<div class="text-justify" >Hello Professor @reminiscence01 and my fellow steemians.
Here is my submission for the homework task.
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### Explain the following stating its advantages and disadvantages:-Spot trading, -Margin trading, -Futures trading
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### <center>SPOT TRADING</center>
Spot trading can be described as buy and sell transactions that are carried out immediately between two parties. It is the buying or selling of a cryptocurrency or stock asset that is settled and executed instantaneously. This means that the exchange of assets between a buyer and a seller happens in a moment.
It is the type of trading used by many scalp traders for making daily purchase and sale of their cryptocurrency assets to make daily profit. In spot trading, orders are filled immediately ones the buyer and sellers have reached an agreement and both get the asset they traded for.
Assets are bought and sold immediately at the spot price and this price can be set by buyer and the seller.
The components of a Spot trade are **buyer, seller and an order book**. Order Book provides the prices from which traders set their prices. Ones the market price reads the price set by a trader, the order is filled.
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### Advantages of Spot Trading
1. Spot trading is easy and simple.
2. It offers quick delivery of assets to both parties involved in a trade.
3. Less risk is involved in spot trading as initial capital cannot be easily lost.
4. Spot markets are usually very liquid because there is always market to trade.
5. Spot trading is flexible. One can select from a number of prices to trade and one can also decide to hold.
6. One can trade with low capital and still make good profit.
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### Disadvantages of Spot Trading
1. Spot traders can only trade with the assets in their possession.
2. Volatility of cryptocurrencies affects the profit made during bear market.
3. One cannot trade effectively when there is bear as most times market is dull with no offer for substantial profit.
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### <center>FUTURES TRADING</center>
This is the type of trading that involves an agreement to purchase or sell a cryptocurrency asset in a future date at an agreed price. In future trading, the agreement on price, quantity and date of delivery are made on a certain day and the delivery and execution of the order at the agreed price is made on a day in the future.
One may see it that it is risky to trade futures based on a future agreed date as one of the parties may fail but they are publicly traded standardized in their settlement contract size, and settlement procedures, therefore cannot be compromised.
### Advantages of Futures Trading
Future trading comes with a lot of profits. Volatility of asset doesn't affect the price that was agreed upon during the time of agreement. In this case if the price of the asset has gone up, the buyer would be at profit.
### Disadvantages of Futures Trading
Futures trading is a volatile, and sophisticated trading that is risky for individual or retail trading as an individual may lose all his initial start up fund and pay more than his investment. It needs a lot of expertise and experience to make good money in future trading. It is not suitable for novices in trading, especially crypto assets. The agreement may be terminated if something happens (e.g death or sickness) to any of the parties.
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### <center>MARGIN TRADING</center>
The term "margin" or "leverage" refers to the process of increasing an investor's purchasing power. An investor is only required to put up a portion of the money required to start a much larger investment. This means that instead of paying the full value of the position, you just have to pay an initial margin, which is a percentage of the position's worth. While trading with a big margin or leverage can be advantageous when the trade goes your way, it is also high-risk because, if you are a retail investor, you could lose your entire investment.
### Advantages of Margin Trading
As a result of the values of the trading positions, it results in high amount of profits. It supports diversification as traders can open different positions with a little amounts of their total start up fund. Another advantage is that quick positions can be opened as there is no need to move a large some of money to one's account.
### Disadvantages of Margin Trading
The most obvious disadvantage in margin trading is that a large loss is realizable. This can also may go above a traders start up fund.
It requires high level of expertise and experience is required just like futures trading.
A margin trader who doesn't have a proper risk management strategy may run at continuous loss until the start up fund is finished.
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### Explain the different types of orders in trading. How can a trader manage risk using an OCO order? (technical example needed).
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There are two main kinds of orders in cryptocurrency trading according to the lecture. This are market order and pending order.
**Market Order:** This is the type of order that is set to be carried out immediately. It is the type of order that executes at the current market price. From my experience in trades, market orders are executed with the highest bid price for a sell order and the lowest ask price for a buy order.
**Pending Order:** Pending order is an order set to execute at a later time. Depending on how the market is, this may takes seconds, minutes, hours or days as the case may be. Pending orders fall in the categories of limit orders, stop limit orders and OCO orders.
**Limit Order:** This is a type of pending order set to execute in the future at a specific price. By future, I mean at a later time that can be in seconds, minutes or hours and sometimes days. A limit order quotes the highest price or lowest price a trader can buy or sell an asset. The limit order may or may not be among the prices that are in the order book but they are not executed immediately.
An example of a limit order is below.
<div class="pull-left" >https://cdn.steemitimages.com/DQmTN1KLNWKbTbNLVv9HLiKpyg99E8dY3t3k77d8gRWyqPq/Screenshot_20211013-122754_1.png</div>
<div class="pull-right" >https://cdn.steemitimages.com/DQmUoquF6ZhcKDBN5ZnbV3uGNhyp6pzMq58X1gVLvJ24Wz5/Screenshot_20211013-122749_1.png</div>
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**Stop Limit Orders:** This is also a kind of pending order. It is very similar to limit order. It involves setting two prices for each buy and sell orders which involves a stop price and a limit price.
For a buy order, the stop price is set at a price slightly greater than the limit price.
While for a sell order, the limit price is set slightly above the stop price.
Below is an example of how to make a stop limit order.
<div class="pull-left" >https://cdn.steemitimages.com/DQmNPiScZynCiLBp2SbTfAurCQN8y64sLmzVkc55oE9TjKx/Screenshot_20211013-122736_1.png</div>
<div class="pull-right" >https://cdn.steemitimages.com/DQmaL3nRJrJvwZWZ4u1jQRQXpqsXACi2j96X1sKtwmBctsy/Screenshot_20211013-122731_1.png</div>
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**OCO Order:** OCO means **one cancels the other**This is a pending order that involves setting three prices to buy or sell an asset. The prices for stop and limit are set just the way the stop limit prices are set while the price is set independently. Once one of the orders is executed, the others are canceled.
This order type is used in managing risk when the market is against one or when one is taking a risk of setting high profit.
<div class="pull-left" >https://cdn.steemitimages.com/DQmdQAFvftCkYi9gyMkxiMSpUivxR86VuPC3Adopxgkdg1t/Screenshot_20211013-122721_1.png</div>
<div class="pull-right" >https://cdn.steemitimages.com/DQmPwETcrnxKbZHEJCaapAtxSYRJMufpnGavuYpEocZp5N3/Screenshot_20211013-122714_1.png</div>
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OCO helps to set the limit and stop limit orders in the same order but one of them is executed in each occasion, making the other invalid.
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### Open a limit order on any crypto asset with a minimum of 5USDT and explain the steps followed. (Screenshots needed from any cryptocurrency exchange).
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<div class="pull-left" >https://cdn.steemitimages.com/DQma8XHkYXaahaRcFM2QMe6FxWZ7Pd8spce9DBajfRsqN4i/Screenshot_20211013-130709.pngStep 1.</div>
<div class="pull-right" >https://cdn.steemitimages.com/DQmbwAQftbS3M6Prxh8TL3LCTV17WXBiFaCnQUf8mre9sTj/Screenshot_20211013-131321_1.pngStep 2.</div>
<center>Open Order</center>
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The steps I followed in opening the above order are explained below.
1. I logged on to my binance account
2. From the homepage, I click on trades.
3. Clicked on the crypto pair on the page and selected from my favourites my preferred pair of crypto. For my work, I selected IOTX/USDT.
4. It was automatically on the buy side, so I entered the required details for the trade.
5. I clicked 100%. This is to say I would use all my available USDT for the trade.
6. Finally, I clicked the buy below. The order was opened this way.
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### 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).
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To attempt this part of the task, I opened a buy position on binance exchange using Bollinger Bands to analyze the market before I opened the buy position. I used $18.8 to buy IOTX. That's to say that the trading pair is IOTX/USDT.
**Why I chose the crypto asset**.
The crypto asset IOTX is the native token behind the Iotex platform. The project of the platform is a about the **internet of trusted things**
The crypto has been in my favourites for a while so at the time of doing this task, I studied the cryptos among my favourites and I found it to be the better crypto to buy. It had just reversed from a downtrend. Moreover, the project behind the crypto is cool, so I decided to buy it
**Why I chose the indicator and how does it fit your trading style**
I chose the indicator because with it, I can easily point when an asset is in a overbought or oversold level. Coupled with the fact that I combine both swing and scalp trading, it can easily help me to sell the crypto asset I have purchased. The overbought and oversold level in Bollinger Bands is easily seen in all time frames so it can be used in both swing and day trading.
**My sell exist order**.
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## <center>Conclusion</center>
There are three different ways of trading cryptocurrency. Spot trading involves reaching agreement and exchanging assets immediately. Futures trading involves reaching agreement and let executing in the future. Margin trading involves making trades with just a little of one's capital and/or trading with more than what one has by borrowing money from the exchange or another trader provided by the system.
Trading orders can be market or pending orders. While market orders execute immediately with the market price, pending orders execute at later time.
I'm glad to have been part of this course and to have also completed the homework task. Thanks for reading.
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Cc:
@reminiscence01
@wahyunahrul</div>