Crypto Trading Basics

How to buy and sell

No matter which platform you use to trade, they all have things in common. You will see common features on each. This guide is to help you understand these features within the chosen trading platform, what they mean and how you use them. For the purpose of the tutorial, we are using the Bitmex Platform. To open a Bitmex account and save 10% on fees for 6 months, click HERE! (We are working on tutorials for all the platforms we have recommended, so please keep a look out).

The basics

If you are reading this, then you should have funded your Bitmex account with Bitcoin and are ready to start trading. If not, click HERE for our tutorial on buying and depositing Bitcoin. So, we will have a look at the layout of the platform and go through what everything means.

(Desktop view of Bitmex)

So, this is what you will see when logging on to Bitmex. So, let’s get started:

The tabs at the top are different currencies that you can trade. For now, we will focus on Bitcoin.

 Leverage

Leverage in a nut shell, is where you can multiply the amount of money you want to trade to make your initial margin smaller. For example:

If you have 0.1btc in your account, you can leverage that amount by 10x and trade a full BTC (0.1btc x 10= 1.0btc) Your margin is therefore only 10%. You can trade up to 100x leverage, which means, if you have 0.1btc in your account, you can trade 10.00btc (100x Leverage is never recommended due to the volatility of Bitcoin). When you begin trading, we recommend no higher leverage than 10x max until you feel confident in trading for profit. If you try to run before you can walk, your balance will disappear very quickly. So to set you leverage, just click on the bar to your chosen leverage size. Bitmex will ask you to confirm this change before accepting it.

Liquidation

This is an important section so pay attention. Your liquidation price is the price the platform has set to close your position when you’re on a loss. If the price of your trade does hit your liquidation, you will lose ALL the margin you have placed on that position, ALL OF IT! The liquidation price changes dependant on the leverage you have. Very low leverages and a big gap between the current price and the liquidation price, but high leveraged orders have a very small gap between the two. Therefore, we never recommend 100x leverage as you will find that you will lose more money then you would like. There is a way to never hit your liquidation price while trading and this is explained later in this article when talking about how to close your position.

The Charts

Every trading platform will have the following charts on their screen, the orderbook and the price chart.

Placing An Order

There are several ways to how to place an order, we will guide you through them all. Some of these will be found in the blue tab next to the Stop Limit button.

Market Order

The market order is the quickest way to place an order. If you place one this way, you will take the price of bitcoin exactly as it is when you execute.

So, once you have entered the amount you want to buy or sell and execute, you will see the following box appear. (NOTE: This confirmation will appear regardless of what type of order you place)

Limit Order

A limit order is an order you execute at a price you decide. It won’t execute immediately as you will have to wait for your price to be reached before opening your position. This is a handy tool to use if you think the price may rebound and you want to get a position open just before.

Trailing Stop

A trailing stop order is where you open an order, but you have a stop loss automatically set at a certain price behind your open position. The trailing stop will all follow an increase in price at the gap you have chosen but will not move with a decrease in price. E.g. If you open an order at a price of $9500 and your trailing stop is a $100 gap, your stop loss is set at $9400. However, if the price goes up to $9600 then your stop loss will then be $9500 ($100 gap still). But a trailing stop will never fall with the price only follow it. So, if the price then drops from $9500 to $9450, then your stop will not move from the $9400 stop. Your trailing stop will stay at that price until the price gets higher than the last highest price (in this scenario, if the price then goes over $9501, then the trailing stop will then follow again). This a handy tool if you are expecting a large change in price, or you are not available to keep tabs on your position, as you can take advantage of a spike, but cover yourself if there is a rejection and resistance after the spike and the price drops again.

Stop Limit And Take Profit Limit

A stop limit order is the same as a limit order, but you set a stop price. The stop price is the price your open order will close at if you are making a loss. A take profit limit order is the opposite. You place your limit order and set a price for your open position to close on a profit.

Stop Market

The stop market button is a price you set after your order is open to close your position at a certain price below your current price. (NOTE: If you set this to a more profitable price then your current price, it will close your position instantly). E.g. If you have bought Bitcoin and the price is $9500, you can set your stop anywhere below that price. But if you set the stop over $9500, it will close your position. This is designed for if the price retracts to stop you from wither losing more than you need to or to take a lower target price to keep you in profit. You can change your stop price at anytime via the stop tab (see open position below).

INPORTANT: YOU SHOULD ALWAYS SET A STOP MARKET ABOVE (IF BUYING) AND BELOW (IF SELLING) YOUR LIQUIDATION PRICE! IF THE PRICE OF BITCOIN HITS YOUR LIQUIDATION PRICE, YOU WILL LOSE YOUR WHOLE OPEN MARGIN AND WIPE IT FROM YOUR BALANCE. THIS IS TO COVER YOUR LEVERAGE. HOWEVEER, IF YOU SET YOUR STOP MARKET TO CLOSE YOUR POSTION BEFORE THIS HAPPENS, YOU CAN SAVE A HUGE AMOUNT OF YOUR MARGIN THAT YOU HAVE ON YOUR OPEN POSITION! A SMALL LOSS IS BETTER THAN A FULL LOSS!

Closing a position

So now you have opened a position using one of the different methods above and hopefully you want to close on a profit. So, we will take a look at your open position.

Open position

(NOTE: If you have set a stop on your position as explained above, you will see it in the stop tab.)

Symbol – Represents which coin you are trading on the position

Size – The size of your order. (Green is a buy order and red is a sell order) Click HERE for a quick tutorial on whether to buy or sell.

Entry Price – The price you paid when entering the order

Mark Price – The current price of the currency you are trading

Liq Price – Your liquidation price

Margin – The margin (cost from your balance) you are using and your leverage X

Unrealised PNL – Your current profit (green) or loss (red) at mark price

Realised PNL – The fee taken (this will be minus from your unrealised when you close. NOTE: Like most trading sites, you are charged commission when opening and closing your position, so to get a better estimate of your profit, times your Realised PNL by 2 and then take off your unrealised PNL.

Close position – You can set a target price in the box and press the close button to confirm. When the mark price hits this, your position will close. If you want to close your position straight away, you can press the market button and close your position at the market price.

That should be everything you need to know to begin trading. We will look at the more sophisticated side of the platform on another tutorial.

But for now, happy trading!

To see our recommended trading platforms, click HERE!

Leave a Reply

Your email address will not be published. Required fields are marked *