Muhammad saleem akram

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#CEXvsDEX101 Despite the rapid evolution of Decentralised Finance (DeFi), CEXs remain enormously popular due to the high level of liquidity and security. CEXs use the order book system to match bid and ask price, which means the more orders there are, the more liquid the market is. CEXs also provide fiat- crypto trading pairs and act as the guarantee for the completion of transactions. They are especially beginner-friendly – most individual investors made their first crypto transactions “on-ramp” or, in simpler terms, with their credit cards. Bitget is one excellent example of major centralised trading platforms, with 2 million users (8,000 of which are active daily) and ranking 3rd worldwide in terms of liquidity.

#CEXvsDEX101 personal information – no KYC compliance is required. There are two types of DEXs, the ones with an order book system (LoopRing, Gnosis Protocol or IDEX) and the ones with the innovative automated market makers (Uniswap was the first to adopt this model). DEXs can list more trading pairs as the listing process is not as demanding as with CEXs.

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Blockchain 101: CEX vs DEX
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Blockchain 101: CEX vs DEX
Blockchain 101: CEX vs DEX
Beginner
2022-07-08 | 5m
In this article, we will dig deep into the critical differences, advantages and disadvantages of Centralised Exchanges and Decentralised Exchanges.

The Definitions
You heard about CEXs and DEXs?

When it comes to transacting digital assets, many are confused by the sophisticated concepts of Centralised Exchanges (CEXs) and Decentralised Exchanges (DEXs). CEXs clearly enjoy the advantages of being the first-mover in the space, but DEXs – with their ability to eliminate financial middlemen – are more favoured by crypto maximalists.

The term “centralised” refers to the intervention of intermediaries, here the exchanges who coordinate trading activities between sellers and buyers on a large scale (Bitget, Coinbase, Binance, etc.). The decentralisation process removes the safety and guarantee offered by registered companies, resulting in DEXs where freedom comes with great responsibilities. Trading fiat for crypto and vice versa are easy on CEXs, while DEXs in general do not support fiat

#TradingTypes101 You will be able to design your own Trading Systems
You will understand how financial markets really work
You will learn about different asset classes, trading instruments and which one to use when
You will lay the fundamentals of becoming a professional Trader that does not rely on others anymore
You will learn the benefits of technical & sentiment analysis, when to use it and when not
You will learn how to use ChatGPT to automatically backtest your Trading Strategies

#TradingTypes101 traders can earn big profits or pile up significant losses. Indeed, with the evidence showing that most day traders lose money over time, it's an extremely risky career choice. Day traders, both institutional and individual, would argue that they play an essential role in the marketplace by keeping the markets efficient and liquid. Though day trading will always be intriguing to individual investors, anyone considering it needs to acquire the knowledge, the resources, and the cash that it takes to have a chance at succeeding.

#TradingTypes101 The so-called first rule of day trading is never to hold onto a position when the market closes for the day. Win or lose, sell out. Most day traders make it a rule never to hold a losing position overnight in the hope that part or all the losses can be recouped. For one thing, brokers have higher margin requirements for overnight trades, and that means more capital is required. There's a good reason for that. A stock can go down or up on overnight news, inflicting a bigger trading loss on the owners of shares.

#TradingTypes101 Day trading is challenging because of its fast-paced nature and the complexity of the financial markets. It requires traders to make quick decisions based on real-time information, which can be overwhelming, especially in volatile market conditions. Traders must be adept at technical analysis, interpreting charts and patterns, and understanding how economic events influence market movements. Moreover, emotional control is crucial; day traders must avoid common pitfalls like overtrading or letting emotions drive their decisions

#TradingTypes101 The percentage of day traders who achieve profitability is relatively low. Various studies and broker reports suggest that a small fraction of day traders consistently make profits over the long term. Estimates vary, but it's commonly accepted that only around 10% to 15% of day traders are successful over time.
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This low success rate is attributed to the high risks, the need for substantial skill and experience, and the intense competition in the financial markets. Many aspiring day traders face significant losses in their early trading careers, and only a few persist and learn the skills necessary to become profitable.

#TradingTypes101 Day trading can be profitable, but it's far from guaranteed. Many day traders end up losing money before calling it quits. Success in day trading requires a deep understanding of market dynamics, the ability to analyze and act on market data quickly, and strict discipline in risk management. The profitability of day trading depends on several factors, including the trader's skill, strategy, and the amount of capital they can invest

#TradingTypes101 Profiting from day trading is possible, but the success rate is inherently lower because it is risky and requires considerable skill. Don’t underestimate the role that luck and good timing play. A stroke of bad luck can sink even the most experienced day trader.

#TradingTypes101 Why Day Trading is Controversial
The profit potential of day trading is an oft-debated topic on Wall Street. Internet day-trading scams have lured amateurs by promising enormous returns in a short period.

Some people day-trade without sufficient knowledge. But some day traders make a successful living despite—or perhaps because of—the risks.

Many professional money managers and financial advisors shy away from day trading. They argue that, in most cases, the reward does not justify the risk. Moreover, many economists and financial practitioners argue that active trading strategies of any kind tend to underperform a more basic passive index strategy over time especially after fees and taxes are taken into account.

#TradingTypes101 Complexity is a factor that often separates these two approaches. While day trading can be conceptually straightforward (buy low, sell high), successful execution requires intense focus and rapid decisions. Options trading, by contrast, involves a steeper learning curve. Traders must understand concepts like implied volatility, time decay, and the Greeks (delta, gamma, theta, etc.) to navigate the options market effectively. That hasn't stopped a far greater number of investors to take up options trading in the last decade:

#TradingTypes101 One key distinction lies in the potential for leverage and risk. Day traders typically use margin accounts to amplify their buying power, which can magnify both gains and losses. Options traders, meanwhile, can achieve leverage through the nature of options contracts themselves. A small move in the underlying asset can result in a significant percentage change in the option's value, offering the potential for outsized returns—but also substantial losses.

#TradingTypes101 Day Trading vs. Options Trading
While day trading has undoubtedly picked up new adherents since the drop in trading fees over the last two decades, it's also been a boon for options traders, whose strategies often complement but are also an alternative for the types of retail traders given to day trading. While both strategies aim to capitalize on short-term market movements, they differ significantly in their mechanics and risks.

#TradingTypes101 The trader buys 1,000 shares of ISI when the market opens, then waits until ISI reaches a particular price point, probably up 0.6%. The trader then immediately sells the entire holding in ISI.

This is a day trade. Obviously, the merits of ISI as an investment have nothing to do with the day trader's actions. It's just a trend to be exploited.

What if ISI had bucked the trend and lost 0.8%? The trader will sell anyway and take the loss.

#TradingTypes101 Day Trading Example
A day trade is the same as any stock trade except that both the purchase of a stock and its sale occur within the same day and sometimes within seconds of each other.

For example, say a day trader has completed a technical analysis of a company called Intuitive Sciences Inc. (ISI). The analysis indicates that this stock, listed in the Nasdaq 100, shows a pattern of price rise by at least 0.6% on most when the Nasdaq is up more than 0.4%. The trader has reason to believe this will be one of those days

#TradingTypes101 you're determined to start day trading, be prepared to commit to the following steps:

Ensure you come in with some knowledge of the trading world and a good idea of your risk tolerance, capital, and goals.
Be prepared to put in the time to practice and perfect your strategies.
Start small. Focus on a few stocks rather than wearing yourself thin. Going all out will complicate your trading strategy and can mean big losses.
Stay cool, and try to keep emotion out of your trades. Don't deviate from your plan.

#TradingTypes101 Despite these challenges, day trading continues to attract newcomers, fueled by social media success stories and the low cost of trading platforms. However, experts caution that sustainable profitability in day trading requires exceptional skill, discipline, and much luck. For most individuals, long-term, diversified investment strategies remain a more reliable path to financial growth.

#TradingTypes101 Factors contributing to these dismal outcomes include high transaction costs, emotional decision-making under pressure, and the inherent unpredictability of short-term market movements. Moreover, the rise of HFT algorithms has made it increasingly difficult for individual traders to compete effectively in many markets.