This time, I want to make a homework post that will answer professor @yohan2on from Steemit Crypto Academy, as the homework is to answer some questions given by our professor.

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[A] Define the following Trading terminologies: Buy Stop, Sell Stop, Buy Limit, Sell Limit, Trailing Stop Loss, Margin Call

There are several terminology that exists when we are going to trade in cryptocurrencies, all of these things are important things that we must know so that we can benefit from the trading we do, these terms include:

• Buy Stop

Buy Stop is an action taken by traders to make a purchase on a cryptocurrency at a price above the current price. This purchase is made by traders when the market trend is reversing from bearish to bullish, in this case traders will not immediately make a purchase, they will wait for price confirmation first, the confirmation in question is when the cryptocurrency price has passed the resistance level that has been set. determined. If this has been confirmed, it is considered that the price of the cryptocurrency will increase and that is when the best price traders can take.

For example, as in the chart above, I put the resistance level of Polkadot at $15.615 and the current price of Polkadot is around $14.500. Then the Polkadot price rose until it broke through the resistance level that I had previously set, after confirmation I also made a purchase at a price slightly above the resistance level just in case the price reversed direction, by making this purchase I was able to get a profit because I managed to make a purchase when the trend is in the Bullish phase and the price is rising high quickly.

• Sell Stop

Sell ​​Stop is an action taken if the price of a cryptocurrency is decreasing until it breaks the support level. This order is made when the trend reverses from Bullish to Bearish, so traders will set prices to monitor price movements first until they break through the support level before entering, if this is confirmed then the order can be executed.

In the example above, we can see that the chart shows that the trend has entered a bearish phase. The current price is at $44.000 with the support level at $39.991. Then the price of Polkadot decreased until it passed the previously set support level, after the confirmation I also made a purchase at a price slightly below the support level just in case the price reversed to go up, by placing this sell order I was able to get a profit because I managed to make a purchase when the trend was in a bearish phase.

• Buy Limit

Buy Limit is an act of buying cryptocurrency at the lowest possible price or commonly called "Buy on weakness", by doing this, traders will get the lowest price so they can get a big profit. The price set for the buy limit is when the cryptocurrency price reaches a support level which is considered the lowest level of a cryptocurrency. Traders will first see the price movement which is in a bearish phase, after the price has touched the support level, that is where traders will place a Buy Limit order with the assumption that after reaching that level the price will reverse into a Bullish trend.

An example of a Buy limit we can see in the chart above, I set a Buy Limit at the support level that I have set, which is at a price of $28.502. The latest price of Polkadot is at a price of around $31.000, we can see that the trend at that time was decreasing so the price of Polkadot continued to decline until the support level, after that confirmation I then made a purchase and after that the price reversed to Bullish so I made a profit which is big because I bought at the lowest price at the time.

• Sell Limit

Sell ​​Limit is an order that will be made when the trend is experiencing Bullish so that the price of the cryptocurrency experiences a high increase until it reaches the resistance level. In this case the trader will wait first for the price movement of the cryptocurrency that is experiencing an increase, after touching the resistance level which is a confirmation that the price of the cryptocurrency is at its highest level then that's when the traders will place a sell limit order so that they will get the highest price.

In the example above you can see that I set the Polkadot resistance level at $38.713 which will be my Sell Limt confirmation point, while the current price of Polkadot is around $33.500. When the price has crawled up and reached the resistance level, then it is a confirmation that tells me to place a sell limit order, after touching the resistance level the Polkadot price slowly admits a decline which made me get a big profit the price I set the sell order at highest price.

• Trailing Stop Loss

Trailing Stop Loss is an action to protect traders from loss while making traders get the highest profit. In this action the traders will set a stop loss based on the percentage of the decline from the current high. But not all stop losses are made based on percentages, there are some traders who set their stop losses based on ratios such as 1:1, 1:2, etc.

Usually the stop loss is placed at a price below when the market is experiencing a bullish phase and the price is set above the market price movement in a bearish bearish phase. When the price moves in an unwanted direction, traders will move their stop loss at the opposite price of their trade entry price by doing this traders will only get maximum profit because the trailing stop will always be moved at a price closer to the price. the current price so that the take profit percentage will be even greater.

• Margin Call

Margin Call is a term where traders will get calls from brokers that aim to solve margin problems that have occurred. Margin is a trade that traders make with brokers with the average having to provide investment funds and traders will borrow from the broker to trade with more funds.

As we know that there is no trading process that always produces profits, there are several times in the trading world where traders often experience large losses and make all their assets run out. That's when the brokers will make a Margin Call and when a margin call is made the traders are warned by the broker to fund the trading account to close the lost open trade positions.

I myself consider this call a "Call of Death" because if traders have received this call then the situation of the trader is not fine. There are several things we can do to avoid Margin Calls, such as making good risk management so that we can find out how much we can afford to lose so as not to get a Margin Call.

[B] Practically demonstrate your understanding of Risk management in Trading

Every activity that we do, be it trading or investing, will always experience a risk of failure that will make us lose the money we have spent on trading or investing. Especially in the cryptocurrency market which has a very large level of fluctuation where asset prices can change a lot in just a very short time, this makes us traders or investors have to be very careful in trading and investing in the cryptocurrency market.

However, we do not need to be afraid of this, because failure is a natural thing where we have to go through all of it. To minimize losses when you fail to trade on cryptocurrencies, there is one important thing that we all need to know, namely risk management. As traders and professionals, we must know that all trading risks can be minimized and prevented by creating and implementing good trading management. Then the addition and incorporation of several strategies and good analysis are also needed in order to minimize losses while maximizing profits.

Risk Management can be broken down into several things that I think are very important for all of us to know, all of which include:

1. Portfolio Management

When we have decided to enter trading or invest in cryptocurrencies, we automatically have our own portfolio, but we must know that we have to manage our portfolio. The purpose of managing a portfolio here is to trade or invest with not only one type of cryptocurrency, by using this management we will be able to minimize our losses directly and appropriately.

For example like this, I decided to invest in cryptocurrencies, then I chose to buy STEEM coins with all the money I had, then a few days after the STEEM price dropped quite deep to above 50% which means I lost the money I had invested more than half of them, and what's more painful is that the only coins that experienced a decline at that time were STEEM coins while most of the other coins did not experience a decline, in this case I was wrong in managing my portfolio management.

The thing we should do in managing our portfolio is not buying just one cryptocurrency, we have to divide the money that will be invested into several good cryptocurrencies, for example BTC, ETH, ADA, DOT, etc. I personally suggest splitting it on atleast 5 cryptocurrencies so that we will have more security.

2. Risk to Reward Ratio

This ratio is a factor that all investors and traders must pay attention to in order to get the maximum benefit from the assets they have. There are various types of traders that exist today, there are some who are afraid to stop losing and there are also traders who are always greedy when trading so that they continuously want to make a profit. This is very wrong and must be corrected immediately, traders should adjust this ratio when trading so that they can accept any situation that occurs in the market, whether to gain profit or reduce losses.

This ratio can be different for each trader, while the ratios that are often used by traders are 1:1, 1:2, 1:3, and so on. The more reliable a trader is in trading, the higher the ratio that will be used will be. But for novice traders will usually use a ratio of 1:1 and 1:2.

The purpose of the ratio is like this, if I am a novice trader to trade on a cryptocurrency and I set the risk and reward ratio for me is 1:1 then I will get two final options, namely profit and loss, if the percentage of profit I want I get 5% then the percentage of loss that I have to set is 5% too, which means I am ready to bear the loss of 5% of the money I traded in the event of a failure in my trading.

3. Take Profit and Stop Loss

As a trader we must always think about when we will start to enter for trading and when we have to make a decision to take profit and of course to stop loss. Many traders are still confused about when they will take profit and when they should make a stop loss. Actually this is related to the Risk and Reward Ratio that I explained earlier where we must know very well when we will enter and when we should exit the trade.

By knowing these two things, traders will be smarter in making trading decisions both in take profit and stop loss, indeed this is a trivial thing for some people, but over time this will be felt when they are no longer able to control their emotions in trading so will get many other losses.

4. Example of trading using Moving Average

Now I will show you how to trade using an indicator called the Moving Average, this indicator is an indicator that can signal the direction of the trend to traders, so that we can make entries in accordance with the direction of the trend.

In this example I will use a UNI/USDT chart with a 1 hour timeframe and two moving average lines with lengths of 50 and 200 respectively.

We can see in the chart above that the two MA lines have crossed where the MA50 is below the MA200, this indicates that the trend has reversed from Bullish to Bearish so this is the right moment for me to make a sell entry because the trend is Bearish.

I monitor first so that there is confirmation where the candlestick touches the yellow MA50 line, after that confirmation is obtained I make a sell entry at the price of the next candlestick and I immediately set my risk and reward ratio. The risk level I set is above the MA line while the reward ratio is below the MA line, as for my trading details as follows:

• Entry Price: $28.61.
• Take Profit Price: $25.611.
• Stop Loss Price: $30.096.

Based on these data, we can get several things, among others:

• Take Profit Percentage: (28.61 - 25.611) x 100% = 2.999%

• Stop Loss Percentage: (30,096 - 28.61) x 100% = 1.486%

• Risk and Reward Ratio: 1.486 / 2.999 = 1/2

From the results of these calculations, we can see that when I set the risk and reward ratio for the trade I did this time, it was 1:2, which means that if I profit from my trade, the percentage value will be 2 times greater than the amount of loss I will get. if I fail in this trade. But you can see on the chart that the price has been moving downwards since the MA50 crossed with the MA200, which means that the trend has entered the Bearish phase and my trade this time was successful and I got the profit that I set, which is 2.999% of this trade.

[C] Conclusion

Everything we do in the cryptocurrency market must have good risk management, because the very large fluctuations in the cryptocurrency market create a very large percentage loss rate for all traders who do not understand how to manage risk and emotions. Then we can also do some of the terminology that I have discussed above in order to maximize the maximum profit and at the same time reduce the level of loss from our trade.

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Thank you for reading my blog, hope it will be useful for readers.
I would also like to thanks professor @yohan2on for creating such an excellent study like this.
See you in the next post!!