Crypto Academy Week 12 - Homework Post for [@stream4u]

in hive-108451 •  3 years ago  (edited)

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Hello @stream4u, for me it is an honor to publish you an assignment for the first time, I gave my best, looking forward to meet your quality standards.
I hope you like it.

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What is cryptographic margin trading?

Margin trading is fairly easy to understand: you trade by trading with more funds than we actually have available. It works by allowing us to have funds that our Exchange will hold in place and use as collateral to borrow more than we actually have and thus be able to have a multiplier of our trading amount of up to 125% extra; not better, because while the returns are higher when we use a higher amount multiplier, the risk is much higher. Now we will use an example to illustrate this explanation: let's imagine the situation where, in the long run, the price of bitcoin is $10,000 and we use a multiplier of our trading amount of 10%, which will make the crypto margin $1,000. When bitcoin increases by 5% in the market, our profit increases by 50%; but this happens thanks to the fact that when we are using a multiplier of 10% we eventually end up giving a profit of 50%. So it will continue to increase, so our profit grows exponentially, however, there is an inverse effect if the price drops by 5%, that means we will lose 50% of our margin, but if the price drops even more we run the risk of being liquidated. Liquidation is when the market moves against your trade until the loss is the same amount as your margin and in that case we lose our position. This is what makes crypto margin trading so risky. The interesting thing about trading with our trading amount multiplier that spot trading cannot do is shorting. Shorting is when we can sell at a high price and buy back what we have sold at a lower price than the original price and thus the price turns into a profit. An appropriate example is as follows: Let's say our entry price is $10,000 and we are using a 10% multiplier, so our margin is again $1,000, and if the price moves down 5%, we will earn 50% of our margin, which is 500. If it moves down 10%, we will earn 100% income. And so on and so forth it grows exponentially as the price moves down. If the market moves against you and goes up 5%, we have lost 50% of our margin. In the long run, if the price goes up too much and our margin equals our loss, then we will be liquidated.

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How To Plan For Trading In Crypto Margin Trading.

Mainly we have to understand that trading on margin in the world of cryptocurrencies works as a kind of credit that we will have to repay through previously established commissions. Before choosing any cryptocurrency asset, its instability should be evaluated. The advisable to start a trade would be to choose a time frame in which there is a minimum probability of reductions. On some platforms for crypto margin trading there is a possibility to choose another leverage after this trade has started and thus have another perspective on the risk/reward for an open position at a convenient time. For example, if our trade has exited with a regular profit and a contrary price movement is not expected, it is possible to increase the leverage. In the first case, it increases our probability of risk and in the second case, there is the possibility of delaying the automatic closing of a bad position. Once willing to enter into margin trading, we must remember that any unforeseen movements in exchange rates can be expected, so we can conclude that the long-term reduction will actually mean a loss of the deposit.

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Crypto Exchanges Name That Provide Margin Trading Service and What Margin They Provide?

a) HitBTC: It is one of the most diverse crypto trading platforms in the market, which allows you to have enough space to experiment with different currencies. However, one of the most striking things about this platform is its low fees. Its highest trading fee is 0.09%, although people who trade higher amounts can enjoy fee discounts or can receive a cashback bonus for each trade.
b) BitMEX: This platform works with p2p processing. BitMEX is ideal for not charging withdrawal and deposit fees. Trading fees are well below 0.1%, while taker trading fees are 0.25% for all currencies except BitCoin which is 0.07%.

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What Is Leveraged Tokens Trading?

These are tokens whose value moves in line with the value of the cryptocurrency they represent. Thus we find the BTCUP and BTCDOWN tokens that will increase as the price of BitCoin goes up or down respectively. The different variations of these tokens have a leverage of between x1.25 and x4, which represents one dollar for each increase or decrease of the BitCoin, since we will have a token whose leverage does not depend on a margin. This is done in order to adjust the leverage to increase profits when the price moves in favor of the token. These leveraged tokens allow trading without the risk of facing a possible liquidation.
Let's take an example, let's imagine we have $1,000 to invest and let's say bitcoin is currently worth $10,000, suppose we want to make a leveraged investment, brokers offer different types of leverage from x1 to x125. That means that if we have $1,000 to invest and we choose a leverage of x10, the position I open with that money is going to be a $10,000 position. But where does the other $9000 come from? The broker lends it to us. We must bear in mind that any movement we see in prices will be reflected positively or negatively. In other words, if Bitcoin goes up 1%, if it goes from being worth $10,000 to being worth $10,100, that will mean 10% of our total position.

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How To Plan For Trading In Leveraged Tokens?

For trading with leveraged tokens it is appropriate to know mainly that these can only be traded on exchanges and we cannot withdraw leveraged tokens in our wallet. To obtain collateral, we must move the money to a margin wallet. In a margin wallet, we can decide the amount of collateral and specify the amount of leverage. If our position is liquidated we will lose our money and have to pay fees. Therefore, it is important to keep track of the risk monitor and make risky decisions. The margin account gives us the possibility to use a counter to ask for more money by changing a regular order mode to a margin order with borrowed money. Finally, when the trade ends, the leveraged funds are manually refunded.

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Crypto Exchanges Name That Provide Leveraged Tokens Service and What Margin They Provide In Leveraged Tokens?

WhiteBIT: This platform offers a trading market with a leverage of 5x. It offers fiat-to-crypto with Euro, Russian Ruble, among others. Unlike other exchanges, it is rare to see one that offers a complete derivatives market and allows conversion from fiat currency to cryptocurrency.
FTX: Offers up to 101x spreads. This exchange offers 3x in different currencies, which means that a person's profit or loss can be up to 3 times that of regular spot trading.
Binance: This platform provides the opportunity to borrow in more than 40 cryptocurrencies. The maximum leverage of this platform is only 5x, not as much as in other platforms. However, its trading margin is available between 3x and 5x.

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Price Forcast (Litecoin).



Analyzing the behavior since the beginning of this year with respect to the LiteCoin chart we have two ideas of its possible behavior for the next 7 days: It may go down to round $210. Currently its price is set in the $360 range, which in case of breaking partly enables this projection. Or, on the contrary, it may execute an ascending triangle and rise in the short term to $530, but the probability of this happening is present as long as it breaks its previous high of $430.

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Please read this:

Professor @stream4u, I thank you immensely for this task, as it helped me to expand my knowledge in the complicated world of trading, since as an investor I have focused more on the HOLD.
The truth is that it cost me, but I gave my best and I feel that I did a quality task.
Thank you! you can't imagine how much it helped me to learn, I appreciate it.


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Thank you for joining The Steemit Crypto Academy Courses and participated in the Homework Task.

  • Provided information are explained well

thank you very much for taking interest in this class

Grade : 7

Thankiu professor @yousafharoonkhan!