CRYPTO ACADEMY SEASON 3 WEEK 8 / PROFESSOR @yohan2on/

Fuente

1- Define the following Trading terminologies;

• Buy stop
• Sell stop
• Buy limit
• Sell limit
• Trailing stop loss
• Margin call
  (I will also expect an illustration for each of the first 4 terminologies listed above in addition to your explanation)

---

Buy stop: We are talking about buying or selling worse than the current price, in this case if our quoted price is $100 we will put a buy stop at $110, for example, but above the current price, i.e. we will buy worse.

Let's imagine that we have the movement of the previous chart and in the place of the red x we make a buy stop, that means that I want to buy, without the price being more expensive, thinking about it, we can have a trend line and if the price is at that height it means that something important happened and it will continue like that until probably the next Fibonacci sequence. If this happens when I say, the order is going to be executed. Then, as the price keeps going up and I see movement as I anticipate I can make a profit.

Sell stop: What we would do would be to sell, but at a worse price, if our asset is trading at $100, we will sell at $90, for example, at any price but lower than the trading price.

Let's imagine the movement of the previous chart, and at the indicated point we make the decision to sell at a lower price than what it is currently and it is for the same reason, because we anticipate that if it goes down at this price it will continue to fall much more strongly and it is at that moment that we make the decision to leave the market. When we reach this position, the sale is made and if it happens as estimated, that it continues to fall, that is when we will benefit. Here we can put our stage profit and stock loss.

Buy limit: It consists of making a limited buy at a price better than the current price, let's suppose that an asset is trading at $100, if I want to make a buy limit I will have to place a limited buy order at a price lower than $100: $99, $90, etc... therefore we will buy better than the current price.

Suppose we are in the position before the red x, and we consider that the current price is very high and we still want to buy, at that moment when the price goes down, it is expected to rise exponentially.

Sell limit: We would talk about the same thing, but in the opposite case; we would make a limited sale at a better price, if the asset is trading at $100, we can sell at $110 or $115, etc. Always above the quoted price. Both are always better than the current price. Buy limit a limited buy better than the current price and sell limit a limited sell at a price better than the current price.

Let's say we have the above chart, we do our analysis and we want to sell this more expensive, so we can place a pending order. If we get to that point, we strongly believe according to our analysis that the price is going to go down, so if that happens and that order is executed.

Trailigin stop loss: It is intended to protect the profits that accrue on a winning trade. It will only move in the direction of the trade. In this way, it drags the accumulated profits.
It is generally used when you want to stay in the operation as long as possible, ensuring possible profits before the price turns. With this mechanism we do not decide when to take profits, but the market itself determines how much is enough.

It is usually placed in three different ways: based on the price, stop losses move at a certain distance from the price as it advances in favor of our operation, but when the price goes against our action, it stops; then it is based on technical reasons, in this case if an analysis of the price movement is made and it is believed that we can know when or how it will vary, then it can be placed to ensure our profits above all.

Lastly, it is based on volatility, with this option we analyze and measure the volatility to have a clearer vision of where to place it.

Margin call: It is the requirement by the broker or dealer to the trader to add new funds to satisfy the maintenance margin necessary to cover his positions in the market, it is a situation that occurs in markets in which trading is done on margin, i.e., those in which leverage is used.

2. Demonstrate practically your understanding of risk management in trade

• Our account has a value of $1,000.
• Define the risk as 3% of your total account. 1.000 * 3% = 30€.
• We want to enter the trade shown in the following image. To have a risk of 3%, you must calculate: 30€ risk / 12% = 250€ total position.
• The possible profit is 29%. 250 of your position * 29% = $72.5.
• The risk:reward ratio is $72.5 / $30 = 2.42.

Tradingview calculates it automatically with the "long" tool, as you can see in the following image. Even so, it is important to do the calculations to see the real amounts without percentages.