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HomeUltimate Crypto Trading Guide-Chapter 4-Technical Analysis Basics

Ultimate Crypto Trading Guide-Chapter 4-Technical Analysis Basics

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Andrew MacGill

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Table of Content:


Technical Analysis Basics:

What is a long position?

A long position (or simply long) means buying an asset with the expectation that its value will rise.
Going long on a financial product is the most common way of investing, especially for those just starting out. Long-term trading strategies like buy and hold are based on the assumption that the underlying asset will increase in value. In this sense, buy and hold is simply going long for an extended period of time.

What is shorting?

A short position (or short) means selling an asset with the intention of rebuying it later at a lower price. Shorting is closely related to margin trading, as it may happen with borrowed assets.
When it comes to shorting on the spot markets, it’s quite simple. Let’s say you already have Bitcoin and you expect the price to go down. You sell your BTC for USD, as you plan to rebuy it later at a lower price. In this case, you’re essentially entering a short position on Bitcoin since you’re selling high to rebuy lower. Easy enough. But what about shorting with borrowed funds? Let’s see how that works.
But In margin trading or future trading You borrow an asset that you think will decrease in value – for example, a stock or a cryptocurrency. You immediately sell it. If the trade goes your way and the asset price decreases, you buy back the same amount of the asset that you’ve borrowed. You repay the assets that you’ve borrowed (along with interest) and profit from the difference between the price you initially sold and the price you rebought.

What is the order book?

The order book is a collection of the currently open orders for an asset, organized by price. When you post an order that isn’t filled immediately, it gets added to the order book. It will sit there until it gets filled by another order or canceled.

 

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Order books will differ with each platform, but generally, they’ll contain roughly the same information. You’ll see the number of orders at specific price levels.

When it comes to crypto exchanges and online trading, orders in the order book are matched by a system called the matching engine. This system is what ensures that trades are executed – you could think of it as the brain of the exchange. This system, along with the order book, is core to the concept of electronic exchange.




What is a market order And How to use it?

A market order is an order to buy or sell at the best currently available market price. It’s basically the fastest way to get in or out of a market.

When you’re setting a market order, you’re basically saying: “I’d like to execute this order right now at the best price I can get.”
Your market order will keep filling orders from the order book until the entire order is fully filled.
This is why large traders (or whales) can have a significant impact on the price when they use market orders. A large market order can effectively siphon liquidity from the order book. How so? Let’s go through it when discussing slippage.




What is a limit order And how to set it?

A limit order is an order to buy or sell an asset at a specific price or better. This price is called the limit price. Limit buy orders will execute at the limit price or lower, while limit sell orders will execute at the limit price or higher.
When you’re setting a limit order, you’re basically saying: “I’d like to execute this order at this specific price or better, but never worse.”

Using a limit order allows you to have more control over your entry or exit for a given market. In fact, it guarantees that your order will never fill at a worse price than your desired price.

However, that also comes with a downside. The market may never reach your price, leaving your order unfilled. In many cases, this can mean losing out on a potential trade opportunity.

Deciding when to use a limit order or market order can vary with each trader. Some traders may use only one or the other, while other traders will use both – depending on the circumstances. The important thing is to understand how they work so you can decide for yourself.

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What is a stop-loss order and how to place a stoploss? (V V Important To Use Stop Loss)

Now that we know what market and limit orders are, let’s talk about stop-loss orders. A stop-loss order is a type of limit or market order that’s only activated when a certain price is reached. This price is called the stop price.
The purpose of a stop-loss order is mainly to limit losses. Every trade needs to have an invalidation point, which is a price level that you should define in advance. This is the level where you say that your initial idea was wrong, meaning that you should exit the market to prevent further losses. So, the invalidation point is where you would typically put your stop-loss order.

How does a stop-loss order work? As I have mentioned, the stop-loss can be both a limit or a market order. This is why these variants may also be referred to as stop-limit and stop-market orders. The key thing to understand is that the stop-loss only activates when a certain price is reached (the stop price). When the stop price is reached, it activates either a market or a limit order. You basically set the stop price as the trigger for your market or limit order.





Stop loss in Urdu/Hindi

Support And Resistance (V V Important)

Support and resistance are some of the most basic concepts related to trading and technical analysis.

Support means a level where the price finds a “floor.” In other words, a support level is an area of significant demand, where buyers step in and push the price up.

Resistance means a level where the price finds a “ceiling.” A resistance level is an area of significant supply, where sellers step in and push the price down.

What Are Support And resistance?

How To Find Support And Resistance Levels





Support and Resistance In More Detail

Support And Resistance In Hindi

Trend Lines ( VV Important)

Trend lines are a widely used tool by both traders and technical analysts. They are lines that connect certain data points on a chart. Typically, this data is the price.

The main idea behind drawing trend lines is to visualize certain aspects of the price action. This way, traders can identify the overall trend and market structure.

Explaining Trends, How To Draw Trend Lines

How To Draw Trendlines





How To Draw Trendlines Like A Pro

Best Trend Lines Trading Strategy (Advanced)

 

DisClamier: This content is informational and should not be considered financial advice. The views expressed in this article may include the author's personal opinions and do not reflect The Crypto Basic opinion. Readers are encouraged to do thorough research before making any investment decisions. The Crypto Basic is not responsible for any financial losses.

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Andrew MacGill
Andrew MacGill

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