Crypto Academy / Season 3 / Week 1- Homework Post for Professor @lenonmc21- Topic: Cryptocurrency Trading . Post by @kayduke
Hello mates. Thanks to CryptoAcademy for the continuous knowledge they are helping me with. It’s been a wonderful learning experience here and this lecture in particular is one I so needed at this point I am getting myself ready to explore the crypto market and start trading. Thanks to @lenonmc21 for this insightful and educating lecture. This is my submission on the homework from your last class.
Some interesting fact I picked from the class, Cryptotrading may seem like just any other trading activity but trading crypto currency needs careful analysis and understanding of the market because of the volatility of price risk traders are exposed to.
1. Define in your own words what trading is, what its function is and how it relates to the cryptocurrency market.
Source license
Trading in the simplest words, is the buying and selling of an item for profits. In a broader perspective, trading is the business of buying and selling commodities, products or services with the sole aim of making profits from the difference in the selling price and buying price but trading can bring loss too. Thus, the price a commodity was bought is greater than the selling price, returns made in such activity is negative which means it is a loss. A varying range of assets are traded everyday. Examples are Gold, Currencies (dollar, euros etc.) and the new one Cryptocurrencies (Steem, Bitcoin, Litecoin etc.)
Cryptotrading can then be said to be the buying the selling of digital assets to make profits. To trade cryptos, there are no physical structures like a market center for the act but it all happens online. There are a number of cryptomarkets, best called Exchanges which facilitate the buying and selling of cryptocurrencies. Examples are: Binance, Huobi Global, FTX etc. Trading with Cryptocurencies, there is high volatility in their prices. Volatility in price means the price of cryptocurrencies easily change and they do at a faster rate as compared to other tradable assets like the Gold or Dollars. The volatility in the price of cryptocurrencies creates room to make quick and huge profits, same way you can make losses too if care is not taken.
2. Define and explain which are the tools used for trading. (Technical Analysis and Fundamental Analysis)
Traders of cryptocurrency are exposed to the volatility of price risk which can lead to huge profits or a huge loss at the end of trade. There are tools available to closely predict cryptocurrency price so as to mitigate the risk and avoid loss. These tools are: Technical Analysis and Fundamental Analysis.
Technical Analysis involves the use of real market data to make price predictions. Unlike Fundamental analysis, technical analysis is mostly quantitative and metrics based. It relies on charting patterns and statistical indicators. The most commonly used charts for technical analysis are candlestick, bar charts and line charts. For new traders, technical analysis may seem difficult but it really the study of supply and demand and anticipating trends in the charts for investment decisions. Technical analysts use the support and resistance levels to identify price points on a chart where the probabilities favor a pause or reversal of a continuous trend.
Example
The chart below tries to explain the technical analysis using the Resistance and Support indicators.
At Resistance, we see the chart cease to move upward and it is followed by a downward movement. Resistance can be seen as a ceiling for the price of the coin. Technical analyst will begin to sell their cryptocurrencies to make profits because they anticipate a drop in price sooner than later.
Support on the other hand is when the chart doesn't move further downward and a steady upward move in price is expected. Technical analyst with this knowledge begin to buy the coin again.
Fundamental Analysis on the other hand involves a qualitative approach in predicting the price of a cryptocurrency or investment decision making. Analyst find available information about the cryptocurrency and make analysis. Analysts may look at the trade volume of the crypto, its use cases, the number of holders or even the founders. Fundamental analyst only consider current market conditions and economics in making their predictions unlike Technical analysts who look at past trends and history.
Example
Elon Musk’s tweet on Dogecoin recently. He made a Tweet in the early hours of Thursday July 1, 2021 and the tweet read "Release the Doge!". Fundamental analysts who are busily digging information on cryptocurrencies after seeing this will quickly stock up doge coins because of the influence Elon Musk has on the cryptomarket lately. Remember what he did to Bitcoin sometime ago? Investors who saw this information and bought the coin will make profits because the price of Doge coin has shot up.
3. Name at least 3 cryptocurrency exchanges with the highest trading volume where we can buy our first cryptocurrencies and explain in your words the ways to buy cryptocurrencies on at least one of these platforms.
There are a number of Cryptocurrency exchanges available for trading. I'll highlight a number of such exchanges and discuss how to buy cryptocurrencies on one of such platorms.
- Kraken
- Huobi Global
- Kucoin
- Coinbase Exchange
- Bithumb
How to buy cyrptocurrencies on Kucoin.
You can get to Kucoin following this link
You sign up if you don't have an account already.
After signing up, this is how the home page looks like.
Tap on Buy Crypto
There are 3 methods you can employ to buy cryptocurrencies on Kucoin.
- The first is using a credit card or debit card. The available means of payment are, VisaCard, Apple Pay, Google Pay and Sepa
There are also a number of Cryptocurrencies you can buy here. Examples are: Dogecoin, Tronx, Chain link among others.
To buy, you enter the amount of local currency unit you want to spend on buying the Crypto with a minimum of $30 and maximum $20,000, select the appropriate means of payment and payment channel (Banxa, Mercuryo, Simplex etc.) and confirm purchase.
- You can also buy Cryptocurrencies using the Fast trade approach. Buying is simpler but you can only buy Bitcoin, Ethereum and USDT using this method.
screenshot from kucoin
You select the crypto you want to buy, how much you want to spend then you tap on buy.
The third method is P2P, peer to peer purchase where users negotiate among themselves and buy and sell cryptocurrencies. The cryptos that can be bought using this method are USDT, BTC, ETH, KCS, USDC. Payment is made through a bank transfer in the local currency of the users.
Conclusion
Trading has been integrated into the crypto world. A lot of people are making profits and even a lot more are running into losses. To be a successful trader in cryptocurrencies, you need to understand the entire crypto market and also employ the Technical and Fundamental Analysis tools to inform your buying and selling decisions. Explore the many cryptocurrencies and exchanges available and invest wisely.
Thanks @lenonmc21 for this wonderful and insightful lecture. I can't wait for the next.