Trading Cryptocurrencies- Crypto Academy / S4W6- Homework Post for @reminiscence01 by @joelmaxwell

INTRODUCTION

Hello wonderful steemian, am very happy to take part in this week home work after a long time, the topic trading cryptocurrency is very interesting and I hope to answer the questions from the wonderful prof and I hope to perform well.

Question 1

Explain the following stating its advantages and disadvantages:
-Spot trading
-Margin trading
-Futures trading

spot trading

This is the type of trading that most people in my locality practice, all the do is to buy and sell coin(digital currency) for the main purpose of profit maximization by this the will buy the coin when the price is reduce or in dip then whenever there is a rise in the price the rush in to the market and sell it out and make profit.
In this type of trading, the trader will look out for a coin he or she may feel or predict with the help of certain technical tools such as indicators that it may rise and will invest in it, if the prediction results is successful and the coin rises the trader will make massive profit.
The trader here can decide to keep it for a long period of time so far it has not reach his target but once it reaches the trader target he will sell it out.
This type of trading is being enjoyed by trader because there is no specific amount to invest in, you make investment with any amount you have no specific amount. They price that is being involved in this type of trading in which the buyer and the seller transact with is know as the spot price.

Advantages

• This type of trading is free for everyone, so far you have what to use in making purchase and you are ready to take the risks.

• They trader makes more profits, if his coin rising prediction works out and the coin rise.

• No liquidation involved here.

• You have full control of the assets and it is also one of the easiest type of trading for traders.

Disadvantages

• Traders can not go beyond it reach and capital, you can only buy with your personal capital.

• The unstability of market means you have to wait for the market to be favourable before you make profit.

• The trader can not rush and sell here for example if the market is in bullish trend the trader will wait for bullish trend for profit making even if he should have emergency, he or she will always wait so as to make profit.
  

  
  
  

Margin trading

This type of trading,unlike these spot trading, has to do it with the ability of the trader to have insights about the rise of a particular coin, But has no Capital, so he or she will proceed to Borrowing funds, from a fellow trader who will now be acting as a third party to do the trading and buy the coin of his choice.These will make him make a lot of profits.
He will make the profits in that, you may not have or you have less funds but once he can successfully borrow he will boost his profit chance because the greater the capital that is invested the higher the profit that will be yield.
Here the borrower of the cryptocurrency can be an exchange like binance or broker.

Advantages

• The trader will make a lot of profit because he will be able to borrow enough Capital and thereby will make it a lot of Profits because the more Capital you invest in a particular business, the more profit you will also make .

• With enough capital the trader will be able to invest in alot of coins because it is good to invest in 2 or more coin than investing in only one coin.

Disadvantages

• Here , there is alot of risk involved in that it is a borrowed capital and if the trader should rush into the market without studying the market, he will blow up the borrowed funds and will land himself into problem.

• The more the borrowed funds, the more the risks because if it should finish it is bad.

• This type of trading is not for beginners but for people that have alot of trading experience and can study the market very well when it comes to trading.
  

  
  
  

Future trading

This type of trading is the type that is mainly practiced by those that are expert or professionals in trading.
These are the people that have long experience and practice when it comes to trading, it is a type trading that only people that can predict the asset price next movement and also capitalize on it appropriately, that can make good use of it in this type of trading leverages are also given to the traders and Traders here buy the future contract with current assets price and values.

Advantages

• Should the trader be appropriate in his prediction, he will make massive profit.

• With the agreement between the buyer and sellers, no matter how the price of assets fluctuate the agreement stands.

• Here, the trader make profit not minding which direction the trend move be it in bullish or bearish

Disadvantages

• If the trading is not process successfully, the trader will incur alot of loss and is risky.

• Large risk percentage, if the trader predictions fails

• For people with high experience, not newcomers.
  

  
  
  

Question 2

a) Explain the different types of orders in trading.

Market order

This is an order that is been initiated by the market takers. These are orders that the market taker comes into the market in order to buy and sell with the current market price. Its primary goals is marketing immediately and is preferable for large stock buying mostly used by online brokers and traders cannot control the price of assets.

Pending order

In this order, the trader will always have the price limit he want the assets to reach before executing the order and by these will place the other and we'll be waiting for the price to the reach. it set price limit before he will execute the order.

Limit order

This is the type of order, that deals with bid price, which is the highest price a trader can pay for assets . It also deals with asks price, which is the least price the seller can sell an asset it, it is an order that is gotten for future purposes. In Limit order, it is the market price is initiated by market makers and Traders and there are also in control of the market price. If the trader is not comfortable with the price of assets he or she will have to wait till When it is favourable before executing of the order.

Stop limit order

This is the type of order that enables the trader to be able to make buying and selling of assets after they stop limit he Set on the assets price is achieved or beyond what he set.

One Cancels the Other order

This is the type of pending order at helps the trader to be able to open 2 orders at the same point in time but When one is executed, the other order will be cancelled.
And it's one of the best order because it helps in minimizing the risks of losing funds and also helps in maximizing profits.

Exit order

In this type of order, we have 2 types which are the stop loss order and the take profit order

Stop loss order

As the name implies, this is the type of exist order that helps the trader to minimize the loss.
By this, the trader will always set the stop loss order so as to be on the safe side of trading because once the trading goes in the trader opposite direction he or she will automatically exist the market so as to minimize loss.

Take profit order

As the name implies, it is also a type of exist order but in this one the trader will always exist the market when the profit he plan or set is being achieved and by this profit will be maximize.

b)How can a trader manage risk using an OCO order

The OCO which means one cancel the other order is the type of order in which 2 orders can be place simultaneously but once one is executed the other order will be cancelled and by this will help the trader to be able to minimize loss when it comes to stop loss and maximize profit when it comes to take profit.
For example using the screenshot above
Here, I set my order to OCO at 44,000 to take profit if the price is achievable by selling and also a stop limit at 42,000 to minimize losses
Once the take profit is executed the stop loss order will be cancelled.

Question 3

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

I will be showing steps on how to open a limit order of 15usdt with the following steps

Step 1
The first thing to do is for me to download a binance wallet and proceed with account open after that I make verification before I click on market to start.

Step 2
After I performed the step one, There will be a space to search, there I will search for trx/usdt in which I will be using for this question.

Step 3
TRX/USDT will open

Step 4
I placed the limit order at 0.08728 which was less than the market price of 0.09840 with $15.63184.

Step 5
This order is going to delay before it is being filled because the price here is leas than the current market price .

Question 4

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.

why you choose the crypto asset

I prefer a is in BTC because it is one of the most popular coin and is being rank number one, when it comes to digital currency. It is one kind that if you were able to buy it far back, you are now a millionaire no matter how the price fluctuate.(from bullish to bearish). It is one coin that gives the owner enough profit. Even if it is in a bearish States, when I was using a demo accounts to do the homework task the BTC according to the screenshot above was decreasing, which means it is in a bearish trend, and from the type of indicator am using, which is a relative strength index(RSI), it hasn't gotten below the lower limit, which is 30. And this means that there is a possibility that you will be in Reverse and a bullish candle be formed

Why you chose the indicator and how it suits your trading style.

I choose the RSI indicator because it is one indicator that is easy to understand because with it as a trader I can be able to identify the overbought in the market when above 70 and the oversold when below 30. Which will play a great role to be as a trader to the how price of asset are moving if it is in a bearish trend or bullish trend. Which is helpful.

Indicate the exit orders. (Screenshots requierd.)

From the chart above the take profit is set at 61,172.351
The stop lost is 61,689.792
While I enter when price was 61,540.099.

CONCLUSION

The class was really interesting has I was able to learn about the different types of order and trading we have and thier merit and demerit.
It is very important to note that once we want to practice any type of trading such as the margin and future we should be careful, we should also make good use of the exist order types which is the take profit and the stop loss order.
I want to thank prof @reminiscence01 for the wonderful lecture.