#4 SMT01 For Trading In Crypto Space

Hello! Friends,

Welcome to SMT01 Series. As we continue on the trading basic terms in the crypto space, like I use to say, don't forget to open one account on an exchange. (bittrex, binance, bitshares, yobit e.t.c). This will guide you on the terms I have been explaining. In case you miss out of the previous series, check it here: #1, #2, & #3

_{Pixabay: Electronic Money}

Let's continue on technical analysis on crypto space:

• Support

This is a price level at which the pressure of buying on a particular asset is historically greater than the selling pressure. This means that the asset encounters support when its price attempts to dip lower than that level. When you are looking for ways to secure profit in a volatile market like crypto all you need to do is to buy into a crypto asset when you sighted that asset is around a level of support and the trader expects that the support will hold.

Note: The moment an asset break through a support level, the level will turn to a resistance level.

• Liquidity

This simply means a measure put in place to convert an asset into cash quickly and without loss. The theory behind liquidity is that the easier this is to convert an asset to cash, the more liquid an asset is.

• Moving Average

This is also used in technical analysis to smoothing the smaller fluctuations in an asset's price. Also, we say, Moving Average refers to the average price of an asset against a number of periods of a given length. The movement comes in different varieties, but again the most common types are known as exponential which is the determinant of the average price of an asset and this does two functions:

1. It gives more weight to more recent prices
2. It gives a simple moving average which determines the average price of an asset without any time bias.

• Confluence

This is the multiple indicators or analytical methods presence in crypto space which indicates the same upcoming movement in an asset's price. It's actually a way of mitigating trading risk just by waiting for multiple signals all forecasting the same thing, rather than for you to enter trading on a single indicator basis.

• Contagion

If you study physics you understand what a wave is. In general, the term wave is caused by a disturbance. Contagion comes into being when a disturbance spreads from one market to another and has the potential to disrupt trading strategies that centered heavily on market correlations.

When a person trying to profit by watching a pair of tightly correlated cryptocurrencies, you wait for one to have a disproportionately low price and thereafter buy that disproportionately cheap cryptocurrency, with the mind that the price will rise soon and restore the correlation between the pair. But from the look of contagion, all the crypto market space might be heading for a dip and this simply means that one will have lost money by taking a long position on the disproportionately cheap cryptocurrency.

• Black Swan

This is an event that is virtually impossible to predict and it has a huge effect on the market. In 2008 Zimbabwe's peak inflation rate of 78-80 billion percent which is one of the standard examples of black swan event. An impossible to predict marketwide changes is part of risk management in trading and this needs to be considered in as much we are dealing with an extremely volatile market (crypto).

You may ask, why then black swan? I will say it was derived from past history. Let me share you with little:

There was a Roman poet coined a particular phrase which he uses to identify something as impossible. The word was written in Romans maybe if I set my eyes on that statement I may drop it in my next series but the phrase means a rare bird in the lands and very much like a black swan. During that period that bird was thought to not exist.
This phrase became popular and the Europeans began to use it in order to call something out as impossible which continued until the man called Willem de Vlamingh discovered black swans in Western Australia with his team of Dutch explorers far back in 1697. This discovery made the black swan a symbol of impossibility void, rather the black swan evolved into a symbol of something seemingly impossible which means it can later become a reality. This was what Nassim Nicholas Taleb popularized into his book in 2001 titled **The Hidden Role Of Chance In Life and In the market.

We are getting closer by the day... To be continued... Thanks for your time.

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