A) Place yourself in the following situation:
You bought BTC a couple of days ago at a price of USDT 62K. Suddenly, you see that this situation is going on:
What would you have done before reading this class? What would you do now? Explain in detail if there's something you would do differently.
Before I continue, I have to make it clear that when it comes to trading you need to understand risk and money management properly as it is needed to keep your trading funds from disappearing over the trade. Being a risk-taker should warrant the loss of funds. I will be giving responses to this post from my little experience as a trader.
As of the time of writing, the price of Bitcoin is $58,086.87 but do not forget that it has not always been at that price since the market changes regularly and is affected by demand, supply, and other intrinsic and extrinsic factors. As at a time, Bitcoin hit its All-Time-High (ATH) of $64,863.10 which wasn't far from the $62,000 stated in the first question but then we expect the market to fluctuate regularly and so when BTC was bought at $62k, there is a possibility for the price to increase or drop.
What I would have done if I bought BTC as $62k
I will give a real-life illustration here where I bought BTC at $63k and I was hoping BTC would hit $70k. I watched it carefully until it got to $64k and almost hit $65k but then it started to drop in price. Funny enough, when the drop started, I was out of connection for about 48 hours as I travelled to a remote region. I am sure you would think that I would have sunk with the price deep but I didn't.
When I bought the BTC at $63k, I set a stop loss at 5%. 5% is a lot with BTC either for a fall or a rise so I decided to mitigate my loss so I used Stop-Limit at 5% to alleviate my losses and jut left the profit to a case of when I returned. Actually, I knew I was going to be out of network for about a day or two but wasn't sure, so I decided to set a Stop-limit.
When I got back to my trade, I realized that I had sold the BTC I held at the rate of $63K sold at $59,900, so when the price dropped to the $50k low, I had $59k in USDT. I bought BTC again at $53k when it had 2 supports at that region.
B) Share your own experience when it comes to making mistakes in trading:
What mistakes have you done when trading and what did you learn from them? If you have little experience when it comes to trading, tell if you got to know about someone else's experience.
My biggest mistake was trading futures when I had no idea about it. I would prefer to refer to it as gambling as I was not well informed about futures and didn't know anything about trading at the moment.
I wanted to get out of a debt and was very fraustrated. I was scrolling through my contact WhatsApp status and came accross a status where a person was showing his profit of over $2000 while trading futures. I was really in need of money at the moment. I had a $10k debt to pay but then, I had $2000 in my Binance account. I decided to trade futures and see what I would make from the trade.
I traded the contract with my entire $2000 with a 75% leverage. I started the trade going completly opposite to the market with the believe that the market would go in oposite direction if I traded in the opposite direction to the market but I was liquidated in less than 5 minutes.
I was very bittered about this and I felt very sick for days. I learnt never to invest what I cannot afford to lose. I should trade only money I can afford to lose and never trade without proper knowledge of trading.
Which of the strategies discussed in this class you find the most useful for you? Why?
After the trade, I learnt a few things which I found in this class again and they include;
Never trade with money you cannot Lose
If I had traded with spare money, I would have not felt worse when I lost the money while trading.
Do not let your emotions control you
I was very emotional with my trading. Just wanted to see profit and wasn't concerned about mitigating losses. I didn't know people could lose money, I just wanted to make profit just like the person in my contact made profit.
C) Place yourself in the following situation:
You're browsing Twitter and you see this:
You see that whenever this kind of things happens, BTC prices rush. What would you have done before reading this class? What would you do now? Explain in detail if there's something you would do differently.
Elon Musk has become a crypto god of late and this has made everything he says to become a driving force. If he says something negative or positive, there is an almost immediate reaction in the industry. With Elon Musk sharing such a tweet, I would do some very simple things which include;
Study the movement of the market
There is a possibility that the market will go for or against the tweet, so the first thing to do is study the market and ensure that the market goes in a favourable directionTrade with funds you can lose
I will trade with part of my funds so I do not lose all my funds while trading.Set a Stop-Loss
This is one thing I will always do. I will ensure to trade, setting a stop-loss.
Conclusion
Trading can be very risky, it is very important to trade with caution. Trading should be done with spare money (Money you can lose) and you should know when you exit a trade, no matter what happens.
I'm sorry! This homework was due on May 8th, I'm afraid to say you were late to it :(
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