Introduction
In Crypto, Bitcoin and Ethereum are the giant crypto assets with highest volume of trade and hence high Liquidity. Apart from these two crypto assets in most cases the rest of Altcoins mostly suffers trials of low Liquidity.
My understanding of the Liquidity Level with Clear Charts from Binance
Liquidity therefore means being able to convert one crypto coin to another using one of the best technical analysis easily without any challenges or losses. At the trading point, both the buyers and sellers are expecting from flow movement of market so that everyone part would achieve his or her target. But due to high volatility of Crypto assets fluctuations it at times breakout in the market analysis hence great losses are incurred.
The Liquidity levels of Crypto maybe the point entries to the end point of trade marked for the "ask"and "bid" at the point of trading where consensus is reached. As trading goes on, the prices may fallout or increased. When there is a down turn of market prices of crypto the ask or the seller may decide to stop trade as well as the bid may also try to stop trading.
In the following Liquidity Levels, I used the most highest Liquidity assets, that's Bitcoin and Ethereum against one of the Stable crypto Assets, that is USDT pairing. When you look at the chart, there is different Liquidity levels where by the seller and the buyer may be advantageous. At the first Liquidity Level of BTC/USDT pair, the seller was caught in high Liquidity where the buyer might be experiencing fakeout which will attract higher market of crypto. The same thing happened in the second Liquidity Level when you study the chart critically. On the other hand, the seller was challenge at the later part of the trade mark where there was a downturn of the market price.
At the ETH/USDT pairing, when the seller and buyer entered in trade agreement, there was higher Liquidity level, but later the seller was caught in fakeout twice in the trading system where he might stop bid.
comparing Liquidity levels of BTC/USDT pair screenshot from Binance
comparing Liquidity levels of BTC/USDT pair screenshot from Binance
The reasons why traders got trapped in Fakeouts with 2 charts showing clear fakeout.
Fakeout in Liquid crypto is the situation where traders or Investors after trade entry expect their crypto assets to take some good Position upon studying the technical analysis but prices turndown and this may cause a great loss. Apart from the Stable coins which have the chance of being high Liquidity and for that matter stabilizing price fluctuations, most of the Altcoins may go fakeout or breakout if care isn't taken. The whole crypto trading is prone to volatility in prices so conscious effort should made to prevent great losses. Some of the reason why Trader got trapped in Fakeout may due to so many factors as explained below:
Over expectations of profits
Most Crypto Makers, especially the novice in Crypto go into trading with the mindset of making huge profits without taking their time to study the market trends and how the system works. They may over borrow more than one crypto assets which may be difficult to monitor and pay with the time limit for those crypto. It's even more advisable to break-even the amount taken from lenders than to incur great losses. Since crypto market is volatile is very difficult to predict the predict whether you can gain or not. In this case when the borrower is not able to stop-loss trade and it happens to be a downturn of crypto market prices, there would be a great losses on the part of the borrower. We have to also not that there is charges on every crypto assets one borrow in addition to the collateral asset.
Little Knowledge on the Crypto Assets one trade
Most of the Novice in crypto may start trading in one of the crypto assets with little or no idea about it. In a situation where where by one has to place order in the case of Limit margin and monitor the system and check up when to stop loss trading, the beginner might not know all these market strategies and there his trade will breakout in the process. For every crypto has its good pairing and for that matter market strategies to be able to make profit. They may need some skills in handling it at each point in time.
Failure to limit the amount of risk
Sometimes the buyer or seller will carelessly miss out mitigating the risk ahead upon studying the teaching analysis chart. Instead of stopping loss order when the his asset reaches say 0.5%, he would be anticipating higher percentage of profit say 10%. This may be tricky for many crypto traders and the trading may fake breakout to insignificant. At each point in time when order is placed by the buyer or seller, the market system should be checked; when to stop loss order and when to come in to trade again. This is to minimal the risk of losing great should it comes.
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How One can trade the Liquidity Levels the right way/The trade criteria for Liquidity Levels Trading (Clear Charts Needed)
1.The use of Technical Indicator Method
One of the the best trading criteria option for traders to aim high Liquidity without incurring much losses is the use of multiple indicator method to monitor his trading in case there would be uncertainty in the market prices. This is not 100% reliable as crypto is highly volatile and unpredictable. However, to mitigate high risk level to minimal it is very wise to adopt this method to be on the safer side of risk bearing.
How does the use of multiple indicator analysis works? This is using a lot of reliable crypto chart analysis which has to do with comparing crypto of these different chart analysis giving you you a crue of future market changes based on the previous experiences of markets. At least the best and competent crypto technical analysis indicator would show similar market indication or signal of prices changes so that you would know the entry and exit point.
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In Binance Exchange platform, we have the most popular ones we use as provided here: Relative Strength Index(RSI), Moving Average (MA), Moving Average Convergence Divergence (MACD), StochRSI, and Bollinger Bands(BB). The chart below demonstrates the use of Moving Average (MA) technical indicator to monitor prices of Eth/USDT pair to know when to sell and when to buy.
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2.Another criteria is the use of limit order/ask or bid spread/stop loss order strategies.
One of the technicalities for a crypto traders to successfully trade the Liquidity levels right is by adopting the lifestyle of these technicalities; knowing when to make limit order, when to bid spread his crypto to favour him attract some profit and when to stop loss order immediately as possible when signal triggers of downturn of prices. These are some of the key factors one can always be at the right point to trade.
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Draw Liquidity levels trade setups on 4 Crypto Assets.
Liquidity Levels in crypto are very vital as it helps traders to choose many options, learn different trading methods and predict future price outcome. In this case, buyers and sellers should plan very well. Though there are many crypto assets, but the most best liquidation I would like to dwell much lesson on Bitcoin, Ethereum, Ripple and Litecoin. They are highly liquidated in terms of the trading volumes.
To draw setups/plans on these 4 strong liquidated crypto one must carefully choose the trading pairing that matches each of these crypto asset at a given time. Through Bitcoin which turns to be a giant of crypto moves while other Altcoins follow suit and falls as other crypto falls, but this isn't always the case.
1.Find a suitable stable coin like USDT which doesn't frequently volatilized compared to other coins and to always trade with
2.Regular check the trading volumes of your crypto assets: BTC, ETH, LCT and XRP. If they are of high volume, this indicates that more people are trading with it. The higher the volume the stronger Liquidity the asset becomes
3.Order limit/ask bid or make entry and exit point by checking all multiple crypto indicators.
screenshot from Binance - Eth/USDT pair
screenshot from Binance - BTC/USDT pair
screenshot from Binance - XRP/USDT pair
screenshot from Binance - LCT/USDT pair
Conclusion
In summary, entering into Liquidity levels of Crypto assets is very important for Investors/Traders since is more profit gains if well managed and applying all the technicalities such as spotting trades and calculating the entry and exit point, stopping loss order by using multiple indicators. However, one maybe at the disadvantage point especially the Novice in crypto trading. One would be susceptible to great market loss. Never trade on crypto assets you don't have much insight or you do not know their rules. Do not over leverage on more assets so that if prices fail you wouldn't be alarmed. If you are able to apply all these concepts you would escape the hight risks of volatility of Crypto.
For the attention of @cryptokraze