Atomic Swaps, DEX, OTC, Limit Order, Stop-Loss, Fill-Or-Kill, Margin Trading & Wash Trading


Welcome to the Crypto Jargon series. I’m your host OJ. Today’s episode is about trading and the types of trading orders. I’ll break down the terms: This episode is sponsored by Ledger: The maker of the best hardware wallets on the market. To find out more about it, Check out the description of the video where you will find the link and my tutorials on the Ledger Nano S and Ledger Nano X devices. Ok, so I’m gonna start with OTC which is an acronym for Over-The-Counter which is a term for Off-Exchange Trading, in other words, trades that occur peer-to-peer (between two parties) rather than using an exchange platform. Orders are not listed on the public order book. and clients can trade with each other via a broker or another third party without anyone else knowing about their transactions. An OTC trade can be done at market value. When we talk about market value, we mean the current market price that is determined by combining an average of prices between different exchanges. Some exchange platforms would only allow you to buy at market value, while other exchanges the ones that we call “trading platforms” are the ones that allow you to set up Limit Orders to choose your price. That means you decide what price you want the order to be executed at and it can stay open for a long period of time until the price parameters are reached so that the order gets fulfilled. The opposite to a limit order is “Fill or Kill” which is an order that must be executed immediately or it gets canceled. So you can set up the parameters of that order, but it cannot stay open until it gets filled. It will have to be executed straight away otherwise, it will be canceled. A Stop Loss-order is another type of limit order. It’s designed to limit a traders loss. It gets triggered at a certain price point and it gets executed if the desired parameters are reached For instance, if you buy a certain asset a coin at $5, and the price doesn’t go up as you expected, you would have a stop loss at $4, or maybe at $4.50 so that if there is a decline in value of this coin you will be selling it before it dips by another 20 or 30%, which is not unusual in the crypto market. Typically, a 10% stop loss is a common practice for traders and they are often establish this stop-loss orders as soon as they make a purchase to protect themselves against bigger losses another usage of creating a Stop loss-order is to actually hide your order. For instance, if you’re placing a very large order to buy or sell It can affect the market if it’s being seen by the other traders, so you might want that order to stay hidden therefore, you would set that order to be triggered at a certain price level and until that price level is reached the order will stay hidden It will only become active at the price level that you set up I’ll give you an example if I want to buy at $4 and currently, it’s $5 So I’m expecting it to go down to the four-level But I don’t want that order to be seen because it’s a really big order and other traders would see that and they would keep the price going up there would keep buying because they know that there is a lot of interest at the $4 range. I would set a stop which triggers the order. I would set the stop at $4.10 and when the price goes down to $4.10 only then my order will become active and I will be hopefully buying it at $4 because you know $0.10 is usually a small margin. When we’re talking about cryptocurrencies, of course with standard currencies, this is a big margin So I’m giving you a very rough example here just to illustrate how to stop all the works So at $4.10 that order will be activated. It will become visible. It will become active and I will still be waiting though for the price to go down to the $4 Which is what I’ve said, I made even said it for $4.01, right? so at that point at $4.01 the order will become active and my actual order is to buy at $4. So, this is how it works. This is how it will stay hidden, all the way until the price goes to $4.01. If this is where the stop is, This is why it’s called a Stop Order. Now, Margin Trading This is the act of adding leverage to your trades When margin trading, you actually borrow money against your current funds to trade cryptocurrency “on margin” on an exchange, In other words, you are borrowing money to increase your buying power Generally, you pay interest on the amount borrowed but not always Now, imagine you work on 10X 10 times leverage, That means you own, let’s say 1 Bitcoin But you borrow the rest and now you place by yourself holders for 10 bitcoins In that case, when you get it right You make 10 times more the money you actually have But if you lose, you now have to cover the borrowed amount and pay it out of your own pocket So it is considered very high risk and can be very profitable or a complete disaster if you get it wrong. So there are very few exchanges that offer margin trading for crypto Moving on to Wash Trading which is an illegal form of price manipulation in which a trader simultaneously places sell and buy orders to artificially increase trading volume and thus, the asset’s price In effect, traders are fraudulently buying and selling assets to themselves with the intention to create fake impression of higher demand. Many times this involves automated software, known as bots which plays multiple orders simultaneously. Now moving on to Atomic Swaps This is a decentralized smart contract technology, which enables direct exchange of one cryptocurrency for another without the need of intermediary or a third party. Anonymous by default, These are highly regarded in the crypto community, but still not used very much because of lack of liquidity. Most of the time, atomic swaps are being executed on decentralized exchanges and talking of decentralized exchanges, this is where the last acronym for this episode comes into play, Dex is short for Decentralized Exchange These types of exchanges are still in their infancy, but with a lot of attention in the crypto community. They are expected to be a big business in the coming years and some of the more well-known ones are Changelly, Bitshares, Barterdex, Altcoin.io, Waves and Binance Dex. Well, this concludes today’s episode of Crypto Jargon, Don’t forget to leave a like and comment below and check out the links in the description box. Also if you are new to this channel, I would encourage you to subscribe and hit the notification bell icon so you don’t miss an episode. Thanks for watching guys, and I’m gonna see you in the next one. Enjoying this content? Why not grab a copy of my book: Crypto Jargon A to Z the most thorough dictionary that exists to date with over 700 definitions of acronyms, trading slang, and all the crypto terminology you need. Just go to www.ojjordan.com/cryptojargon and grab your digital copy today

12 thoughts on “Atomic Swaps, DEX, OTC, Limit Order, Stop-Loss, Fill-Or-Kill, Margin Trading & Wash Trading”

  1. I guess these are the most exciting terminologies for me on crypto space – trading! Not new really, since some are common with stocks and fx. Will stay tuned!

  2. Exchanging crypto is already high risk, now imagine doing that with margin trading. In this example an automatic sell would occur if you got 10% loss and then you’d lose all your 1 BTC, is that correct? I tried once in Poloniex just to see how it works.

  3. I have always wondered what stop loss is and never understood them since. so is dex. Thanks oj for the education and i am always looking forward for the next one.

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