Steemit Crypto Academy Season 3-Week 1 HomeWork| What is Cryptocurrency Trading and on what platforms can we do it?
Hello everyone, I am glad to be a part of another Steemit Crypto Academy, and I am particularly excited for the great opportunity to learn through this platform. Moving forward to the task set by professor @lenonmc21 after paying rapt attention to the great lecture that he delivered on What is Cryptocurrency Trading and on what platforms can we do it?, I will be answering the questions without any time. Join me as I answer this question to the best of my knowledge following the guidance of the professor.
Define in your own words what trading is, what its function is, and how it relates to the cryptocurrency market.
Trading
In the ancient contemporary world, the need for humans to exchange what they have with what they needed, brought about the word trade. The idea of trading initially was first practiced by the ancient men when they used the exchange of food materials to meet their daily needs, a man with lots of yams could exchange some of his tubers of yam with a man who has lots of vegetables and this trading idea was called TRADE BY BATER. The concept of trading moved to exchanging physical currency for the products that we need, this idea is commonly used in a traditional market where market women simply provide their goods in exchange for physical currency.
However, the idea of trading has now moved beyond the purchase of physical goods, it goes deep into the exchange of currencies and assets, the concept of trading is seen in almost every sector today especially the financial sector where bounds and shares can be purchased.
In the financial market, trading is the speculation of financial assets, derivatives, and options such as stocks, bonds, currency (forex), and cryptocurrency with the hope and aim to make a profit when trading them (ie buy/long or sell/short).
The idea of trading is divided into two parts, it can either be profitable or unprofitable. I am saying this because during the process of any trading exercise, there might be a rise or fall in price and depending on the time the trader enters the market there is a huge possibility of either taking profit or recording loss.
Cryptocurrency Trading is the buying/long and selling/short of crypto assets to make a profit. Just like trading stocks or currencies, cryptocurrency can serve as the stocks of several crypto projects (there owning a share of the project) or as a digital currency that could be traded. Also, cryptocurrency can be traded in terms of derivatives, contracts, and the use of margin.
A simple example of trading cryptocurrency is buying a coin at a low price and selling the coin when it is high, only to buy again at a low price and sell high.
Another way of trading cryptocurrency is trading contracts where a person speculates that the price of a coin will increase and thus long (buy) the coin contract and make a profit as the coin rises while losing money when the coin drops. On the other hand, the trader could speculate that a coin will drop in price and so sell/short the coin contract and make money if the price goes down while losing money if the market goes in the opposite direction.
With cryptocurrency trading just like other financial trading, traders can trade using margin thereby amplifying their position size.
Define and explain what are the tools used for trading ( Technical Analysis and Fundamental Analysis ) and at least one example of each. ( A screenshot is required ).
Technical Analysis
In trading, Technical Analysis is the use of charts, candlestick type, oscillations, and price indicators to determine the movement of the market. It requires the use of prior market formation to predict the future event of the market. Technical Analysis is simply the recognition of price actions, and volumes in other find the support, resistance pattern of price candlesticks
The use of technical analysis is to determine the period of entry and exit in a market without making casual guess on the next movement of the market. Technical analysis indicators used in trading includes Moving Average (MA), Exponential Moving Average (EMA), Simple Moving Average (SMI), Moving Average Converging/Divergence (MACD), Relative Strenght Index (RSI), Money Flow Index. Technical Analysis chart patterns includes Ascending triangle, Descending Triangle, Symmetrical triangle, Scallops, Cup and Handle, Head and Shoulder, Double Buttom, Wedges, Pennant, Flag, Gaps, Pipe Buttom, and so on.
Example of using Technical Analysis
This is a Technical analysis on BTC/USDT and using chart patterns such as head and shoulder, as well as indicators such as RSI, Volume, and MACD.
Fundamental Analysis.
This is also a great trading tool, we all understand the power of news either it is positive or negative. Traders use the great tool of news to determine the direction of a token or currency. If there is news of a bad occurrence with a particular currency, it is most likely that there is going to be a drop in value of that currency either the news is real or fake and on the other hand as well, whenever there is positive news about a currency or token, there is definitely going to be a predictable rise in price.
An example of fundamental analysis is what Elon Musk did with Dogecoin, just an accreditation from the tweet of a successful entrepreneur like Elon put Dogecoin into limelight. Cryptocurrency projects also understand the impact of fundamental analysis, so great resources are usually pumped into users providing a good use-case for their products, with a good use-case of the product, there is a huge possibility of an increase in price and vice versa.
Name at least 3 cryptocurrency exchanges with the highest trading volume where we can buy our first cryptocurrencies and explain in your words the ways to buy cryptocurrencies on at least one of these platforms ( Do not use Binance
There are numerous exchanges to trade cryptocurrency and there are few with large volume and liquidity, amongst them are Kraken, Huobi and Kucoin.
I will be explaining how to purchase cryptocurrency on Kucoin exchange and to buy a coin on Kucoin, you need to first sign into the exchange.
Signing in can be via Mobile number, or Email. After inputing either of both, the password to the exchange account is needed.
After signing in, the exchange page showing the exchange wallet is displayed.
To buy my first cryptocurrency, i will click on the "Buy Crypto" button after which after which I get options such as purchasing with a debit/credit card, P2P trading of fiat to cryptocurrency and Fast Buy.
To purchase with Debit or credit card, click on Credit or Debit card. This page has other methods of Payment such as SEPA, Google pay and Apple Pay
The other method to purchase is via P2P trade, where there is a direct transfer of fiat and cryptocurrency between two users having the exchange as the escrow.
The fast buy is the third option and users can buy USDT, BTC, and ETH with their local currency very fast.
Conclusion
Trading is a very important skill to learn and I am glad i was able to learn. Exhanges have been able to support different types of trading including Derivatives, Margin, and so on.
It is good to be a of this class, thanks a lot to everyone who took time to read through my post.