In order to profit from crypto trading, every aspiring financier must obtain basic rules for market manipulation and analysis. It is crucial to know the lingo to better adopt sophisticated trading strategies and understand industry standards.
This article describes corresponding information every investor would love to have at his or her disposal.
Buy Wall/Sell Wall
A buy wall is a process that happens when a particular group of traders buys a coin in the exchange order book. This is done to deceive other buyers about strong demand for a specific trading pair. Traders implement such strategies to adjust the market price. For the order to be filled, many impatiens compete to purchase as many low-cost orders as they can and therefore, increase the price slightly above that of a buy wall.
Buy walls do not stand on the market for long; normally, the orders are either filled or drawn very quickly. Further, it’s the best-known form of market manipulation, and when it happens to a “healthy” coin (e.g. Bitcoin), the trading goes normally without radical damps on the horizon.
Make sure to analyze market sentiment (i.e., the percentage of how many trades have taken the position in a particular currency pair). In other words, before making any trade decisions, investigate currency performance.
Contrary, sell walls indicate a rather unhealthy performance of the currency pair. This process occurs when a group of traders gets rid of a large holding of a coin. The wall is intended to avert the orders from being sold at a high price. This leads to devaluation of the coin (i.g., no real growth is occurring to it). Typically, the orders are getting filled gradually, from highest to lowest.
Both processes indicate the best time to either sell or buy cryptos, and very often affluent traders take advantage of the price differential.
Futures contracts are financial agreements that oblige the participants to exchange a specific amount of asset at the predetermined date; such contracts are designed to optimize trading on a futures exchange because they enable traders to speculate on price changes.
The term futures expiration concerns the date when participants exchange their assets. The buyer has to buy an asset and obtain it from the seller at the expiration date. Even in the event of market-wide decline of stock prices, and severe losses, a trader is able to re-establish the balance by gains in the short futures position.
To trade with futures, an investor has to investigate the strategies used for hedging and speculation purposes.
Future Gap Fill
Future gaps are price patterns which represent times of low trading activity. Gaps often occur when markets are inactive, closed or haven’t traded overnight. There are two types of such gaps represented on futures price charts. The up gaps occur when the market’s low price is higher than the peak price of the previous day and thus are considered bullish. In contrast, the down gaps appear when the high price falls below the minimum price, and are considered bearish.
Futures gaps happen regularly on the Bitcoin market, and are very popular with enterprising traders; while the BTC/USD pair spot trades 24/7 while Bitcoin futures do not, you might be surprised to find out how many futures gaps occur on the market.
In the Forex Exchange market, this term refers to a margin call, at which the exchange closes out a trader’s stocks due to the loss of trader’s Initial Margin. This is due to the use of leverage and because the trade is made with a contract whose price is derived from an asset and not the asset itself. Usually, the process of liquidation is predetermined and the brokerage firm gives a heads up.
When this happens, the trader loses all his or her capital. Additionally, liquidations of large derivatives can lead to significant price fluctuations. Precisely, in 2019, the BitMEX users have witnessed a series of liquidations, amounting to $700 million worth of assets. This usually has seriously affected the market’s price and liquidity.
To conclude, it is crucial to continually expand your knowledge and understanding of cryptocurrency trading. Keeping track of the market’s activities and most importantly, analyzing major trading strategies will help you take root in the pool of the leaders of crypto investing.