The basics of any trade

Table of contents
The basics of any trade ............................................................................................................................ 1
Spot vs future trading: ............................................................................................................................. 2
Shorting ............................................................................................................................................... 2
Leveraged / margin trading ................................................................................................................ 2
Different modes in future trading (isolated/cross) ................................................................................. 2
Isolated mode: ..................................................................................................................................... 2
Cross mode .......................................................................................................................................... 2
Stoploss (SL) & take profit (TP) ................................................................................................................ 3
Stop-loss .............................................................................................................................................. 3
Take-profit ........................................................................................................................................... 4
Limit orders & market orders: ................................................................................................................. 4
-Market order ...................................................................................................................................... 4
-Limit order .......................................................................................................................................... 5
Everything in a visual perspective (binance) ........................................................................................... 6

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Spot vs future trading:
Most exchanges offer two different types of trading:
-First off, we have regular (spot) trading. This is the section where you buy any crypto you want and if
it goes up 20%, you profit 20%. Vice versa if it would go down 5% you would lose 5%.

-Second we have margin/future trading. Future trading incorporates two new factors:

Shorting
Short trading basically means betting against the price course of the crypto u invest, or in other
words: you expect the crypto to go down. Let’s say BTC is at 35K right now and we expect it to drop
to 31.5K (10%). We place a short order and actually earn 10% when the price goes down 10%. Vice
versa, if the price would go up 5%, we would lose 5% of our entry. Hence the terms: shorting
(expecting price to decrease) and longing (expecting price to rise)

Leveraged / margin trading

In future trading you can use leverage/margin. Leverage allows your regular entry to be x(leverage)
times to a nominal entry. So, here’s an example: If we enter a long with 100USD and use 5x leverage,
our nominal entry would be 500USD. That means you earn and lose 5 times as much as regular spot
trading. So basically, leverage scales your profits & losses.
Example:
person A and B expect BTC to rise in price from 40K to 44K(10%), person A longs on spot and person
B longs on 10x leverage, both invest 100USD at the time BTC is at 40K:
*BTC actually rises to 44K (+10%)
A: No leverage involved -> (nominal entry = 100*1) -> earned 10% on this = 10$
B: 10x leverage involved -> (nominal entry = 100*10) -> earned 10% on this = 100$
vice versa if btc would drop 10% A would lose only 10 and B would lose 100.

Different modes in future trading (isolated/cross)

In future you can choose either isolated or cross mode.

Isolated mode:
This mode gives you a liquidation value based of your leverage. Lets say u use 50x leverage u can only
lose 2% of your entry before ur entire entry gets liquidated (50x2% = 100%) -> u only risk your entry

Cross mode
Cross mode allows breathing room for the trade, because the liquidation value is based off the
leverage + the amount of $ in your future balance. So, if u go beyond the 100% loss in previous
example, the exchange will use your future account balance to make up for additional loss -> u risk
your entire balance in the future tab. This can be helpful because now we’re trading on leverage,
small price changes have high impact on our trade, example:
crypto X price is 100$ and we expect an increase to 120 (20%). We go x20 leverage with entry =100
USD (nominal entry = 100*20 = 2000).
Price drops to 93 first and then to 120 -> isolated would liquidate entry: (7%*20 > 100%) whereas
cross would use balance in future account for this additional loss and eventually make $$ at p=120.
Vice versa, if price keeps dropping below 93 -> the loss on cross is much on cross is much bigger.

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Stoploss (SL) & take profit (TP)
Stoploss & takeprofit are key concepts in trading and are part of most if not any successful trading
plan with proper risk management (these concepts will be explained later). These two can be used in
any (future) trade -> that means shorts & longs.

Stop-loss
A stoploss is placed below the current price and stops the trade at that value, used when:
1) PREVENTING MORE LOSSES: So, for whatever reason the price didn’t do what we thought it
would do and now we’re in a loss on our trade. At some point there is a value where you just cut
your losses and move on. These stop losses are best used when strategically placed at key price
points. Example:

We think the price will rise at ENTRY and thus we enter market in long. Everything looking great we
in profit but then tragedy strikes and everything goes downhill. IF we used a stop loss, the trade will
be stopped on the level indicated, if not we lose more money (assuming we’re on cross -> isolated
might have liquidated at this point). This really shows how a well-placed S/L can help losing more
money. As for the strategics where and how to place it, we’ll get more into that later.

2) SECURING PROFITS: Now that might sound counterintuitive with the name but I’ll show with this
example again.

Let’s say we made the same entry, everything goes well short term (we reach CURRENT PRICE LEVEL)
and we want to secure a bit of our profits. We can do this by moving the stop-loss up at that point so
let’s say entry was 15, current price level is 20, if we put the stop-loss at 17.5 we’re guaranteed
profit.

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Take-profit
The takeprofit is used above the current price and stops the trade and stops the trade at this value.

As the word suggests this is used to take profits when we did a successful trade. For instance, if we
enter btc long at 30k, expect it to rise to 32.5k, where it will have a bounce back potentially -> we use
our take profit <32.5 so the trade shuts down automatically in profit.

Example of trade with t/p & s/l combined:

Hit T/P -> successful trade.

IMPORTANT NOTE: These graphs & explanations show takeprofits & stop-losses on LONGS. If we
were to short (earn money when price goes down) it would be the exact opposite:
Stop-loss: Used above the current price
Take-profit: Used below the current price

Limit orders & market orders:

Last but not least there are multiple ways of HOW you want to enter the market. There are more
than two ways but for now we’ll discuss the two most important ones.

-Market order
In a market order you sell or buy at the current market price. If you press your buy button now, you
instantly acquired your crypto at the price you currently see on your screen.

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-Limit order
Limit orders allows you to choose a price where you want to get in a trade. If this value gets hit, your
trade starts. This works for shorts and longs, for example (LONG):

Let’s say we’re now at Current price which is 35, we analyze that if the level reaches 30 the chance of
a bounce up will be significant & thus we want to get in around that price. A market order would get
us in instantly at 35 (current price), whereas a limit order only start the trade at a chosen level.

This also works with shorts, but now we want to choose a place where we could go down:

For both limit & market orders you can use the stop-losses and take-profits we discussed earlier. As
you can see limit orders in combination with the right tp’s and sl’s can make it so that you can plan a
trade in advance. It allows you to step away from your monitor, rather than being glued at ur screen
and binge watching the graphs. Trading plans are very important to be a successful trader. Setting up
such plans takes a lot of knowledge about the market/patterns and more, we’ll get into it more later
on.

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Everything in a visual perspective (binance)

Choose the crypto u want to

trade in here.

Cross/isolated mode

Leverage

Short or long order

Market or limit order

Current price

This slider allows you to buy %

of ur total balance or: choose
amount of crypto u want above

Take profit & stop loss

This should give you all insight to set up any trade properly.
AND REMEMBER: DON’T BET MORE THAN YOUR WILLING TO LOSE -> THINK IN WORST CASE
SCENARIO’S.

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