Steemit Crypto Academy Contest / S3W4 – Cryptocurrency Trading by @drqamu

Hello dear steemians, hope you are all doing well and enjoying this season . Today I choose to write a task set by Steemit cryptoacademy which is about crypto trading.

Discuss in your own words what is cryptocurrency trading. And tell us what type of trader are you or do you see it more effective? Justify your answers.

Before understanding the concept of cryptocurrency trading, we must first know what is trading. Trading in simple terms refers to buying or selling any asset or service. So cryptocurrency trading refers to buying or selling of cryptocurrencies. The act of buying or selling is known as position in the crypto sphere. When we buy a crypto asset is known,it is known as long position and when we sell an asset, it is known as a short position. In cryptocurrency trading, we take a position in the direction of the expected movement of the price of an asset.As crypto trading is carried out in pairs,the base currency is bought or sold for either USDT or other crypto. So trading may be crypto to crypto or crypto to USDT ( stable currency).

For example, if we have USDT in our account and we want to buy BTC in anticipation of a forthcoming price hike. We will select BTC/USDT pair and place a Buy order ( Long position ). On the other hand, if after doing analysis, we expect a decrease in the price of BTC, we will go short by selling BTC for USDT.

So to understand the type of trading that I find interesting I'll briefly let you know few trading types. Cryptocurrency trading has multiple types:

• Spot Trading.
• Leveraged trading - Future and Margin trading.
• P2P trading.
• Arbitrage Trading.
• Options trading.

^{Few trading types on Binance}

Each of these trading types is in itself a separate topic for discussion so I'll be only mentioning definitions of these and proceed to my trading type.

Spot trading is that type of trading which is carried out with the help of available funds of the trader in the support market. On the other hand, leveraged trading is carried out with the help of funds leveraged by exchange ( multiple of once own funds). P2P trading is carried out between two individuals in an exchange at desired prices. Options trading involves trading contracts at discounted rates and not the crypto tokens per se. Arbitrage trading is a type of trading in which an individual takes advantage of the price difference between different exchanges and buy assets on an exchange with a lower price and then transfer them to the exchange with a higher price and sells them there.

As for trading styles are concerned, crypto traders have different trading styles depending upon the time for which they can hold their position. If a trader buys and sells a crypto token on the same day, then that style of trading is known as intraday trading.On the contrary,if a trader holds his position for days or weeks then that style of trading is known as swing trading or position trading.

Having tried the multiple types of trading, my favourite style is a Spot swing trade. By spot swing trade, I mean trading with my funds without taking leverage and holding positions as long as targets are met. Let me put forth some solid reasons for my trading style :

• in Spot trading I am not borrowing or leveraging any funds from the exchange. Leveraging of funds increases the risk of liquidation in case trade doesn't go in the right direction. So spot is less risky trading.

• Position can be held long as one desires to hold without any additional charges On the other hand, in leverage trading,rollover charges apply on holding the position for greater than 8 to 12 hours.

Have you tested several time units? What Timeframe and Crypto Asset Pairs Are Best for You? Why?

As mentioned above, trading styles are classified based on the time for which a trader holds its position. If a trade is carried out in a single day, it is known as intraday trading. If trader holds his position for days to weeks, that is known as swing trading. And if a trader holds the position for months,that is known as position trading or investment.

I have been in a market for two years now. As retail traders, we don't have much role to play in the market, unlike big players who can manipulate the market.I have tried intraday trading, leveraged trading and swing trading in these years. I haven't been able to do well in intraday and leveraged trading. So I am doing short-term swing trading. I hold the position for few days to weeks and sell on achieving the desired level of profit. As I don't like aggressive trading, so I am satisfied with spot trading. I enjoy small profits without losses spot trading, you can have a 100% win rate because all that is needed is to hold long unless desired levels are reached.

The only way to book a loss is an untoward event that disturbs the fundamentals of the token as has been seen in the LUNA crash. I recently booked a loss in EZ as Binance is going to delist it in two days. I bought this token last week and since then it has been sinking till date I read the news of its delisting. So I sold it at loss.

As for trading pairs are concerned I like trading in coins with solid fundamentals and a good ranking in the market. I also add volatile tokens to my portfolio as they boost the portfolio in short term. Coins with solid fundamentals that I like are DOT/USDT, BNB/USDT, ADA/USDT, and XRP/USDT, Similarly, coins with volatile nature like RUNE, CRV, EZ, and ZRX are also traded to have short-term gains as well.

To acquire some trading experience, it is important to trade regularly. Have you had regular trading activity over the last few months? Tell us what you learned from this experience. ( eg: Over the long term, do your gains exceed your losses? Do you have a method of recording and reviewing your trades to improve your performance? refined your trading system after being dissatisfied with its results?)

Being a short-term swing trader who trades in multiple trading pairs, I do trades almost regularly and have learned some important lessons from the market, Few of them are as :

• Never enter market in FOMO and leave in FUD. I have made some losses in both the scenarios in last few months. One big example is that of LUNA. While LUNA was crashing, I purchased a spot with the hope of gaining in future. I ended up losing all the invested funds. Similarly, I also made a loss towards the end of 2021 when news about the ban of cryptocurrencies in indian market was on a rife. I exit the maket in FUD and booked the loss ,I realised that in long term losses are easily recovered and even good profits can be booked.

• Never do oversizing in the market because that is going to give you disproportionate loss in case of market movement in an unexpected direction. Oversizing is done always with the greed of booking huge profits without considering losses. So never be greedy.

• Psychology of trader is the most important thing that a trader should have control on. Due to poor and immature psychology, I used to hold losing trading and exit winning trades.

• There should be a proper risk-to-reward system to sustain the market .The development of proper money management system is mandatory in the market.It includes factors like risk per trade,risk perday, quantity and most important is STOPLOSS.

• Maintain a trading journal on a routine basis. It is ideal to write whatever comes to your mind in the market Review the trading journal routine basis to rectify the mistakes and analyse the trading system or set-up. Make necessary changes in your trading style, set up strategies and note down the results until a profitable system is developed.

What impact does artificial intelligence have on crypto trading in the short and long term? Have you used it before or want to handle an automatic trading robot? Tell us the causes of your choice.

Artificial intelligence is considered to be the future of the crypto sphere as it caters to multiple domains of trading. We have seen that BOTS are being incorporated in major crypto exchanges like Binance etc to facilitate automated trading. The use of AI has the following benefits over manual trading in the crypto sphere:

• Ai can help in predicting trends more accurately by analysing multiple timeframes and multiple indicators simultaneously.

• AI can help in placing trades more frequently on preset values.

• Ai can help in providing price alerts more accurately and on time.

• AI can help in the proper utilisation of funds under preset conditions.

• AI can help in enhancing the security of the trading.

As for my experience with AI is concerned, I haven't used it because I didn't find it beneficial in short term. Previously I wanted to give it a try on Binance but when I checked the results for the short term they were negative. However, in long term most of the crypto pairs were positive.

Conclusion

Crypto trading involves taking position in the direction of market movement over a variable period of time. Each trading type has its pros and cons. With experience in market , we get to learn various things and explore different phases of the market . As time passes , we gradually refine our experience and ultimately grow into a more experienced trader with stable psychology. Besides manual trading, AI has also set foot into market with pros and cons .