Steemit Crypto Academy | Season 3 Week 8 - Risk Management in Trading | Homework Post | by @mustafaasif

Question no:01

• Define the following Trading terminologies

• Buy stop

The market will place a long/buy order when the price is going higher. To post a Buy stop order, you place a long/buy order above the current market price. As soon as the price hits a certain level, the order will be executed.
To earn a profit, we place these orders when the market is rising and we believe that our financial product that has been impacted by it will also increase.
If you're looking to buy something, you should only use this.
To decide when we should enter the market based on our analysis, this type of order is programmed and delivered to the Broker or the Exchange.

Source

---

---

• Sell stop

An example of this would be the buy stop order. Such an order should be placed in a negative trending market. At the time of ordering, we were able to get a cheaper price than the current market price. When an asset's price is decreasing, this order is placed a bit lower than the current market price. Our order is carried along by the market when the price hits our order level.
As an example, if the price of an asset drops, we put a order below it. We may conclude that the sell stop is set at a level below current market prices, and it is intended to profit from negative moves in an asset while also guarding against infinite losses of a specific open position.

Source

---

---

• Buy limit

For example, if the market is high, you can put a purchase limit order under the spot price. For retesting, this is the most usual sequence to use. If a trader believes the trend is likely to retest resistance, an order was passed at that level.
This is when we'll enter the market, and if our prediction or technical analysis is accurate, it will continue to increase until we reach our already anticipated Profits. - Although doesn't ensure a price increase, they must keep it in mind when using our order.

Source

---

---

• Sell limit

The trade ceiling, like the buy limit, has a bleak outlook. An order to sell limit is put above the current market price when the trend is negative and the current market price is below it Because the trader believes the trend will repeat the resistance level, the order is placed above the current market price. To create a sell limit order, the trend must be negative, and the trend must be creating swing low points before having tested great reason. Sell limit orders are placed at resistance after the value is smashed through resistance and generated a swing point so that they will be confirmed if the price returns to the support level.

Source

---

---

Source

---

---

• Trailing stop loss

Trading using a trailing stop-loss order lets you profit from a trade's winnings as long as it goes your way. A trailing stop order is activated at the same moment and is immediately closed if the transaction reverses by a given percentage of decimals or pulses.
. It is, nevertheless, more lively. A trader does not require to act after placing a trailing stop order. Using the following stop-loss has a plethora of benefits.
A trailing stop order, on the other hand, is not often used by traders. On the whole, many traders and even trading signal suppliers choose to use this technique.

---

---

• Margin call

Margin calls require that they put funds into their account. An investor's margin account gets depleted as a result of a losing transaction.
An investor may also close core competitiveness based on gains or damages; this does not indicate a need for further financing, but it does indicate that they are losing money,This could have a negative impact on their cash and working investment

Source

---

---

Question no:02

• Practically demonstrate your understanding of Risk management in Trading.

• Risk management

Many people don't realize that crypto trading isn't just about making money, but also about taking big hazards, because the sector is growing quickly. Risk management is essential if you don't want to lose all of your money the next day. It is possible to generate a lot of money while minimizing your risk.
The risk of making a loss when trading Bitcoin will always be there. The task is to understand and reduce associated risks from a failed deal as the outcome of risk management.

• Importance of Risk management

You took the choice to trade in digital currencies and put your whole deposit on Ripple, a solid and dependable project. However, as the saying goes, unusual events happen if people don't think about it - and BTC proved this to be true. As a consequence, it plummeted by as much as 55%. It's worth noting that these aren't simply any old quantities of cash. Over the last year, the chart of Ripple's price has fluctuated wildly. A single transaction might result in you losing half of your money. A risk assessment is essential for traders who are not trading spontaneously.

• Trade Plans

Traders who aren't successful often begin a deal without understanding whether or not they'll make a profit. In the same way that lucky or unlucky players, emotions begin to take control and decide their transactions.While many individuals cling on to their losses in the hopes of recouping their losses, traders may be enticed to keep trading in the hopes of gaining even more money.

• Stop-Loss and Take-Profit

The price at which a trader will sell a coin and incur a loss is known as the stop-loss point. There are times when a deal does not go as anticipated. To avoid the "it'll return" approach and prevent losses from spiraling out of hand, the points were introduced. As an example, when a coin goes below a crucial support level, traders are prone to selling as fast as possible.
As an alternative, a sign mark has been the level where an investor intends to sell a coin to make a profit. This occurs when the increased gain is restrained by the risks. If a coin reaches a crucial ascending triangle after a strong run higher, investors may want to sell before a period of sustained.

• Risk/Reward Ratio

When it comes to take-profit levels, they are the rate where an investor will be able to sell a coin to make a profit. In this situation, the increased capacity is capped owing to the hazards present in the environment. Traders may decide to sell a coin when it reaches a big resistance level following a strong upward run.

R = (T.P($5000) – E.P($1500)) / (E.P($1500) – S.L($4000))

• E.P = $1500
• S.L = $4000
• T.P = $5000
  Ratio
  R = (5,000 – 1,500) / (4,000 – 1,500) = 1.4
  1.4 is an excellent ratio. We urge traders to avoid trading with a leverage level of less than 1:1.

In the following you can see the M.A was adde and in the other chart there is E.M.A Indicator. I have used this two moving Average Indicator for this question.

Source Tradingview

Source Tradingview

---

---

Conclution

To obtain better outcomes, we need to use financial products or actual assets on the stock market.
These elements, in my opinion, must be closely monitored by the buyer or dealer while investing in the financial markets since they will determine the direction of travel. They can assist a buyer or dealer decide when to purchase or whom to trade to maximize the elements that create the most revenue. All of these elements are essential to market tools, which is why I feel it's crucial to grasp them.

---

---

Thank you @yohan2on and @yousafharoonkhan for such a wonderful task.

#yohan2on-s3week8 #trading #risk-management #uganda #education #steemexclusive