Steemit Crypto Academy | Risk Management in Trading | Homework task

(Question 1) Define the following Trading terminologies; (Buy stop, Sell stop,Buy limit, Sell limit, Trailing stop loss, Margin call)

Buy Stop Order
The Buy Stop order is a very effective order that is utilized in an uptrend to profit from the ma volatility. The buy Stop order is placed just above the current market price or resistance in the market, and it will be executed once prices reach that level. It is placed above a resistance because when a resistance is overrun, there is usually a bullish trend that will last for a long time, and there is very little chance of the price returning below the broken resistance. As a result, this is a very favorable trading method for avoiding losses in Crypto markets due to short-term price volatility.

We can see an example of a Buy Stop order in the chart above. We can see that the order was placed at a higher price than what was available at the time. Once the uptrend has broken over the resistance, it will almost certainly continue to rise and profit from the trend.

Stop Sell Order
A sell stop order is a stop order while selling. It differs from a limit order in that it includes a stop price, which causes a market order to be executed.
A stop price is provided in sell stop orders. A trader would pick a price to sell at in the case of a sell stop order. A market order to sell is activated if the stock's market price goes to the stop price. Stop orders, unlike limit orders, may have some slippage since there is often a little difference between the stop price and the next market price execution
On most trading platforms, a stop-loss order could also be placed as long as the stop price is less than the present market value for a sell and better than the present market price for a purchase. As a result, stop orders are frequently used in advanced margin trading and hedging strategies.
When trading on leverage, you can utilize a sell stop to start a short sale. A sell stop is generally employed by a trader who owns a stock to limit losses or manage gains.

Buy Limit Order
A buy limit order allows traders to restrict how much they pay for an asset by allowing them to acquire it at or below a specific price. When an investor uses a limit order to make a purchase, he or she ensures that they will spend that price or less.
The price is guaranteed, but the order fulfillment is not. After all, a purchase limit order will not be filled unless the asking price is equal to or less than the maximum price. The order will not be honored if the asset does not reach the stipulated price, and the investor will lose out on the trading opportunity. To put it another way, an investor who uses a buy limit order is assured to pay the buy limit order price or better, but the order is not guaranteed to be filled.
A purchase limit order is a fair order to employ if an investor expects the price of an asset to drop. A market order to purchase stop limit order is the better bet if the investor doesn't mind paying the present price, or even more, if the asset starts to move up.

Sell Limit Order
The trend is bearish for sale limit, just as it is for buy limit. When the trend is bearish, a sell limit order is placed above the current market price. This order is placed above the current market price because the trader believes the trend will retest the resistance point.
The trend must be bearish in order to set a sell limit order, and the trend must be establishing swing low points before retesting resistance points. To use the sell limit in this type of trend, we set the sell limit order at the resistance point after the price has broken resistance and generated a swing point, so that when the price retests the resistance point, the sell limit order will be verified.

Trailing Stop
A trailing stop is a type of stop order that can be issued at a percentage or dollar amount distant from the current market price of a securities. A trailing stop loss is set below the current market price for a long position. The trailing stop for a short trade is set above the current market price.
A trailing stop is a type of stop-loss order that allows a transaction to stay open and profit as long as the price is going in the investor's favor. If the price changes direction by a defined percentage or dollar amount, the order terminates the trade.

Margin Call
This is for traders who trade on margin. They must make a deposit in their account after they receive a margin call. Due to a loss deal, a margin trader's funds fall below the required level expected by his broker.
It's similar to an indicator telling a margin trader that he needs to top up his account. Margin trading, as we all know, entails borrowing money in order to trade. There is a minimum amount that must be accessible in the account, so when a trader receives a margin call notice, they must deposit money into that account.

(Question 2) Practically demonstrate your understanding of Risk management in Trading.

Risk management refers to a set of processes employed by traders to limit losses and keep accounts from exploding. This means that we must be aware of each trade we place using the risk management approaches listed below.

Organizing Trades
Planning trades entails determining whether the broker is suitable for regular trading, as well as understanding why you are entering that particular trade with correct analysis.

Taking into account the 1% rule
Traders are willing to lose 1% of their account in a single trade because of this. This suggests that the trader is willing to lose $2 on a $200 account.

Setting Stop-Loss and Take-Profit
We can determine stop loss levels from liquidity levels and use them in calculating take profit levels in the risk:reward ratio utilizing indicators such as moving averages, Fibonacci, and methods such as the break retest break and the market structure break. Once any of the levels are reached, this will aid in the closing of trades.

Use a Moving averages trading strategy on any of the crypto trading charts to demonstrate your understanding of Risk management. (screenshots needed)

The 50 EMA line has crossed the 200 EMA line, as shown in the chart above. The "Golden Cross" is the circumstance depicted on this chart. In this scenario, the 50 EMA line works as a strong support, indicating a downtrend to uptrend trend reversal. I'm going to put a Buy Order at $42,443.38 above the Golden Cross or Support point. Stop Loss was set below $39,852.98 and Take Profit was set above $46,732.13.

Stop Loss = $39,852.98 Buy Price = $42,443.38
$46,732.13 is the profit target.

Conclusion
Risk management is a crucial element that investors and traders must evaluate, manage, and execute effectively in order to maximize profits and minimize losses while investing in and trading cryptocurrencies. There are a variety of approaches and techniques that may be used to come up with a suitable asset management formula and arrangement. Profitable buy and sell orders may be made by employing indicators and trading tools to forecast prices during an upswing or decline. By focusing on risk management and thorough analysis in trading, it is believed that investment and capital would rise in the future.

Thank you @yohan2on