing and applying this risk management strategy will definitely help you a lot to avoid risking your assets.

Scaling

In the crypto industry, it is practically impossible to predict the precise price or time at which the market's direction (and/or volatility levels) will change.

As a new crypto trader, it's best for you to divide your entries and exits into two or more orders around your intended entry and exit areas unless you have a strong conviction that the price you want to enter at will move further or fall below.

Let's say, for example, that you want to buy a token at $20, but your analysis indicates that it may dip as low as $16 before sentiment completely turns bullish. This is the same example from the position sizing section.

Consider breaking up your larger trades into smaller ones to lessen the likelihood of setting your entry too high (perhaps missing out on the best price or reducing possible profit) or too low (maybe missing out on the deal). As a new trader, always make sure that you abide by this rule.

I am inviting my fellow friends. @temitopef, @yakspeace and @preye2.