Trading Basics: Your Trading Average in the Markets
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Learn how easy it is to trade like a bot in this short tutorial about averages.
Disclaimer: I am NOT a CPA, nor am I licensed to issue any kind of financial advice, therefore the contents of this post are purely for educational and entertainment purposes only, and should be taken with a grain of salt.
What is your average in the market?
To better understand an average in the markets, the first thing to do is to identify its usefulness and what it is made of. Your average position is the sum of all trades for a single market distributed by a given number of items exchanged, so for example - when trading in BTC-USD you have a starting balance and a current balance, wherein the important values reside.
Total Cost ÷ Total Owned = Average Cost per Unit Owned.
In this scenario we will identify changes in your average according to a few hypothetical trades. If you trade USD$100 for 10 BTC then your average is now USD$10 per BTC, this means that you have effectively now locked your position at the price of $USD10 per Bitcoin and you now hold 10 BTC, there is no mystery there. However, suppose the market prices go up and you then decide to buy 10 more Bitcoin at the price of $20 in that case your average exists in between $10 and $20 (As you started in USD$10.00 and reached USD$20.00. Your new average is USD$15.00 per bitcoin and you have 20 BTC.
Still with me so far? Great, now here's where things get a little more interesting. As you raise your balance on one side it becomes increasingly more difficult to change your average. If the prices suddenly fell to USD$12.5 per bitcoin, you would be at a loss as you have overpaid at an average of USD$15.00, but not all is lost, let's calculate what your current market value is and see how much your bitcoin is worth before selling it and worsening your average.
So, 20 BTC at a market price of $12.5 means that the total market value for your 20 bitcoin is of $250, so in this case if you were to sell all your 20 BTC at the current market price you would gain $USD250.00 and leave the market a cozy USD$50.00! This action would result in a 20% loss for you. Knowing averages, you now see that it is not wise to sell at a loss, so instead you decide to buy 20 more bitcoin! This changes your total average and your total is now 40 bitcoin and you have spent $USD550.00.
Now, to find your new average position in the market, simply divide your cost by the total quantity and you will end with your position. $550.00 / 40 = $13.75.
Is this the same method a trading bot uses?
Essentially, yes. Our crypto trading algorithm called Zephirex CORE does this in many different ways, and in 7 different currencies in real-time, by performing the similar functions in this example along with more data inputs, our software generates momentum in both directions, and by making small increments to the quantity purchased and sold it generates metaphorical "lift". Any time a major market change is detected, it makes precise corrections to the total average in our portfolio in over 10 different markets simultaneously, thus competing with other human traders 24/7 every day of the year.
Where do I find more information about this project?
You may visit our homepage at https://zephirex.com to learn more about our software, our official ERC-20 token called Zephirex (ZPX) and other products. For information about our newly-launched ERC-20 token visit Etherscan.io - Zephirex (ZPX).
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