How to Trade Cryptocurrency
This guide provides a quick overview of the three ways to trade (buy/sell) cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH).
Background
I first started writing about cryptocurrencies in 2013, and mined Bitcoin from my laptop that year. I also had the pleasure of being quoted by Minyanville for an analysis in my article titled, Bitcoin Arbitrage, Scalping Market Inefficiencies, and Currency Market Share Gradual Shift, which appeared on Yahoo Finance.
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Fast-forward to today, and the market for alternative investments has grown exponentially. Cryptocurrencies have surged in popularity – thanks to the proliferation of financial technology (Fintech) that has fueled the adoption of non-bank financial products sought by investors, and powered by distributed ledger (blockchain) technology.
Powered by Blockchain Technology
According to data from CB Insights, the amount of venture capital (VC) funding invested in fintech companies reached a new quarterly record in Q2 2017 of $5.19 billion, of which $232 million was invested in blockchain/Bitcoin companies.
Replacing the need for any trusted third party, Block chain technology is being used to power and verify cryptocurrency transactions belonging to public addresses (that hold bitcoin) controlled by private keys (used in bitcoin wallets) across decentralized networks.
According to data from CoinMarketCap, cryptocurrency universe market capitalization is at yet another all-time high of $139 billion as of August 14, 2017.
Powered by CoinMarketCap The bulk of value is held by Bitcoin (nearly 50%), with the cryptocurrency trading just above $4,200. Using price data from Bitstamp, the chart snapshot below from TradingView shows daily candlestick prices for Bitcoin versus the US Dollar (BTC/USD), depicting how steep Bitcoin's price rise has been in 2017.
Emerging Alternative Asset Class
Needless to say, Bitcoin’s place as an alternative digital asset among cryptocurrencies has become entrenched, despite likely headwinds it will continue to face as it evolves further. The U.S. Securities and Exchange Commission (SEC) announced in early August 2017 that certain Initial Coin Offerings (ICOs) – which use cryptocurrencies for financing – would be regulated as securities.
Shortly thereafter, the Chicago Board of Options Exchange (CBOE) followed, saying that it would be launching options on cryptocurrency derivatives, as investors are already looking at different ways to incorporate digital assets such as Bitcoin into their portfolios.
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Many investors now recognize cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH) as asset classes. Therefore, knowing the three ways to trade this cryptocurrency can be useful for Bitcoin investors (and can be applicable to other cryptocurrencies).
Quick Pointer: Trading costs, including any commissions and fees for trading cryptocurrencies, can be substantial, reaching well over $1,000 per $1,000,000 worth of currency or more, compared to trading the same amount in fiat (non-digital) currencies in the foreign exchange (forex) market.
After going over the three ways to trade Bitcoin, we will extend our exploration into the pros and cons of each way, and then provide a bottom line for each category and an overall summary further below.
Below are the three ways you can trade Bitcoin:
Buy the underlying from an exchange or online cryptocurrency broker (holding the actual currency in a wallet at the exchange or off-site) Trade (buy/sell) a CFD (Contract for Difference) derivative and hold cash margin with an online forex broker or multi-asset broker. Buy a publicly listed security related to Bitcoin and hold shares with an online stockbroker. Buying the Underlying (Actual) Asset: Pros and Cons
Taking the first option listed above, which is to buy the underlying, you become the direct holder of the digital asset. Upon purchase, the cryptocurrency is sent to your bitcoin address or account (wallet) with the exchange. From there, you can transfer the crypotocurrency to any bitcoin address or wallet address using your private key that verifies you control ownership of the asset.
This responsibility to safeguard your private key which controls the digital asset also comes with some additional risks, as explained below. First, we will go over the positive sides of owning the underlying digital asset.
Pros
You control the actual underlying digital asset. Most versatile option (can be transferred, sold, exchanged/converted). Can be secured with the use of a private key or by the exchange's wallet No thirdparty counter-party risk when the private key is held in cold storage offline. Multiple payment wallet options available to store/transfer the asset. Cons
Private Key that may be unique to each address must be safeguarded (your responsibility). Technical knowledge may be required to carry out operations. Lost private key may equate to lost asset (unrecoverable). If the private key is stored at the exchange where you bought the Bitcoin, it could be hacked and your Bitcoin could be stolen from the exchange. Thirdparty wallets can get hacked or subject to malware/phishing and your Bitcoin can get stolen. If you keep the private key offline only (cold storage) and lose your private key and not able to recover it your Bitcoin is lost forever. You must remember your password or private key if you store your Bitcoin electronically or be sure you can recover your private key (the easier this is, the more prone your Bitcoin is to potential theft by hackers). Bottom line
For longterm investors who are willing to actively safeguard their Bitcoin, owning the underlying is clearly the way to go, but prudent steps must be taken to mitigate the risk of Bitcoin theft and/or loss of private keys (i.e., diversifying holdings across wallet/storage types, using two-factor authentication and strong pass phrases).
Bitcoin Exchanges
Coinbase Binance Bitfinex Bittrex Kraken Poloniex Swissquote Z.com Trade (GMO Coin offering) It is important investors realize not all exchanges and brokers that offer delivery of the underlying Bitcoin are created equal. Some firms have fallen victim to theft by hackers who have stolen Bitcoin belonging to clients whose money was held at the exchanges. Meanwhile, other Bitcoin exchanges have gone bankrupt (as in the case of Mt. Gox), as a result of fraud or mismanagement.
This counterparty risk and risk of loss from hackers is another reason why some investors don’t hold their Bitcoin on exchanges directly but transfer it to an independent wallet (which carries its own risks, as outlined above).
Nonetheless, choosing an exchange that meets your needs is important. For US-based investors, CoinBase is one of the leading exchanges to offer cryptocurrency trading on Bitcoin, and recently integrated with Fidelity Investments so Fidelity clients can see their Coinbase balances from their Fidelity brokerage accounts.
For non-US clients, Swissquote – a major forex brokerage/bank in Switzerland – has teamed up with Bitstamp to offer actual deliverable Bitcoin. And Japan-based GMO Click Holdings, another one of the largest forex brokers by volume, has launched its GMO Coin offering for Bitcoin investors.
Trading Bitcoin as a CFD/Derivative: Pros and Cons Pros
Trading a CFD or derivative on Bitcoin negates the responsibility to safeguard any private keys. Greater degree of leverage is usually offered on derivatives, so your cash margin can have more buying power (increased risk/reward). CFD/derivatives permit shorting by opening a selling position without first having a long (buy) position, for those looking to speculate on a decline in prices of the underlying. Brokers may be able to offer lower transaction fees, although spreads may be slightly wider or marked up, depending on the liquidity sources the brokerage uses. Cons
Spreads (trading cost) are usually wider compared to trading the underlying. Trades may be cancelled or reversed in the event the broker finds fault in its systems (price, etc.) or if it finds a client violates their particular account agreement with the said broker (agreements vary). Clients rely on the creditworthiness of the online broker for managing any risk prudently and ensuring that it is well capitalized (less risk of going defunct). Margin trading means there is a chance of a negative balance occurring in the case of huge market volatility, a gap, or other Black Swan systemic event. In such cases, counterparty risk falls on the broker, which means if the broker declares bankruptcy, investors may suffer substantial losses and not receive priority among creditors. Bottom line
Active traders looking to speculate on Bitcoin over the short or medium term may find that trading CFD/derivatives on Bitcoin using an online forex broker will provide them with 24hour trading, potentially lower margin, and the ability to go either long or short. Because of counter-party risk, choosing a broker is just as important as finding one with the best trading tools or commission rates.
Forex brokers that offer (margin trading) Bitcoin as a CFD
Admiral Markets ADS Securities Alpari AvaTrade AxiTrader CityIndex easyMarkets eToro ETX Capital Forex Club FXOpen FXPro FXDD Henyep (HYCM) IC Markets ICM Capital IG Interactive Brokers iTrader LCG Markets.com Pepperstone Plus500 TickMill ThinkMarkets UFX VantageFX WWM XTB XM Z.com Trade tradingview ethereum,bitcoin forex broker,trx tradingview,trading bitcoins for beginners,tradingview xrp,bitcoin trading philippines,lowest fee bitcoin exchange,bitcoin trading platform,how to make money trading bitcoin day 3 of 5,kraken exchange,xbt,bitcoin trend prediction,bitfinex fees,cexio nicosia,bitfinex login,bitcoin trading sites,bitcoincryptocurrency reddit,cryptocurrency investment,cryptocurrency trading,cryptocurrency ethereum,cryptocurrency types,cryptocurrency exchange,cryptocurrency ppt,cryptocurrency charts,cryptocurrency market,cryptocurrency meaning in hindi,cryptocurrency list,cryptocurrency for dummies,cryptocurrency adalah,crypto opportunities,cryptocurrency in india,what is bit coin,how cryptocurrency works,
How to Choose the Best Trading Platform for Forex Trading?
Trading the Forex market is one of the best ways to develop an additional source of income and guarantee financial freedom for you and your family. As most experienced traders will tell you; comprehensive trader education and a good trading platform are the two main prerequisites for success in Forex trading.
A number of online Forex platforms are available in the market today. Some examples include the ubiquitous MetaTrader4 for retail traders, Currenex for institutions and high frequency traders and various proprietary broker platforms. Each of these platforms has their own advantages and disadvantages and they are generally built to target a particular type of trader (newbie, pro, technical trader, scalper etc.).
Since this can be very confusing, especially to newbies, let us take a close look at some of the main features which go into the making of an ideal trading platform.
1. Speed and Reliability
The most crucial aspect of a good trading platform is its ability to display accurate price information on a consistent basis. Even a small lag in displayed prices can lead to trade re-quotes and losses. Similarly, a good platform should have minimal system downtime to allow for seamless and smooth trading activity without any major disruptions.
Use the demo version of a platform to see if the streaming price quotes and trade execution time are to your liking. Additionally, try to find out whether the Forex broker offers a "no re-quotes/no re-pricing" guarantee.
2. Forex Market Analysis
Most Forex traders use technical analysis to trade the Forex market. Hence, it is imperative for a good platform to have auto-refreshing charts which allow the trader to analyze market data on multiple time frames (1H, 4H, Daily, weekly etc.). Additionally, the trading platform should have a large number of popular preset technical indicators (RSI, Bollinger Bands, ROC, Moving Averages etc.) which are commonly used by traders.
On the fundamental side, an ideal Forex platform should also have a reliable live news facility from a reputed news wire service which would help traders take advantage of economic events. Finally, a platform that offers single click execution and also offers the ability to trade directly from a chart is a must for Forex traders who use a trading strategy based on scalping.
3. Ability to trade Multiple Asset Types in Different Markets
Since the Forex market does not function in seclusion, it is obvious that there are a number of co-relations between various Forex currency pairs and other asset classes. For example, the Aussie Dollar (AUD) has a very strong positive co-relation to the S&P 500, the Canadian Dollar has a positive co-relation to the price of crude oil etc.
Keeping this in mind, it is very important to choose a Forex trading platform that allows you to trade seamlessly across multiple asset classes like equity, commodities, Forex, debt, options etc. IA platform which allows you to trade in highly liquid CFDs is an additional bonus.
Any trading platform that has all the above-mentioned features will make for a very good Forex trading platform. Utilize the free demo versions of various platforms to check for the above mentioned features before making your final choice.
Shawn Sofo James has 7 years experience in the Financial Markets, before joining AvaFX he worked for PRO Investment Bank as an Investment Analyst. Shawn is also an active financial author and has his PhD in economics.
Article Source: https://EzineArticles.com/expert/Shawn_Sofo_James/1263010
Article Source: http://EzineArticles.com/6822352
How to Choose the Best Trading Platform for Forex Trading?
Trading the Forex market is one of the best ways to develop an additional source of income and guarantee financial freedom for you and your family. As most experienced traders will tell you; comprehensive trader education and a good trading platform are the two main prerequisites for success in Forex trading.
A number of online Forex platforms are available in the market today. Some examples include the ubiquitous MetaTrader4 for retail traders, Currenex for institutions and high frequency traders and various proprietary broker platforms. Each of these platforms has their own advantages and disadvantages and they are generally built to target a particular type of trader (newbie, pro, technical trader, scalper etc.).
Since this can be very confusing, especially to newbies, let us take a close look at some of the main features which go into the making of an ideal trading platform.
1. Speed and Reliability
The most crucial aspect of a good trading platform is its ability to display accurate price information on a consistent basis. Even a small lag in displayed prices can lead to trade re-quotes and losses. Similarly, a good platform should have minimal system downtime to allow for seamless and smooth trading activity without any major disruptions.
Use the demo version of a platform to see if the streaming price quotes and trade execution time are to your liking. Additionally, try to find out whether the Forex broker offers a "no re-quotes/no re-pricing" guarantee.
2. Forex Market Analysis
Most Forex traders use technical analysis to trade the Forex market. Hence, it is imperative for a good platform to have auto-refreshing charts which allow the trader to analyze market data on multiple time frames (1H, 4H, Daily, weekly etc.). Additionally, the trading platform should have a large number of popular preset technical indicators (RSI, Bollinger Bands, ROC, Moving Averages etc.) which are commonly used by traders.
On the fundamental side, an ideal Forex platform should also have a reliable live news facility from a reputed news wire service which would help traders take advantage of economic events. Finally, a platform that offers single click execution and also offers the ability to trade directly from a chart is a must for Forex traders who use a trading strategy based on scalping.
3. Ability to trade Multiple Asset Types in Different Markets
Since the Forex market does not function in seclusion, it is obvious that there are a number of co-relations between various Forex currency pairs and other asset classes. For example, the Aussie Dollar (AUD) has a very strong positive co-relation to the S&P 500, the Canadian Dollar has a positive co-relation to the price of crude oil etc.
Keeping this in mind, it is very important to choose a Forex trading platform that allows you to trade seamlessly across multiple asset classes like equity, commodities, Forex, debt, options etc. IA platform which allows you to trade in highly liquid CFDs is an additional bonus.
Any trading platform that has all the above-mentioned features will make for a very good Forex trading platform. Utilize the free demo versions of various platforms to check for the above mentioned features before making your final choice.
Shawn Sofo James has 7 years experience in the Financial Markets, before joining AvaFX he worked for PRO Investment Bank as an Investment Analyst. Shawn is also an active financial author and has his PhD in economics.
Article Source: https://EzineArticles.com/expert/Shawn_Sofo_James/1263010
Article Source: http://EzineArticles.com/6822352
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