The 6 Steps of the Trading Process
Your weekly Educational piece brought to you by the CryptoAltum Cryptomenon Team.
You’ve just created your account at CryptoAltum. Now you’ve got the hopes and dreams of becoming the best trader and getting the profits rolling in. However, you realize you don’t have the fundamental knowledge to actually make a trade, well, have no fear! We at CryptoAltum will be explaining to you how a trade is made from the initial discovery to the end result of closing a trade. So buckle up and read on!
Any well-trained trader knows that you never ever trade with your eyes closed because it’s quite impossible to click on the right buttons when you can’t see them. What’s meant by this is you should never open a trade without being sure of at least one market move.
That’s why each and every trading journey starts with identifying an opportunity; the epic hunt for a signal that can help you understand the direction the markets are moving towards. This could be as simple as reading an interesting article that tells you what’s happening in the cryptocurrency market, just like the ones we write at CryptoAltum. You can visit our Blog for daily market analysis about the top three most traded instruments in the cryptomarkets; Bitcoin, Ethereum and Ripple.
However, if you believe you can trust your own judgement over anyone else’s, you can begin your search by scanning the multitude of indicators that are at your disposal on the MT5 platform. You can examine all the content in front of you, then make your trading decisions accordingly.
Maybe you’re the kind of person who needs both; reading some analysis and understanding what the numbers are saying then using the indicators accordingly. It doesn’t matter how you search, as long as you search and understand what the markets are saying.
So, let’s say you’ve already conducted an extensive search and found out that Bitcoin (BTCUSD) is experiencing some downward movement and seems to be on the course to continue moving lower. You then decide to open a Sell position on BTCUSD.
Step 2: Opening your Trade
What good is all the research that you’ve conducted if not to capitalize on the information and actually open a trade? So, you need to head over to the MetaTrader 5 platform (MT5) and set up the trade.
Let’s say you’ve decided to enter a 1 lot size of BTCUSD.
To actually open the trade, you need to head over to the Market Watch section of MT5 and search for BTCUSD. Then, simply double-click on the BTCUSD symbol, and the New Order window will appear:
The first thing you should do is to check the volume you want to trade. In the example above you’re looking to trade 1 lot of BTCUSD, meaning that the volume would be 1.00.
The next thing to check is whether you want a Market Execution or a Pending Order.
What’s the difference?
Well, Market Execution is when you open the trade immediately at the current market price. Pending Orders are when you set a certain price to enter the market at and once the market reaches that level, your trade is automatically executed.
For this example, we’ll keep it simple and choose Market Execution. Once you’ve set up everything, it’s time to press the Sell or Buy buttons depending on what the analysis suggested we should do.
Now that you’ve opened your trade, it’s important to set your Stop Loss (SL) and Take Profit (TP) levels.
In the above example, you’ve decided to Sell 1 lot of BTCUSD, this means that you should specify a TP that’s lower than the current market price since you want the price to fall, and an SL above the current market price.
Now that you have that idea in mind, it’s time to understand what kind of risk you’re willing to bear. Let’s assume that you’re willing to sacrifice only 10% of your equity on such a trade, so you know your SL. If you’re unsure of the kind of profit you want, as a rule of thumb, always go with a reward to risk ratio of 2:1. You’d be willing to make twice as much as you’re willing to lose.
Back to the trade.
Assuming that you have 1 BTC in your equity, this means you’re only willing to risk 0.1 of the BTC on this trade. We won’t go into details on how the TP and SL are calculated in such a trade, since this isn’t our focus today. Once you’ve figured out the levels for both the TP and SL you need, you should actually implement them into the trade.
There are two ways to do this. You can do it before you even enter the trade; you set up your TP and SL by filling in the appropriate boxes with the levels. This way is shown in the previous image. The other way is through modifying your trade. To do so, you must locate the trade on your Trade Terminal then double click and the following box will appear:
Make sure that ‘Type’ field shows as ‘Modify Position’ and not anything else, otherwise, the adjustment won’t happen. Once you have the type as ‘Modify Position’you’ll be able to adjust your TP and SL according to your preferences. At CryptoAltum the minimum market price must be 720 points away from the current market price in order for the system to accept your SL and TP.
In this example, you’ve set your SL at $12,843.23 so you’re risking a loss of 0.1 BTC. Your TP is at $9,632.41 which equates to a profit of 0.2 BTC. Technically, your reward to risk ratio is 2:1.
Make sure you press the Modify button, or the system won’t make the modification and your trade will remain without a TP and SL. We don’t want that.
You’ve set up everything at this point. You’ve opened your trade and set up your TP and SL. It’s finally time to monitor your trade and make sure everything is going according to the plan.
To locate your trade, you should go to the Trade Terminal which is located at the bottom of your MT5 platform as shown in the following image:
This section is where you can watch your trade closely and adjust your TP and SL whenever you need to. You’re also able to monitor your trade on the graph itself. It shows you where exactly did you enter your trade and the levels of your TP and SL as well.
The green dotted line is where you’ve entered your trade. It shows you your entry-level. As for the red dotted lines above and below your entry-level, they’re your SL and TP, respectively. Since this is a sell position, you’ll find your TP below the entry price and your SL above it. If it were a buy position, those levels would have been reversed.
Step 5: Closing Your Trade
Things are moving in the markets as we speak and sometimes you need to close a trade manually before it reaches either your TP or SL. If you leave your trade until it reaches either the TP or SL it’ll automatically close once it hits either of these levels.
To close manually you need to revisit the Trade Terminal at the bottom of the MT5 platform. If you want to completely close out a trade, you can simply press on the “X” button right next to your Profit tab. When you do so, you completely close out a trade and whatever profit or loss you’ve made becomes reflected in your account.
Now that you’ve closed your trade, it’s time to review and see exactly how much profit you’ve made.
On the Trade Terminal, you can find the History tab. When you press on that tab, you can view all the trades that have been made. The entry point, exit point, along with your TP, SL, and profit or loss of each trade are displayed there as well.
That’s it guys; the six steps of the trading process.
No matter what your crypto-related question is, feel free to reach out to your CryptoAltum Account Manager or our outstanding Customer Care Team. Your personal and dedicated Account Manager is on hand ready to help you with any questions.