CRYPTO TRADING

101_FOR BEGINNERS
 1. A COMPREHENSIVE
INTRO TO BITCOIN
AND
CRYPTOCURRENCY
TRADING.

The cryptocurrency markets have expanded dramatically since their

early days, with 24-hour trading volumes this year averaging about $50
billion and frequently surpassing $100 billion. A variety of institutional
and retail traders now participate in the cryptocurrency market, and
digital assets, specifically Bitcoin (BTC), are often regarded as an
alternative investment class.

This guide will teach you the fundamentals of cryptocurrency trading if

you're new to the markets and will also show you how to use a trading
dashboard if you decide to start trading.
1.1 INTRO TO TRADING: BUY
LOW, SELL HIGH

Although the basic idea of buying low and selling high is still the cornerstone of
trading, the market now includes a wide range of items, including futures, options,
and swaps, in addition to a variety of tactics, such arbitraging, shorting, and
hedging.

Finding advantageous opportunities to buy an asset at a specific price and sell it at a

higher price—a strategy known as a long trade—is the main objective of a trader.
The goal is to capitalize on the price gap and generate growth. In contrast, a short
trade aims to profit from a collapsing market by first selling an asset at a higher price
and then repurchasing it at a lower one.

But trading is a more complicated procedure. Determining whether an item is

undervalued or overvalued at any particular time requires a careful analysis of its
market pricing. Finding potential purchasers who understand an asset's underlying
value and are prepared to pay higher prices is necessary to be able to sell it for more
money.

Value assessments and valuations are complicated subjects that need in-depth
research, which aspiring traders must understand. Successful trading requires
developing proficiency in understanding complicated economic aspects, analyzing
financial data, and comprehending market indicators.

Remember that discipline, risk management, and strict dedication to a well defined
trading plan are essential components that typically separate successful traders
from the rest. Emotions frequently affect judgment, resulting in quick decisions and
undesirable consequences. Long-term success in trading depends on creating a
logical and methodical trading strategy.

Continuous learning, keeping up of market developments, and getting advice from

seasoned pros will all be crucial to improving your trading abilities. Putting in the
time and effort to understand the complexities of trading will surely pay off and
increase your chances of success in this exciting and demanding field.

While this introduction gives you an overview of the fascinating world of trading, I
strongly advise you to learn more about it through in-depth materials, classes, and
professional advice. To successfully manage the constantly shifting financial
markets, traders need to be knowledgeable, disciplined, resilient, and adaptable.
1.2 REALIZED AND
UNREALIZED GAINS AND
LOSSES

Taking a position is another name for entering a trade, whether you're going long or
short. It may be thrilling to see your position increase as the market swings in your
favor. However, until you actually leave the position, any profits you see against it
are "unrealized" (also referred as "paper gains"). In order to exit the position, you
must either purchase the asset back (against a short trade) or sell it (against a long
trade).

For example, you essentially went long if you purchased one bitcoin for $5,000
during the March 2020 drop in hopes of future gain. You have an unrealized gain of
$13,250 if you are still holding the coin, which is today worth about $18,250
($18,250 minus $5,000).

But your possible profit will also be diminished to $12,000 if the price of Bitcoin falls
W
below $17,000 within the following hour. This example shows that you won't truly
make money until you sell that coin and take your long position off the table. Until
then, you can only look at potential, or unrealized, gains.

Similarly, negative price moves cause "paper losses" that are only recognized when
you abandon the trade. In any scenario, it is critical for a trader to understand the
difference between unrealized and realized gains and losses. Gains and losses
exist only when they are realized.
1.3 TRADING OR
INVESTING

Trading and investing may coexist despite being two different activities, each with
its own strategy, perspective, and time horizon. Although pursuing portfolio
development is their ultimate objective, their approaches and pledges diverge
greatly. Anyone entering the fascinating but unstable cryptocurrency industry must
be aware of these differences.

Investing in a cryptocurrency, such as Bitcoin (BTC), involves more than just

purchasing the commodity; it additionally includes accepting the underlying
concept and philosophy that drives it. This long-term commitment is sometimes
referred to as "hodling," in which investors keep their BTC for years or even
decades.

This strategy is similar to putting your trust in the technology and the long-term
growth of the whole bitcoin ecosystem. In order to enjoy possible benefits in the
future, investors are prepared to withstand market swings since they think the
asset's value will increase over time.

Trading Bitcoin, on the other hand, requires taking advantage of transient market
fluctuations and events that affect prices. Traders are more concerned with
profiting from short-term market swings than investors are with long-term
commitment. Their main objective, whether it be scalping or day trading, is to buy
cheap and sell high within specified timelines.

Day traders work in target-specific, shorter time periods, usually holding positions
for many hours in a single trading day. Scalpers, a subtype of day traders, trade
quickly, entering and quitting positions in minutes or even seconds. Their strategy
is based on rapid decisions and exploiting chances in unpredictable markets.

While there are no specific rules governing the period of a trade vs an investment,
traders typically participate in short-term swings, while investors take a longer-
term view. The decision between trading and investing is ultimately determined by
an individual's financial objectives, risk tolerance, and appraisal of the chosen
cryptocurrency's potential worth and prospects in the short and long term.

Deciding whether to trade or invest requires combining your specific financial

goals and properly examining your selected asset's price, value, and future
potential over both short- and long-term timeframes.
 2. UNDERSTANDING
CRYPTO MARKETS
While a marketplace is not required for trade, it provides several advantages. Even
if, in principle, you may trade anything by purchasing it straight from a seller and
selling it to someone else (for example, from your neighbor and then to someone
you know), this scenario is not scaleable.

Although cryptocurrency exchanges and other marketplaces provide numerous

benefits, their capacity to supply liquidity may be their most important feature. This
allows traders to swiftly execute several transactions in a matter of minutes without
having to look for or wait for buyers and sellers. The ease and speed with which
you may purchase or sell an asset in response to market orders without
significantly impacting the asset's market price is known as market liquidity.

A liquid asset is often one that has a large trading volume and a price that doesn't
change significantly from trade to transaction, indicating that many people are
interested in trading it. Marketplaces such as exchanges pool demand for a given
asset in a centralized place so that buyers and sellers can be more easily and
quickly matched.

Given the necessity for liquidity, dependable price indexes, safe transactions, and
other characteristics, practically all cryptocurrency trading now takes place on
certified exchanges such as OKX, Binance, Kucoin or through specialized brokers.
2.1 SPOT OR DERIVATIVES

Crypto markets largely follow the same formats as their traditional counterparts
and are divided into spot and derivatives. A spot market allows you to purchase or
sell cryptocurrencies instantly and receive the real coins/tokens you're trading. A
derivatives market deals with contracts, such as futures, options, and swaps, that
follow or derive value from an underlying coin. Trades using derivatives contracts
do not necessarily result in the delivery of real coins/tokens to traders.

Derivatives are more complex trading products by nature, and they frequently
carry a larger risk than spot trading.

2.2 TRADING PAIRS

Cryptocurrency markets have a selection of trading pairs, each representing a

market and is identified by a combination of asset tickers, such as BTC/USDT,
ETH/BTC, or LTC/BTC. Two currencies are appropriately referenced by each
market pair.

Some exchanges include fiat trading pairings, which are trades between
cryptocurrencies and government-issued money, including Bitcoin/USD, Bitcoin/
EUR, or Bitcoin/GBP. These are not always cryptocurrencies. Quotes or exchange
rates are reflected in these pairings. The base currency is the first one in the pair,
while the quote currency is the second.

Trading pairs are how cryptocurrency prices are often reflected, especially on
exchanges. For example, a BTC/USDT pair trading at 100,000 USDT means 1 BTC
equals 100,000 USDT, or roughly $100,000.
2.2.1 CRYPTO-DENOMINATED

As discussed above, trading pairs include base and quote currencies. While base
currencies can be any of the listed cryptocurrencies on an exchange, quote
currencies are usually more limited.

In the crypto space, BTC is the leading digital currency and is also the predominant
quote currency in crypto-denominated trading pairs. The stablecoin Tether (USDT)
and the leading altcoin, Ether (ETH), are other common quote currencies.

2.2.2 FIAT-DENOMINATED

Fiat-denominated pairings are easier to understand than crypto-denominated pairs

for traders who balance their accounts in their respective fiat currencies. For
example, a trader operating in USD may want to trade BTC/USD or similar pairings
in order to have BTC prices stated in USD.

2.2.3 CHOICE OF TRADING PAIR

Both crypto-denominated and fiat-denominated trading pairs have their pros and
cons, and your choice depends on your trading goals and targets.

For example, traders who wish to keep and perhaps increase their BTC holdings
(independent of how Bitcoin's fiat-denominated price moves) choose BTC-
denominated pairings. However, individuals who are ultimately trading for fiat
growth and want their gains to be unaffected by quote currency price swings
would choose fiat-denominated pairings.
 3. UNDERSTANDING
MARKET PRICE AND
ACTIVITY
Now that we've covered trading pairs and quotes, let's look at how these quotes,
which are actually market prices, are generated.

When the BTC/USDT pair is stated as 100,000 USDT, it indicates that 1 BTC is
trading at that market rate. However, in reality, and particularly in volatile
cryptocurrency markets, this is a very simplified explanation of the price of one
bitcoin, as the listed price is subject to change and does not always apply in both
directions (you can't always buy and sell at the same price).

This amount (100,000 USDT) simply represents the latest price at which a deal, no
matter how tiny, was performed on the market. While this technically makes it the
market price, it is highly unlikely to be the price you get on the market for your buy
or sell orders.

In contrast, the real market quotations are represented by asks and bids, where
asks are sell orders (I want to sell BTC at a specific price) and bids are buy orders.
3.1 ASKS AND BIDS,
MAKERS AND TAKERS

As previously stated, there is a difference between the last traded price and the
current market price. The latter is determined by a variety of parameters, including
the spread between asks and bids, as well as their depth.

To put it simply, asks are sell orders and bids are purchase offers that are currently
displayed on a certain marketplace. Each ask and bid consists of a price and an
amount. For example, an ask may request to purchase 0.5 BTC at $18,000 per BTC,
resulting in a total order price of $18,000 x 0.5 BTC = $9,000. Similarly, a bid of
0.25 BTC at $17,500 per BTC indicates that the bidder is prepared to acquire 0.25
BTC for $4,375.

Both asks and bids are available to be taken or filled by anyone on the exchange
(unless the ask or bid is canceled by the trader before being filled). However, in
both cases, you don’t need to fill the entire ask or bid amount. You can choose any
amount less than and up to the amount quoted.

When trading in any market, you have two choices. Either you can take any of the
existing asks and bids (as explained above) or make your own. In doing so, you
also choose to either become a maker or a taker, and your orders are subject to
different fees in each case. Makers are encouraged with lower fees, as they add
liquidity to markets by actively proposing trades, whereas takers pay slightly higher
fees because they remove liquidity by filling and consuming existing orders.

Maker example: Let’s say Bob decides to sell some of his Ethereum and places a
limit order on an exchange at $3,610 but the current market price is $3,600. Bob’s
order isn’t matched immediately because he’s asking for a higher price than what
the current market is willing to pay. The order sits on the order book (a type of
digital ledger that lists crypto orders on a trading platform), which adds liquidity to
the market. Bob is charged a maker fee because he’s adding liquidity to the market.

Taker example: Let’s say instead Bob decides to place a market order for Ethereum
at its current price of $3,600 and then immediately completes his order. In this
scenario, Bob is the taker. He likely has to pay a higher fee because he removed
liquidity from the market.
3.2 ORDER BOOKS

The order book, which is updated in real time and represents the market's depth
and liquidity, displays all current bids and requests on all exchanges. Order books
also have transaction history charts, which show the most recent successful
transactions.

However, it is important to realize that all bids and requests in an order book are
revocable by the traders who submitted them, and they are not guaranteed until
they are filled.
 4. TRADE ORDER
TYPES AND THEIR
USES
Since we have gone over many of the fundamentals thus far, we may shift our
attention to placing trading orders.

Many different kinds of trade orders are available on exchanges, so you may pick
and choose the ones that work best for your trading strategy and objectives. In this
guide, we'll go over the most commonly used order types and what they mean for
traders.
4.1 LIMIT ORDERS

A limit order is the most common type of trade order and is suitable for both
beginners and experienced traders. As the name suggests, a limit order allows you
to define a specific price limit for your buy or sell order, and the market will only
match it with your exact quote or better.

For example, if you place a limit purchase order for 1 BTC at $17,123, it will only be
completed if there is a seller on the market asking for $17,123 or less for 1 BTC.
Similarly, a limit sell order with the identical information will be filled only if the
market finds a buyer prepared to pay $17,123 or more for your 1 BTC.

Limit orders are straightforward to manage since they allow traders to define
acceptable minimums and are effectively "take it or leave it" offers, allowing for
simplified earnings and loss calculations.

4.2 MARKET ORDERS

Where limit orders allow traders to set their own prices, even if that means waiting
for orders to be filled, market orders are filled immediately at whatever rates the
market is willing to offer.

For example, if you want to sell 1 BTC with a market order, the exchange will fill
your order immediately at the best available price.

Market orders give up control over price specifics in return for quick execution and
are preferred by traders seeking instant exchanges, independent of price changes.

It is crucial to remember that because of the bid-ask gap, trading using market
orders is very unlikely to result in growth during shorter time periods. You will
effectively be buying high and selling low if you continue to purchase and sell at
market prices one after the other. As a result, you will lose money.
4.3 STOP ORDERS

Stop orders, an advanced order type, empower traders to establish specific

conditions, such as the "Trigger Price" and "Order Price." Once these conditions
are met, the system automatically places buy or sell orders on the market.

The two stop order kinds that exchanges often support are "Conditional" and "One
Cancels the Other," or OCO stop orders.

Stop orders may first appear complicated to novices. But once you understand how
they work, you'll discover that they're quite useful and sensible instruments for
market navigation.

For example, when posting a conditional stop order, you must first provide a
trigger price. The trigger price, as the name implies, is the price at which your
order is triggered or activated. However, the trigger price does not reflect the price
at which your order will be executed. For this, you must include a second
parameter, the order price, which is the actual price at which your buy or sell order
will be posted. Alternatively, to ensure quick execution, you can choose to execute
your order at the market price once the trigger price condition is satisfied.

An OCO stop order works in the same way but with two sets of conditions (two
trigger and order-price conditions) as opposed to just one. This order type is useful
if you want to place orders covering both market surges and drops.

For example, if Bitcoin is trading at $18,000 and your trading strategy involves
selling 1 BTC at $19,000 in the event of a rally, or selling it at $17,500 in the case of
a drop, you can use the OCO order type to execute these trades. You define one
set of trigger and order prices for the upside and the other set for the downside. In
an OCO trade, whichever set of conditions is met first will be executed, while the
other will automatically be canceled.

Given some of the concepts discussed earlier in this book, we can link the use of
conditional and OCO stop orders to the timely realization of gains and the
mitigation of risk through the early realization of losses at levels you consider
acceptable.
5. NEXT STEPS — GAME ON!

This book should have provided you a sound foundation for bitcoin trading. You will
have a better understanding of markets and their fluctuations now that you have
learnt this. If you decide to start trading cryptocurrency, the tools, techniques, and
tactics listed above will undoubtedly be quite useful.

It’s also important to be aware of the risks associated with cryptocurrency trading.
The markets are highly volatile compared to traditional stocks or shares — and with
that comes a heightened chance of loss. As any successful trader will tell you that
proper risk management and exit strategies are crucial.

Disclaimer: The content in this book is provided for informational purposes only. It
is not intended to provide (1.) investment advice or an investment recommendation;
(2.) an offer or solicitation to buy, sell, or hold digital assets, or (3.) financial,
accounting, legal, or tax advice.