Homework Question

• Explain the following stating its advantages and disadvantages:
• Spot trading
• Margin trading
• Futures trading
• a) Explain the different types of orders in trading.
• b) How can a trader manage risk using an OCO order? (technical example needed).
• a) Open a limit order on any crypto asset with a minimum of 5USDT and explain the steps followed. (Screenshots needed from any cryptocurrency exchange).
• Using a demo account of any trading platform, carry out a technical analysis using any indicator and open a buy/sell position on any crypto asset. The following are expected.
• i)Why you chose the crypto asset
• ii)Why you chose the indicator and how it suits your trading style.
• iii)Indicate the exit orders. (Screenshots required)

Introuction

Good Day Steemians , I will be responding to assignment given by professor @reminiscence01 , Thank you for this interesting topic ''trading cryptocurrencies'' and also as a newbies their is need to understand cryptocurrency trading concept.

Cryptocurrency trading is simply the act of buying and selling cryptocurrencies using an exchange account.

• Question 1
• Explain the following stating its advantages and disadvantages:
• Spot trading
• Margin trading
• Futures trading

Spot Trading

Source

Spot trading can be define as the act of buying or selling crypto assets at given period of time. In spot trading, you can purchase your crypto and it will be delivered to your wallet immediately.

A spot trade can also be called spot transaction. in Spot transaction crypto are delivered immediately into your wallet account within seconds provided there is no payment issue.

Spot trading is used in crypto trading, forex trading, stock exchange etc.

In summary, spot trading is a transaction that took place between two persons that agree to exchange asset at a given period time .

For example assuming I purchase 1000 Steem and it's $70 at 12:20 pm on the spot trade, on delivery, the amount to be delivered will still be 1000 steem at the same price.

Advantages of Spot Trading

• Transparency: Spot Trades ensure trade in a transparent platform where the actual price of the assets is known to the all parties involved.

• In spot trade buyers receive his crypto immediately payment is verified.

• It give the trader the opportunity to a favorable trading decision us make better trade decisions. When the value of an assets reduces the trader can hold it back until a favorable moment to sell it off.

• Traders in spot markets has the right to decide who and when to sell his crypto.

• Trades is being completed on the spot without further delay.

• It does not require fixed amount or huge amount of money for start up capital.

Disadvantages of Spot Trading

• Spot Trading can present a high risks especially when trading a volatile crypto. Due to the volatility of some crypto buyers can buy at higher price and sell at lower price because the price of the crypto have dropped.

• In spot trades, their might be oppose in trading where both buyers and sellers agree on settle at a future date.

Margin trading

Source

Margin trading is a case where traders lend or borrow assets from other traders or a situation whereby an exchange platform contribute to their capital so as to leverage their positions.

It gives traders the opportunity to make spot transactions with the aid of borrowed funds.

In summary margin trading deals with borrowed funds from third party.

Advantages of Margin trading

• Due to the fact that you acquire in multiples , the funds in your wallet will you the opportunity to trade and make more cash.

• It gives Investors the opportunity to borrow funds and trade so as to make more profit without adding more capital.

• It gives investors opportunity better opportunities.

• Margin trade allows traders to borrow so as to enable them raise capital.

Disadvantages of Margin trading

• There is high risk of investors losing more than they invested which can lead to liquidation.

• It requires high level technical know how, You proper knowledge of proper Technical analysis.

• Margin trading gives opportunity profit when ever trade moves in the wrong direction.

Future trading

Source

A futures is a contract or agreement between buyer and seller to buy or sell a asset or commodity in the future at an agreed-upon price.

Future Trade simply means the agreement between two person to trade at a stipulated price in future.
The commodity that can be traded in the future includes: stock, indices.

Advantages of future trading.

Predicts future demand and supply of an asset. Future trading provides traders with a wide information about the future price of an asset.

Equal opportunity: future trading provides everyone equal opportunity to participate in a trade. Small traders participates by making their little deposit instead of paying up all the funds for the asset.

Disdvantages of future trading.

Rapid movement of future price: the price of a given contract can either increase or decrease on a daily basis and if it goes against you, you will be required to fund your wallet or leave the trade.

Contract deadline: future trading as a contract have an expiring date and once it reaches, the asset looses its value.

Difficulty in opting out of a contract: future trading is somehow difficult for a layman to deal with and may lead to loss of asset.

• Question 2
• a) Explain the different types of orders in trading.
• b) How can a trader manage risk using an OCO order? (technical example needed).

Trade order is the types of orders that can be placed on a trading platform, we have different types of trade order, they include:

• Market Order
• Limit Order
• Stop Limit Order

Market order

Market Order is where the investor places a buy or sell order of an asset at the current market price, here a trader buy or sell an asset at the current market price of the asset.

The below image shows see that the price of the asset at that moment was used in opening the trade.

Stop limit Order

This is the combination of stop loss and limit order, in that you can place a limit order combined with stop loss in order to limit losses, Once the order reaches the stop level before moving into limit order, this implies that after the stop price have been reached it then executes the order whenever the limit price is achieved. It is used to minimize loss.

Limit Order

It is the order given by a trader to buy/sell whenever the order gets a point or lower. for instance if I set an order to buy steem whenever it falls to #190 so until this criterial is reached the order won't buy any steem and if I set it sell whenever steem rise to #300 the order wont be executed.

One Cancels the Other (OCO) order

It is the combination both limit order and stop limit order. While creating an order, you will place a limit where will enter the market and also where it will stop. It also helps decrease trading risks. For instance, steem price moves from $2 and $2.5, the investor will place an OCO where would be a buy stop order just above $2.5 and a sell stop order below $2 so when one is executed, the other one will be terminated.

How a trader manage risk using OCO order

OCO gives trader the opportunity to manage loss meaning that the trader has the opportunity inserts his limit (from where he would enter a trade) and also a stop loss where the trade will not go beyond.

so for a trader to reduce risks using OCO order, he would set two orders, a buy limit order and a stop-limit order. The two orders was set in order to check and avoid loss so when the sell limit order is met, the stop limit is terminated vice versa.

• Question 3
• a) Open a limit order on any crypto asset with a minimum of 5USDT and explain the steps followed. (Screenshots needed from any cryptocurrency exchange).

Attending to the above question I will be using binance exchange app on my mobile.

• STEP 1
  I will open my binance app on my mobile and login .

• STEP 2
  Go to went to trade and select spot.

• STEP 3
  On the spot, select the pair u want to trade, I selected ADA/USDT pair. i will make sure my order is set at a limit order so as to place a limit trade, the price of ADA as against USDT is $2.209 but checking the chart I noticed the the price will go down to $2.00 so I had to set my limit there.

• STEP 4
  Below is the screenshot showing my limit order yet to be executed.

• Question 4
• Using a demo account of any trading platform, carry out a technical analysis using any indicator and open a buy/sell position on any crypto asset. The following are expected.
• i)Why you chose the crypto asset
• ii)Why you chose the indicator and how it suits your trading style.
• iii)Indicate the exit orders. (Screenshots required)

Source

Note:

From the above graph, It's already Indicating a red zone(entry point) and Green Zone above (Exit Point)

I choose Gala because it is a blockchain game every individual would want to plan. Gala wants to introduce creative thinking into gaming by giving users the right to control game and in game assets with the aid of blockchain technology

I choose the bollinger band indicator because it measure the volatility of the market as well as the overbought and oversold conditions, The band helps to identify the area of dynamic support or resistance as the price moves.

It suites my trading style because it enable me to plot a trend line in two standard deviation and it gives me the
opportunity to know when to enter or exit.

Above is the image showing my "Take Profit Point" or my Exit Order .

Conclusion

Investing and Trading crypto assets risky and but extremely profitable if know what to do at any given period of time. From the above assignment I was able to know once you have the basic trading skill you can actually do well in trading.

Thank you Professor @reminiscence01 for this wonderful lecture your contributions to crypto academy is top notch.