A Comprehensive Guide on Limit Entries for Crypto Pair Trading to Maximize Profits

Welcome to the Wonder Trading Channel: A Comprehensive Guide to Spread Trading

If you are involved in trading financial instruments, you have probably heard of spread trading. This trading strategy involves simultaneously buying one asset and selling another asset in a pair to profit from changes in their relative price. In this article, we will focus on the two-leg entry technique, which is used to create profitable spreads and arbitrage trading.

Understanding Spread Trading

Spread trading is a strategy where a trader tries to profit from the difference between the prices of two assets. In the context of cryptocurrencies, this could be, for example, the difference between the price of bitcoin and ethereum. Interestingly, the spread can be both positive and negative. A positive spread arises when the price of one asset exceeds the price of another, and a negative spread when the price of the first asset is lower than the price of the second.

Trading spreads on a cryptocurrency exchange has many advantages. Firstly, it allows traders to make profits in any market conditions, including during a crisis. Secondly, spread trading is more predictable than traditional cryptocurrency market trading because it does not depend on the overall direction of the market.

To see the spread chart, you need to divide the price of one asset by the price of the second asset. For example, here is what the Bitcoin and Ethereum spread chart would look like.

The Two-Leg Entry Technique

When trading on the spread chart, we will make four trades. We will always buy one asset and sell the other. For example, to enter a long position on this spread chart, we will buy Bitcoin and sell Ethereum. To enter a short position, we will sell Bitcoin and buy Ethereum. In total, we will have four trades – two for opening and two for closing.

Opening and closing these trades at the market price will always reduce the profit because the commissions for four trades will often exceed the profit from the spread trade. In order to reduce the commission from trades and increase profit, we have added the two-leg entry feature for pair trading spreads.

Using the Two-Leg Entry Feature

To use the two-leg entry feature, go to the Wonder trading platform and open the terminal. Switch to the spreads and arbitrage mode and select two-leg entry. Let’s consider an example to understand how two-leg entry works.

If we are trading in a long spread of ada and Ethereum, the first limit order will be placed at the nearest bid offer in the ADA order book, and the second limit order will be placed at the nearest ask offer in the Ethereum order book. The system will wait until at least one limit order is executed. Once one limit order is executed, the other limit order on the other leg will be canceled, and a market order on this leg will be executed to fix the spread price.

Exiting the position will be similar, but unlike entry, a take profit or stop loss will be used as a stop price for exit.

To open a trade on the platform, go to the spreads and arbitrage mode on the terminal and select two-leg entry. Choose the trading pairs, set the necessary settings, and execute the trade. For buying, the stop order price should be below the current price, and for selling, it should be above the price.

When opening a trade on the platform, you can see that one trade is in a buying position while the other is waiting for selling. In the order books of the selected coins, it will look like this – one limit order will be placed below the set stop price for buying, and the second order will be above the stop price for selling. When one of the limit orders is triggered, the second order will be executed at the market price, thereby forming the spread.

When trading spreads using the two-leg entry feature, we can achieve maximum accuracy in order execution and reduce fees by using limit orders.

Conclusion

Spread trading is a popular strategy in the world of financial instruments, and it can be particularly advantageous in the cryptocurrency market. By understanding the concept of spreads and utilizing the two-leg entry technique, traders can increase their chances of making profitable trades. The Wonder trading platform provides a user-friendly interface and features like two-leg entry to enhance the trading experience.

Thank you for reading this comprehensive guide to spread trading on the Wonder Trading Channel. We hope you found this information valuable and wish you good luck with your trading endeavors.

Frequently Asked Questions

1. What is spread trading?

Spread trading is a strategy where a trader simultaneously buys one asset and sells another asset in a pair to profit from changes in their relative price. It involves taking advantage of the difference between the prices of two assets.

2. How does spread trading work in the cryptocurrency market?

In the cryptocurrency market, spread trading involves trading the difference between the prices of two cryptocurrencies. Traders can profit from both positive and negative spreads by buying one cryptocurrency and selling another.

3. What are the advantages of spread trading?

Spread trading has several advantages. Firstly, it allows traders to make profits in any market conditions, including during a crisis. Secondly, spread trading is more predictable than traditional cryptocurrency market trading because it does not depend on the overall direction of the market.

4. How does the two-leg entry technique work?

The two-leg entry technique is a feature offered by the Wonder trading platform. It involves placing two limit orders on the bid and ask offers of the selected assets. Once one limit order is executed, the other is canceled, and a market order is executed to fix the spread price.

5. How can I reduce fees and increase profit when trading spreads?

To reduce fees and increase profit when trading spreads, it is recommended to use the two-leg entry feature and place limit orders instead of executing trades at the market price. This allows for maximum accuracy in order execution and reduces the impact of commissions on the overall profit.