Taker Execution – Forex Academy

Introduction

Chainlink is a decentralized oracle network whose purpose is to connect smart contracts with the real world. LINK is its native digital currency, which is used to node operators on the Chainlink decentralized oracle network. LINK has a market capitalization of $1.5 billion and stands 14^th on CoinMarketCap. LINK can be bought using fiat currency as well as traded against other cryptocurrencies like BTC and ETH.

Understanding LINK/USD

The price of LINK/USD depicts the value of the US Dollar equivalent to one Chainlink. It is quoted as 1 LINK per X USD. For example, if the market price of LINK/USD is 4.36166, then each LINK will be worth so many dollars.

LINK/USD specifications

Spread

Spread is nothing but the arithmetic difference between the buying and selling price of the cryptocurrency. Unlike forex brokers, these prices are decided by the traders and not the exchange. Hence, the spread constantly varies in exchange as well as across exchanges.

Fee

Typically, there are three types of the fee charged by exchanges including

Execution fee (Taker or Maker) – twice, for opening and closing the trade
30-day trading volume fee
Margin opening fee, if applicable

Example

Long 1,000 LINK/USD at $4.45509
30-day volume fee is $0
Order is executed as Taker
With Leverage

Total cost of the order = 1,000 x $4.45509 = $4455.09

Assuming the taker fee to be 0.26%, the opening fee will be – $4455.09 x 0.26% = $11.58

The margin opening fee of 0.02% is charged for opening the position using leverage – $4455.09 x 0.02% = $0.89

If the order is closed at $4.50000, the total cost of closing will be – 1,000 x $4.50000 = $4500.00. And the fee for closing will turn to be – $4500.00 x 0.26% = $11.70

Thus, the total fee will be the sum of all the fees – $11.58 + $0.89 + $11.70 = $24.17

Trading Range in LINK/USD

Chainlink is traded in cryptocurrency exchanges and not forex brokers. So, there is no concept of pip and pip value. Instead, the value of the crypto is directly taken into account.

A trading range is the tabular representation of the approximate value movement of the pair, which is obtained through the Average True Range (ATR) indicator. In layman terms, the numbers in the table depict the amount of US dollars a trader will gain or lose in a given time frame. The following table shows the value of the price movement for 1,000 quantities LINK/USD.

Note: the above values are for trading 1,000 units of LINK/USD. If X units of the pair are traded, then the ATR values will be,

(ATR value from the table / 1,000) x X units

Procedure to assess ATR values

Add the ATR indicator to your chart.
Set the period to 1
Add a 200-period SMA to this indicator.
Shrink the chart so you can assess an extensive period
Select your desired timeframe
Measure the floor level and set this value as the min
Measure the level of the 200-period SMA and set this as the average
Measure the peak levels and set this as Max.

LINK/USD Cost as a Percent of the Trading Range

Below are two tables representing cost variations for different time frames in terms of a percentage for taker execution and maker execution.

Taker Execution Model

Opening = $11.58 | Margin fee = $0.89 | Closing = $11.70 | 30-day volume = $0

Total fee = Opening + Margin fee + Closing + 30-day volume = $11.58 + $0.89 + $11.70 + $0 = $24.17

Maker Execution Model

Opening = $7.12 | Margin fee = $0.89 | Closing = $7.2 | 30-day volume = $0

Total fee = Opening + Margin fee + Closing + 30-day volume = $7.12 + $0.89 + $7.2 + $0 = $15.21

*Assuming maker fee to be 0.16% the trade value.

Interpretation of Cost as a Percent of the Trading Range

Let us directly understand the table with an example.

1H time frame

ATR value = 41.92

Cost percentage = 57.66%

4H time frame

ATR value = 92.32

Cost percentage = 26.18%

Comparing ATR values, we infer that more profit can be generated in the 4H time frame ($92.32) than in the 1H time frame ($41.92). But, a critical point to note is that the cost is the same for both the trades. A fee that is paid to gain $92.32, the equal fee must be paid to gain $41.92. This difference is represented using the cost percentage. Thus, the percentage in the 1H time frame is higher than that in the 4H time frame, indicating that the relative costs are higher.

Trading the LINK/USD

LINK can be traded against USD and few cryptocurrencies as well. However, LINK/USD is seen to have the highest trading volume. Comparing the liquidity with other cryptocurrency pairs like BTC/USD, ETH/USD, and XRP/USD, LINK/USD is less liquid.

From the above comprehension of the cost percentage, we understood that the costs remain the same irrespective of the time frame you trade. Thus, to relatively reduce the costs, we must focus on the columns of the table. The effective way to trade this pair is to enter the market when the volatility is at or above the average values. For example, if you are a day trader who trades the 1H time frame, you must make sure that the volatility is above the average level. In doing so, you will be able to extract more from the market for the same total fee. Cheers!

Introduction

Cardano is a decentralized platform allowing programmable transfers of value securely in a scalable fashion. It is the first blockchain created out from a scientific philosophy. It is also the first research-driven cryptocurrency that is built on the Haskell programming language.

Cardano is traded with the ticker ADA. It has a market capitalization of $2.2 billion. It can be bought, sold, and exchanged in several cryptocurrency exchanges. Apart from USD, it can be traded against other cryptos such as BTC, ETH, USDT, etc.

Understanding ADA/USD

The price of ADA/USD depicts the value of the US Dollar equivalent to one Cardano. It is quoted as 1 ADA per X USD. For example, if the market price of ADA/USD is 0.086112, then each ADA will be worth 0.086112 US dollars.

ADA/USD specifications

Forex brokers allow trading of only a few popular cryptocurrencies like Bitcoin, Ethereum, Ripple, etc. The other cryptos must be traded via cryptocurrency exchanges. And the working of these exchanges is different from that of forex brokers. As a major difference, cryptos are not traded in lots, in cryptocurrency exchanges.

Spread

Spread is the difference between the buying and selling price of the cryptocurrency. Crypto exchanges match these prices between induvial traders. Thus, there is no fixed spread. Also, typically, the spread is negligible in trading cryptos.

Fee

There are different fees charged by cryptocurrency exchanges for trading any coin. The various forms of fees include

Execution fee (Taker or Maker)
30-day trading volume fee
Margin opening fee, if applicable

Note that the taker or maker fee will be considered for opening as well as closing the trade, and will depend on the value being traded.

Example

Short 10,000 ADA/USD at $0.085800
30-day volume fee is $0
Order is executed as Taker

Total cost of the order = 10000 x $0.085800 = $858

Assuming the taker fee to be 0.26%, the opening fee will be – $858 x 0.26% = $2.23

Assuming the trade is opened with leverage, and the margin opening fee is 0.02%, the fee is calculated as – $858 x 0.02% = $0.17

If the order is closed at $0.095800, the total cost of closing will be 10,000 x $0.095800 = $958. And the fee for the same obtained is – $958 x 0.26% = $2.5

Thus, the total fee for the opening, maintaining and closing the trade would be equal to – $2.24 + $0.17 + $2.5 = $4.91

Trading Range in ADA/USD

The trading range represents the number of units moved in the pair in a specified time frame. For example, if 10,000 ADA/USD is traded and the average unit movement in the 1H time frame is 0.000778, then it means the pair will yield 10,000 x 0.000778 = $7.78.

Note: the above values are for trading 10,000 units of ADA/USD. If X units are traded, then the ATR values will be,

(Above ATR value / 10,000) x X units

Procedure to assess ATR values

Add the ATR indicator to your chart.
Set the period to 1
Add a 200-period SMA to this indicator.
Shrink the chart so you can assess a large time period
Select your desired timeframe
Measure the floor level and set this value as the min
Measure the level of the 200-period SMA and set this as the average
Measure the peak levels and set this as Max.

ADA/USD Cost as a Percent of the Trading Range

The following tables depict the variations in total cost in terms of percentage based on the change in volatility and time frame.

Taker Execution Model

Opening = $2.23 | Margin fee = $0.17 | Closing = $2.5

Total fee = Opening + Margin fee + Closing = $2.24 + $0.17 + $2.5 = $4.91

Maker Execution Model

Opening = $1.37* | Margin fee = $0.17 | Closing = $1.53*

Total fee = Opening + Margin fee + Closing = $1.37 + $0.17 + $1.53 = $3.07

*Assuming maker fee to be 0.16% the trade value.

Trading the ADA/USD

Cardano stands 10^th in CoinMarketCap in terms of market capitalization. Thus, making it a tradable pair in the crypto market. Almost all forex brokers do not ADA enabled for trading, so it must be traded through cryptocurrency exchanges. The fee structure here is quite different from forex brokers. However, the overall fee is more or less the same.

Comprehending the above tables, the magnitude of the percentage depicts how expensive/cheap a trade will be relative to the time frame and profit/loss. Let us understand this with an example.

The average values in 4H and 1D are 26.65% and 9.73%, respectively. The percentage in the 4H time frame is greater than the percentage in the 1D time frame. This means that the total cost for both is the same ($4.91), but relative to the generated profit, it is higher in the 4H time frame. A detailed reason for this can be given from the trading range table.

In the trading range table, the corresponding values are $11.52 and $31.55. This can be interpreted as, an average of $11.52 will be generated in trading the 4H time frame, and $31.55 when trading the 1D time frame. The fee in both cases is the same. Thus, we infer that the fee that is paid to generate $31.55, the same fee is deducted for generating $11.52. And hence, this is exactly what the higher percentage value depicts.

Reading through the row, the percentage values for a time frame is highest in the minimum column and least in the maximum column. So, if you’re are able to deal with higher volatility, it is ideal to trade when the volatility is around the average or maximum values. And if you cannot deal with the high volatility, you may trade the higher time frames to reduce the relative costs.