You may wonder if there is a genuine return from the crypto market or retail investors are putting their money out of greed, encouraged by viral news. Whatever are the reason, the market depth and breadth of the crypto market is increasing day by day. The first layer of the open system interconnection (OSI) refers to the standard communication system using a universal protocol to transfer data from different computer systems. It is a standard language for computer networking. Through it raw data, electrical signals are transmitted, the logical data packets are dealt with other layers.
Seven layer OSI model
Layer two is an assortment of communication protocols used by layer two devices such as multiple bridges, switches and network interface cards (NIC). It is the second of seven-layer OSI model designed for error-free data transmission between devices within the same network. Layer two can transmit data over a wide area network or from one node to another in a local network. There are seven layers in an OSI model; each has distinct functionality. Each layer functions independently though an integral part of OSI.
Layer three is responsible for logical addressing for transmitting data from one node to another. In simple terms, layer three receives data from layer two and delivers it to the intended device with the aid of IP address and other protocols. Thus, each layer acts discretely but complements each other for error-free transmission of data.
The cryptocurrency domain are made up of state–of–the–art technology, and in this space, there are multiple tokens such as Bitcoin, Ethereum, LTC and other Altcoin. All these protocols are devised for a seamless operative system, generating value. Depending on their reliability and functionality, their value moves up or down. Investors who have bought tokens at a low price make a profit by selling at a high price. The difference between the buying and selling price, less if any fees applicable is their net profit. But investors exposed to overwhelming fear, apprehended by huge volatility, often sell it at a lower price and incur a loss.
Everyone wants to buy at low and sell at high, making a moderate profit when it comes to investment. But, unfortunately, investors cannot envision the outcome of the consequential investment profit. As a result, many investors tend to believe trades have an equal possibility of gain or loss. But you comprehend the concept of risk: reward ratio, your perception about investment will change.
The risk: reward ratio
If you are a day trader or short term investor in the crypto news market, the risk factor is always against you. It is more difficult to profit when the market is extremely volatile. For example, if you buy twenty ETH at $2000 each, the total investment stands at $40k; the expected selling price is $2600, making a profit of $12000. If the stop-loss for the trade is $1800, if triggered, your loss would be $4000.It implies you are risking a loss of $4000 against a profit of $12000. Hence risk: reward ratio is 4000:12000, 10% is loss and 30% in profit. So the risk: reward ratio in this scenario is 1:3, stating that you are assuming three times of profit for every unit of loss.