If you aspire to be a trader, you should understand the basic of trading. The basic is too simple “buy low, and sell high” but as a newbie how do you really understand that statement?
Image Source: facebook.com
When I was newbie exploring trading, I don't even understand the basic even that buy low and sell high thing because when you are on the trading platform live, you'll get confused with the moving graphs, candlestick and the green color of buy and red color of sell.
Understand the basic of trading “Buy Low & Sell High”
Do you even understand that buy low and sell high? Why the color of BUY button is GREEN while the color of the button SELL is RED? You know when I was newbie, I don't understand it. I was even confused that the buy button has higher price than the sell button.
From that I asked myself “How it is called buy low and sell higher, when those buttons contradicts with that statement?”
From the photo above, it's BCH/USDT pair price. You'll see that the BUY button has $638.71 price while the SELL button is $636.87, see? How come it's like that?
Btw I used Stormgain chart for this and it is a margin trading platform and not on spot.
Why buy button is green?
Green represent a positive outlooks of the price, and buyers represent a green candlestick.
When there are more buyers coming in the market than sellers, the candlestick shown will all be in green. This also means that the trend is upward 📈 and it is called bullish.
Why sell button is red?
Red represent the negative outlooks of the price, and sellers represent a red candlestick.
When there are more sellers in the market than buyers all candlestick will be red colors. This means that the trend is downward 📉 and refers to us as bearish.
Why buy button price is higher than the sell button?
In trading there are buyers and sellers, buyers will buy the prices given by the sellers that is why the prices that will reflect on buy button is higher than the sell button.
Just look at the order book above sellers prices on the left side color red, starting from $638.68 to $639.92 the price that will reflect on buy button are the price that was asked first, when that price filled already it will move on to the next ask price until it goes higher and higher because lower prices has been bought already.
If you noticed the more people buy the more prices goes up because of the demand and supply low. Inorder to cater all demands the price will be adjusted higher because the supply is decreasing.
Why sell button price is lower than the buy button?
The price that will reflect on sell button are the prices that the bidders placed on market price, usually buyers wanted a lower price entry that is why the prices are lower compared to sellers price.
Just like the buy button the sell price button price will also flactuates once the first price bid was filled.
Why is called Bid and Ask in order book?
Bid and ask are the quotation price that buyers are willing to pay for the trade and sellers willing to take as payments of the trade.
The Ask is the sellers price quotation that will reflect on the buy button.
The Bid is the buyers quotation price that will reflect on the sell button.
What is the basis of current price that will reflect on the coin?
The current price that will reflect on the coin will be based on the volume of the trade if there is more volume of sellers than buyers then expect that the price of the coin will drop, while if the volume of buyers is higher than the sellers this will bring price increase of the coin.
The price that will reflect on the coin is based on who are the dominant, the buyers (bulls) or the sellers (bears). It's like the one who dominates will win the bid and that will be the one to reflect on the price.
If you noticed above the coin price is changing color as well meaning if more sellers then it's red and if more buyers then it's green.
How to buy low and sell high then?
To buy low just tap the BUY button, DO NOT CLICK CONFIRM. Instead click the LIMIT/SELL then input your price limit, but if you want to enter trade right away chose the bid prices above the. Click confirm. You can put the TP (take profit) amount and SL (stop loss) on your trade if you are in leverage. But if on spot you can just simply set sell limit at your own price preference.
If you are in leverage buy means BUY LONG.
In SELL this is only applicable in margin trading if your prediction of the coin price will drop, this is called shorting the coin or SHORT SELL. DO NOT CLICK CONFIRM, instead click the LIMIT/STOP then input your price target for shorting then confirm.
If the price drops then you'll gain from that, it's like you are betting that the coin will drop and if your bet is correct you'll get profit from that.
Closing Thoughts
Those are the things that confuses me before, ending I buy high and sell lower instead. Sometimes I even picked prices on the Ask instead on bid if I bought coins ending right after entry price my PNL is already negative lol.
If you want to learn about trading then understanding the basics is a must.
Note: Original Content unless revamp. This is also based on my understanding, if I mentioned some info incorrectly feel free to do correction, it would be highly appreciated.
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