Understanding Crypto: Basics of Trading
Hello Wildflowers 🌸🌸,
In our previous blog, we gave an introduction to blockchain & cryptocurrency. We started out by understanding these terms, just so we get an idea of the terms we hear in this space.
If you ever walk into a conversation about cryptocurrency, I hope you are able to hold your own & if you come across some jargon flying around, you will be able to make sense of what is being said.
In this post, we will be focusing on trading, what it means and the basic fundamentals you need to know to give it a try.
DISCLAIMER: All information shared here is solely for knowledge purposes as the writer is in no financial position to give any financial investment advice. Thank you.
What is Trading?
Trading cryptocurrency is the same as buying the shares of a company in the stock market. You would want to buy stocks when they are low and sell when they increase in value. The simplest rule to remember is
Buy Low, Sell High
What does a Crypto Trading Floor Look like?
For any trade to happen, you have to be familiar with what a typical trading chart would look like. Even before you decide what coin to buy, it’s important to understand how trade happens. If you register into a standard crypto platform, a coin chart will look like the image above.
P.S: It would be different if you are viewing from a mobile app. but its basically the same thing
When you look at this board for the first time, it would seem excessively chaotic, but if you look closely, you’ll notice that is divided into sessions. There are partings that seem to divide it into 4 different parts. the left columns, the right columns. the centre session and the bottom session. we would take them one after the order, and explain what they represent, combined together, you’ll get a sense of what is happening on this very busy screen.
Section 1: The Left Column of the Chart
The left side of the coin represents the buying coin order list
The first column is the market price of Bitcoin when the trade happened.
The second column is the amount bought and the last column is how much USDT was paid per trade
This can be found at the top left corner of the page and it contains the type of crypto whose chart you are looking at, otherwise known as the market. This is the amount of BTC bought against Tether(USDT).
Section 2: The Right Column of the Chart
The top right column contains all the cryptocurrency pairs you can trade. The cryptocurrency pair shows what cryptocurrency you can use in exchange for another cryptocurrency.
For example: If you see BTC/USDT, That is a trading pair. It means that you can buy BNB with USDT and sell BTC for USDT.
P.S: As you can see there are several trading pairs against COIN/BTC so ensure you're using the right pair to trade before you buy/sell
The row in the top corner close to the trading pair contains the last price of the coin, the change in price in the last 24 hours, the highest and lowest price in the last 24 hours and the volume traded on the exchange (platform) ona daily basis.
Section 3: Trading Chart:
The trading chart is the main thing that sticks out when you view the page. It can either be viewed in a line graph or a candlestick format. Either way, they show the fluctuations in the price of a particular coin
The images in this article are all showing the charts in the candlestick format because that is what traders use. In this format, trades summaries for each day are denoted with candlesticks.
From the diagram,the high and low are the highest and lowest prices of a coin for a given day. The open is the price at the start of the day and the close is the price at the end of the day.
The colour, shows whether there was a drop or a rise in price at the end of the day. Red means a drop in price, which means the price at the start of the day is higher than the price at the end of the day. Green means a rise in price, meaning the price at the end of the day is higher than the price at the start of the day. These daily summaries, when put together, provide a trend that forms the candlestick chart.
The selling coin order list and the buying coin order :
This is because the top half is all the buy ordersThis can be seen on the leftmost part of the page as shown below. It is readily noticeable that the top half of the pane is coloured in red and the bottom part is coloured in green. on the cryptocurrency we are looking at and the bottom half is all the sell orders. The bottom part of the rightmost pane shows all market trades and the overall personal trade history of the user in that market/trading pair.
Section 4: The buy/sell session:
The bottom session of the board is The buy& sell section and it is made of three main tabs — Limit, Market and Stop Limit.
Market: This is the most common trade type that is used by people. you can specify whether choose what amount you want to buy or sell and carry out the action at that time. The caveat here is that all trades are made at the current market price.
Limit: This is used if a user feels the price for a cryptocurrency is too expensive to buy or too cheap to sell. Here, the user can specify the price at which they want to buy a particular cryptocurrency and when the market price falls to that price or below(stop limit), the trade is made.
A user can specify the price at which they want to sell and when the market price rises to that price or above, they then sell. All these happen automatically. Due to how cryptocurrency price movements are not easily predictable, the buy/sell orders under “Limit” could stay there for long periods of time if the stop limit is not reached. So there is the option to cancel at any time and set new orders.
Stop Limit: This is a price at which a Limit trade is executed. It is mostly used to minimize risk in trades.
Traders then analyse this with techniques known as “technical analysis” to form opinions about which trade is best to make. Exchanges normally provide a “trading view”, which provides tools for traders to manipulate the charts and compare charts across markets
There are more advanced form of trading such as Futures & Margin. Margin Trading enables you to make more gains by increasing the capital you use in trading. Crypto futures allows you to gain exposure to digital currencies without the need to possess actual cryptocurrency. it allows you to take advantage on the asset of a coin based on its future value, while avoiding the risk
So there you have it, the whole concept of trading in a typical crypto exchange. There are several figures, features or aspects we did not touch. Familiarize yourself with the environment, by studying the trading graphs of the coins you are interested in buying.
If you are not registered in any exchange, Roqqu.com is a soft landing for you to begin your journey before migrating to a more technical platform like Binance.
What would you like us to talk about in the next episode of #UnderstandingCrypto. You can share selected topics to me via my handle @wildflower on Twitter. Lets know what you think about this and also tell us about your trading experience. we love to hear.
Big thanks to Philip Narteh that helped me put this all together. He saved the day, you can check him out on Twitter, LinkedIn & Facebook
#Roqqu #Cryptocurrency #Trading #Binance #CryptoFutures #UnderstandingCrypto
