Steemit Crypto Academy | Season 3 Week 8 - Risk Management in Trading

Good day guys I am @olawole111 a student of the steemit crypto academy, I will be writing an assignment based on Risk Management in Trading lectured by @yohan2on, enjoy as you read.

1- Define the following Trading terminologies:

• Buy stop
• Sell stop
• Buy limit
• Sell limit
• Trailing stop loss
• Margin call

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Trading is not just about knowing technical and fundamental analysis, there are basic rules called Terminology a trader must follow to be successful in trading, some of this terminology are those mentioned above in which we will be talking about.

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BUY STOP

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Buy stop is one of the important terminology a crypto trader should know.
Buy stop is a market placement order made above the current market price. This market placement order is used when the price has not gotten to where a trader wants to make a placement or order, it can also be called a reminder in such a way that when buystop is placed as soon as it get to the set price,the order placed will automatically start by it self and buy stops are mostly used by traders when the market is on a bullish trend and is also forming a bullish continuation or reversal pattern.

This screenshots was taken from meta trader 4(MT4).
From the screenshots above we can see how the buy stop was used together with the stop loss and the take profit, some of us make some mistakes on imputing the values the buystop price must be above the current market price,if its not done this way the market order will not place.

SELL STOP

Sell stop is just exactly the reverse of buy stop, sell stop Is also a market placement order where by the entry price is placed below the current market price,its mostly used in a bearish trending market and when a bearish continuation pattern is formed.
Sell stop is also used when a volatile news is about to drop.

Noticing the screenshots above we will see how the sell stop was placed and the stop loss price was below the current market order,following all this terminologies will make us have an efficient trading as a crypto trader and noticing the chart very well we will see that a head and shoulder pattern is forming, with this pattern we can bring out an entry opportunity from it.

BUY LIMIT

Buy limit is also a very good terminology to use and practice with as crypto trader.
Buy limit is a market placement order used when the price has passed the set price you want to place your entry,we used Buy limit mostly when we notice that the market is going to do a retest before continuing a trend.

The above screenshots is showing a clear use of how to use the buy limit on a chart, mostly use when either a bullish or bearish pattern is formed,here traders place an entry below or above the current price, so far the current price have passed where u wanted to place the order.

SELL LIMIT

Sell limit also a market placement order just like the buy limit, but it is the inverse of buy limit here traders place an entry above the current market price, sell limit is mostly used where a retest is bound to happen and before a retest is likely to happen we most have a chart pattern that will retest before breaking the neckline

The above screenshots has provided us some information on how to place a sell limit order, as a trader something has to be noted the current price, stop loss and take profit has to be placed correctly or else the sell limit market order will not place or it brings a error message.

TRAILING STOP LOSS

Trailing stop loss, trailing means a continuous action , so when we are talking about trailing stop loss, is an act to moving our stop loss closer to the market as the market is moving ,here a trader has to be active on his PC or mobile device because trailing stop loss needs monitoring especially when the market is very volatile .
Trailing stop loss is a way of locking profit why trading, but as we move the stop Loss we must have it at the back of our mind that the asset market price can fall back any time and as soon as it falls back it is possible the price hit our stop loss and kick us out of the market though we might be in profit , but a trader it is not advisable to use trailing stop loss all the time because it won't allow us to hit the maximum profit we should hit , we should set our take profit and stop loss and allow the market play around it. with this we will be more efficient as a trader.

MARGIN CALL

Margin call is like an alert given to a trader while trading ,it tells a trader that he or she is about to run out of funds on his or her live trading account,telling the trader to to deposit more funds or close the entry So as not to allow the the price fall below the margin call percentage, because this can lead to a situation where by trader may loss all his funds in his account.

2. Practically demonstrate your understanding of risk management in trading use a moving average trading strategy on any crypto trading charts to demonstrate your understanding of risk management

In trading planning is very important because any trader that fails to plan should be ready to plan to fail, any trader that does not have a written plan can't be successful as a trader, because trading entails planning of risks management in other not to loss the trading account.

RISK MANAGEMENT

Risk management in trading is a way traders share their their trading account into ratio in other not to loss all their money on a trade, in risk management setting out risk-reward ratio, stop loss and take profit** is very important because all this merged together will give us a better risk management.

STOP LOSS

Stop loss serve as a guild while trading , it is triggered when the trade is not going in our favour, stop is placed below the entry price when placing a buy order and it is placed above the entry price when entering a sell order and must always set our stop loss.

There are rules to placing stop loss in which traders has to follow for him or her to have a better risk-reward ratio, for example our stop must not be too far or to near to the entry Price.
And let assume we want to take a trade of risk -reward of 1:2 our stop Los will be at 10pips and our take profit will be a maximum 20pips.

TAKE PROFIT

Take profit is a place in trading where we take our profit out of the market as a trader our take profit must not be too high, it must follow our risk -reward ratio and as trader we must follow out plans strictly we not be greedy because greediness can lead to lost of fund.

RISK-REWARD RATIO

Risk reward ratio I personally tag it as (RRR)
As earlier said we need to plan very before taking any trade.
Risk reward ratio is done to know the amount a trader is willing to use on a trade ,we have different types of risk reward ratio examples are 1:1,1:2, and 1:3 but some might decide to go above this.
Assuming I have an account of $100 and am putting all in one trade my here is the $100 and am Willing to Make profit of $300 dollars,$300 dollar is my risk reward coefficient and $100 is my risk coefficient .
100/300 will give me my risk to reward ratio which is ratio 1:3.

Using moving average trading strategy on any crypto trading charts to demonstrate your understanding of risk management

I used a 10period moving average place a trade on ETHUSD on 5min chart and used risk reward ratio 1:1,using 0.01 lot size and Targeted 10pips