Having already mastered the basic trading jargon, it’s time to get to know some of the more sophisticated processes. With this handy guide to advanced trading, you’ll have a deeper understanding and get more out of your interactions with the bitFlyer platform.
To help you better understand each term, we will not only explain it, but also use it in practice. So let’s get started.
Anti-money laundering (AML)
Anti-money-laundering (AML) refers to a set of procedures, laws, and regulations that are needed to stop the practice of generating income through illegal actions. In a crypto exchange, AML capabilities are enacted to prevent the conversion of money obtained from illegal activities.
A stop order is a command to buy or sell an asset when its price hits a particular point. Stop orders allow you to predetermine your exit price, which limits losses if there is a sudden crash. The stop order becomes a market order when the price reaches the predefined entry/exit point.
You have 1 BTC, for which you have paid $3700. You are expecting BTC to hit $5000 sometime in the next month, but you do not want to take a huge loss if the market turns the other way. So, you set a stop order for $3650. If the stock goes up, you will make quite a handy profit. If the stock goes down and hits $3650, the exchange will automatically make it a market order and sell your asset. Bear in mind that you will not necessarily receive exactly $3650, you will most likely receive a little more or a little less once the trade is executed.
A limit order is an agreement that you make with an exchange to execute a trade at a certain price point or better. If that price point is never reached, your order may never be executed. However, if it does take place, the price is not guaranteed. Limit orders allow you to set a time limit on the order, after which the trade won’t be executed at all. It can be used to both buy and sell.
Stop limit order
A stop-limit order is an order that will be executed at a specified (or potentially better) price, after a given stop price has been reached. Holders set two prices with a stop limit order; the stop price and the limit price. If the limit price takes place, the price is guaranteed.
The latest BTC trading price is €6000, and the resistance is around €6100. If you think that the price will go higher after the price reaches the resistance, you can put a Stop-Limit order to automatically buy more BTC at the price of 6110 euro. This way you won’t have to continuously watch market movements waiting for the price to reach your target.
Conditional order and its types on lightning: IFD, OCO and IFD-OCO
A conditional order is an advanced trade order which is automatically submitted or canceled if specified criteria are met. It lets you set order triggers for stocks and options based on the price movement of stocks, indexes, or options contracts. Typically, conditional orders are used when it is important to automate part or all of the trade entry/exit order entry process.
- IFD means “If Done”, and is an order with two-parts. If the primary part of the order is executed, the second part of the order will be activated accordingly. Therefore, if two orders are made at the same time and the first one is filled, then the second order is automatically placed.
- OCO is for “one cancels the other”. This conditional order stipulates that if one order is executed, then the remaining one is automatically canceled. In fact, OCO essentially eliminates emotions from trading activity and promotes systemic trading by ensuring on trigger entering of trades.
- IFD-OCO: IFD-OCO is an amalgamation of the aforementioned processes. After an IFD order is filled, the OCO order is automatically placed.
Moving average (MA) and Exponential Moving Average
A moving average (MA) is a method used in technical analysis to smooth out smaller fluctuations in an asset’s price: It’s the average price of an asset over a number of periods of a given length. Simply put, it determines the average price of an asset without any time bias.
Exponential moving average is a method used in technical analysis to determine the average price of an asset while giving greater weight to more recent prices.
Circuit breakers, or collars, are financial regulatory instruments that prevent stock market crashes from occurring. Usually, circuit breakers are employed for both stocks and indices, protecting members of the stock market against speculative gains and dramatic losses. When a stock enters an upper circuit, it puts an investor who has already invested in that stock at an advantage. Meanwhile, a stock movement into a lower circuit would place the investor at a disadvantage, due to the difficulty in selling off devalued shares.
In China, circuit breakers hold off trading for 15 minutes after a five per cent index drop, and trading is halted for the day if the drop dips to seven per cent.
Depth chart gives a visualization of the demand or supply of a particular stock, commodity or cryptocurrency. They essentially show the supply and demand at different prices.
Technical analysis (TA)
Technical analysis (TA) is a trading strategy that emphasizes using mathematical patterns and indicators to predict where an asset’s price will go in the future. Some focus on TA to the exclusion of all else, reading charts without reading any actual market news — though this isn’t recommended. TA assumes that a security’s price reflects all publicly-available data and instead focuses on the statistical analysis of price movements.
Fundamentals analysis (FA)
Fundamental analysis (FA) is a trading strategy that emphasizes trading based on the intrinsic value of the asset. Traders consider a wide range of quantitative and qualitative data in an attempt to determine this intrinsic value. Especially in these early days of crypto, a lot of fundamental analysis amounts to trying to determine which cryptocurrencies have compelling long-term value propositions, rather than being mere get-rich-quick schemes.