Steemit Crypto Academy || Season 3 Week 8 || Homework Post for Professor {@yohan2on} by @ladyofpolicy
Good day everyone in steemit cryptoacademy,it's such an interesting topic for this week and I really enjoyed the topic. I specifically wish to appreciate Professor @yohan2on for this wonderful topic which is well detailed and quite explanatory. After studying the week's lecture,I will like to answer the homework questions which I find very interesting.
Define the following terminologies
• BUY STOP
This refer to to an order which enlightens or tells a trader to buy a security at a certain market value (price). It can either be a limit or an order depending on the exact price at that period in time.
A buy stop order originally aims at preventing or reducing tendencies against trading losses.
With respect to the XRP chart above, the blue line represents the normal market price and a buy stop order was placed above.
• SELL STOP
A sell stop is an order which occurs when the specified price (sell stop price) has been attained or surpassed. It can decide either the buying or selling of a security once the market price is being attained or surpassed.
This type of order limits the rate or frequency at which assets are being sold once the stock market price level is attained.
With respect to the XRP chart above, A sell stop order was placed below the price level.
• BUY LIMIT
This is an order which instructs a trader to purchase assets or securities at a specific price or below that specific price so as to allow a trader be in full charge of what to pay for the particular asset.
With respect to the XRP chart above, the buy limit order is placed in a Downtrend. When the price reaches there, it starts to buy and the price rise up.
• SELL LIMIT
This is an order which instructs a trader about the least price at which he can sell his assets. It is a limit order and allows a trader to set the limit at which he can sell at market price.
With respect to the XRP chart above, the sell limit order is placed above the market price and the trader expects it to keep selling above resistant level.
• TRAILING STOP LOSS
This type of trading order allows a trader to decide or set the highest value of loss in can bear or receiveduring daily trades. This helps to reduce the amount of losses incurred in trading processes. This is usually used most times when the value of trade didn't go as planned. The main reason for using this type of order is to reduce or curb the rate at which losses are being incurred.
• MARGIN CALL
During trading activities, a trader requires a certain amount of capital to keep up to trade. Once this capital falls below the minimum level, a message is being sent across to the trader in order to notify the trader. This process is call MARGIN CALL. Margin call can also be used to observe ones account since it has to do with the amount of capital one owns. During a loss in trade of assets, the money in one's account (capital) falla below level and therefore, one cannot be able to keep up with trading activities.
PRACTICALLY DEMONSTRATION OF RISK MANAGEMENT IN TRADING
Before thinking of putting up or establishing a business, certain factors need to be considered. Things like losses that are prone to occur are a thing that's meant to be taken note of. Before venturing into a business, one must set out strategies to avoid losses because losses are almost inevitable and will have tendencies to occur. Risk management is strategies laid out which help to reduces or avoid losses that are being incurred in everyday trading. In daily trades, a trader should be able to set a specific amount he/she is willing to lose in each trade, this helps one to avoid liquidation. These decisions are made possible by using position sizing and stop losses.
Being able to match up to one's trading terms and conditions is another important factor that is necessary for daily trades. Here, the uptrend, downtrend, stop loss, break and retest options come into play.
One can decide to put his/her stop low in the previous high or low depending on one's choice. This helps to determine the possibility of making a profit.
UPTREND
We would wait for a break and resistance followed by a retest before we enter a buy as seen below in the xrp chart below and we set stop loss below broken resistance
DOWNTREND
We wait for a break of support and then a good retest then enter while setting stop loss above
DEMONSTRATION OF RISK MANAGEMENT USING MOVING AVERAGES TRADING STRATEGY ON ANY CRYPTO TRADING CHARTS
Proper stop losses and trading entries can be made possible with the use of indicators such as moving averages trading strategy. A bullish market occurs when the moving average is below the market price. A Downtrend comes into play when the market price is below the moving average.
• Uptrend
The moving average is below the price and it is also serving as a support zone, a break in price isn't expected to happen through the moving average because it is already serving as a support level.
At this stage, a stop loss of 5-10pips is being set below the moving average.
From the XRP chart located above, there is a retrace of price which was moving average and serving as a support level.
• Downtrend
The price here is lower than the average margin. That is, the average margin is higher than the price and it is serving as a resistance level. Stop-loss can be set at this level.
In order to use moving average to set a stop loss, the stop loss is put at 5-10pips above the moving average to cause a break in the moving average.
From the XRP chart above, price retraced and started moving and served as a resistance level.
CONCLUSION
Trading orders are very important in trades. Setting these orders very right enables one to avoid daily losses during trade and helps one maintain a stable trading activity. Thanks for the lecture you gave us @yohan2on
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Thanks for participating in the Steemit Crypto Academy
Feedback
Your definitions of the Trading Terminologies were not well convincing. You need to do more research on the same so that you attain a clear understanding of those terminologies.