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Stop and Consider This Before Investing

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It seems like everywhere we look there is a sensational media account of bitcoin’s stratospheric price and amazing quadruple digit appreciation. About as often a new ever-higher forecast for 2018 appears.

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Massive volatility permits fear and greed exists side by side. That usually means we all need to take a deep breath and try to put emotions aside.

Fundamental help is rare these days. Headlines dominate our actions. Here are a couple of examples. The CME and CBOE’s offering of a bitcoin futures contract will help smooth price volitility. Bloomberg News reports that Goldman Sacs is close to opening it trading desk to Bitcoin.

What Are Headlines Really Worth

These are two announcements are good for investors driving Bitcoin prices ever higher. But they don’t answer the most important question: What are digital currencies worth?

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It is an educated guess, so here are some of the best educated guesses so far.

First we need a valuation method and one of the most interesting that I have come across is from crypto disciple Thomas Lee. He currently forecasts a $25,000 Bitcoin price before 2022. Here is how he gets there.

Metcalfe’s Law Makes Sense

Using something called Metcalfe’s Law he compares the value of a cryptocurrency to the value of companies like Facebook and Google.

Here is how the formula works. Take to total number of users, multiple that number by itself. Then, take that result and multiply it by the average transaction for each user.

If this all sounds way too geeky, you’re not alone. It helps if you remember the self generating explosion that took place in social networking and apply that to cryptocurrencies; applying Metcalfe’s Law makes sense.

Lee claims this method explains virtually all of the historic price movements of Facebook, Google and Bitcoin. We haven’t double-checked his work, so we are taking this explanation at face value.

Metcalfe’s On Steroids

Ok, so if we apply Metcalfe’s Law to Bitcoin and other cryptocurrencies, is it just as appropriate to compare their potential to Facebook and Google? That is an easy question to answer, of course it is.

The market for Facebook and Google services is virtually every person on planet earth. The same holds for Bitcoin. So please allow me burn some battery life on my iPhone calculator. Numbers can be really boring so keep some coffee nearby.

Comparing Facebook and Google

The combined value of Facebook and Google is just a tad over $1.25 trillion dollars. Meanwhile bitcoin is bouncing somewhere around the $300 billion level. That is a big upside for bitcoin, if it reaches some sort of level comparable to two of the biggest tech giants of the past 25 years. Here is where things get really interesting.

BusinessInsiders.com recently posted an article with some jaw dropping stats on the global supply of money. This is the addressable market for cryptocurrencies. Under their Broad Based Definition, there is a staggering $90.4 trillion of money floating around the world.

For bitcoin’s theoretical value to match the Facebook, Google combo, bitcoin would need to capture a mere 1.3% of the global loot. Achieving that level of acceptance means bitcoin’s value could reach three times present levels. Is that realistic; from our illustration it looks very achievable. If all these developments took fives years, that offers a better return than most.

Applying Metcalfe to Ether

 If you accept Metcalfe’s law as a starting point for valuing bitcoin then consider applying it to Ethereum. The mantra of successful investing is applying the discipline of comparative selection. Here is the case for Ether, the crypto that fuels the Ethereum blockchain.

The Ethereum platform is not so much a currency as it is a decentralized blockchain the holds the promise of making corporate big data safer to store. Companies that have tested applications of the Smart Contracts that is part of Ethereum have found savings in the billions. Security and savings are two words that are powerful selling tools to corporate CEO every day of the week.

There are limitless business applications to Ethereum. The open source nature of the platform help explain why nearly $4 billion will be raised in startup capital by the end of 2017 and why over 300 major corporations have joined the Enterprise Ethereum Alliance since it founding in February.

Ethereum’s potential should be viewed in terms of the $110 trillion+ World Gross Product. This is not an absurd figure considering that every part of the world is becoming digitized and decentralized blockchain technology has a role anywhere where data is stored and manipulated.

Bitcoin versus Ethereum

 It is virtually impossible to come up with a good reason that either of the two largest cryptocurrencies has greater potential over the other. The prospects for both are pretty amazing. But if that is the case then consider this.

At it’s recent $20,000 all time high bitcoin was valued around $300 billion. Ethereum on the other hand at its $687 high was worth only about $70 billion. Investment analysis is the discipline of comparative selection. This makes Ethereum the clear choice when looking at comparative values.

Over long periods, this spread in values could and should narrow. In the short term, as we witness in Decembers severe price correction, both crypto’s lost equally: about a third of their value: something to keep in mind.

The purpose of all this exercise is to draw attention to a way of looking at value. It is not the only method, but it is something that puts emotion in its place. These are our opinions only so do not consider this in the same context as advice from your regular investment advisor.

Featured image courtesy of Shutterstock.  

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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A Beginner’s Guide to TRON (TRX) Cryptocurrency

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Since the inception of the very first bitcoin in 2008 and right after the rapid increase in bitcoin’s price, numerous other cryptocurrencies including Ethereum, Litecoin, Monero, Ripple, etc have been launched and introduced to the gargantuan market of cryptocurrency trading. Among the thousands of cryptocurrencies available at the moment, TRON has gained considerable popularity in the last few months. This cryptocurrency was first introduced to the market as an initial coin offering (ICO) on September 9, 2017, by a Singapore based non-profit organization.

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By definition, TRON refers to an open source blockchain-based protocol specifically designed for the digital entertainment industry spread across the globe. It offers a decentralized platform that shares various entertainment content by leveraging a blockchain and peer-to-peer (P2P) network technology.

With its official cryptocurrency Tronix (TRX), this decentralized platform aims to mitigate the plenary control of the internet by a paltry number of corporations such as Google, Facebook and  Amazon by handing ownership of the data pool to the user. As per TRON’s whitepaper, the sole purpose of this cryptocurrency is to become an asset for humankind rather than turning into a profit-making tool for cryptocurrency traders.

The Technology behind TRON

TRON incorporates a blockchain based peer-to-peer technology which basically means that like other cryptocurrencies, it is capable of eliminating the middleman. From another aspect, TRON’s technology is a distributed storage facility that allows its users to access entertainment content from every part around the world without seeking assistance from GooglePlay Store or Apple Store. As a result, the content producers are able to receive funds directly from the consumers quickly.

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As a cryptocurrency platform, TRON is capable of supporting multifarious blockchain networks and smart contracts including bitcoin, Qtum, Ethereum, EOS, and various other smart contracts. With this innovative technology and Peiwo App, TRON has become the first smart contract blockchain protocol that possesses over 10 million wallet holders all across the globe.

Stages of TRX:

TRON incorporates several stages or phases as it implements multiple blockchain technologies. It is currently on Exodus stage but in the coming years, this cryptocurrency is supposed to incorporate five more phases:

  1. Exodus: This modus operandi of this phase is quite similar to that of IPFS (a peer-to-peer hypermedia platform that is capable of making webs faster). As mentioned earlier, TRON is currently in this phase and the principal objective of Exodus is to provide a simple distributed file sharing facility. In this phase, TRON cannot leverage any blockchain technology on its current platform.
  2. Odyssey: This is the second phase of TRON and it intends to incentivize the creation and early adoption of a propriety community of entertainment contain creators. The Odyssey phase will be similar to the proof of stake paradigm. In this phase, the scale of reimbursement for creation is linked to a metric which follows a tipping scheme instead of views or clicks. The reason for eliminating the click or view system is to ensure authentication. Clicks can be produced in a bulk if there is a click farm or automated body involved. In this phase, the users of TRON will be able to make transactions by using TRX via unidirectional payment channels similar to µRaiden.
  3. Great Voyage: The third phase of TRON will be a personal ICO based on the advantages of blockchain network. Income payment, dividend management, and management of supporters would be the three principal objectives of this phase. Great Voyage would be able to transform this cryptocurrency from “fan economy” to “fan finance”. To achieve these goals, a personalized blockchain platform of TRON would be created in this phase.
  4. Apollo: This phase will also exhibit similar characteristics as Great Voyage. Like the third phase, Apollo would also offer an individual ICO to its users and an Ethereum-like platform. In this phase, TRON will be able to launch its own tokens that users would be able to emply for decentralized trading. Through this decentralized trading, the economic vitality of the entire system is likely to be increased considerably. However, there is also a possibility of a slight ramification where the network would not be able to validate the uniqueness of every token individually. To prevent this situation, TRON is likely to introduce a sophisticated security system that would successfully obliterate malicious websites, Sybil attacks, and hack attacks.
  5. Star Trek: The fifth phase or the Star Trek phase is actually quite similar to the technology of Augur that is basically a gaming platform. In this phase, the content platform of TRON would be transformed into a decentralized gaming platform with autonomous gaming as well as predicting functions. As the current value of the global gaming market is more than $450 billion, this phase is likely to provide TRON the impetus it needs to reach a desirable market capitalization.
  6. Eternity: As the sixth and final stage of this cryptocurrency, Eternity would basically deal with the fundraising and monetize depending on the growth of its community. In this phase, the investors would be able to put their money in globally popular games.

The Advantages of TRX

The TRX cryptocurrency of TRON can provide the following advantages to its users:

  1. Data liberation: The users or data creators would have the fundamental ownership of the entertainment contents and other related data instead of middlemen like Google Play Store or Apple.
  2. Personal ICO: The liberty to dole out individual digital assets.
  3. Gaming and market forecasting: TRX comes with a distributed digital asset that allows market forecasting and gaming for the investors.

TRX Market Cap, Circulation, and Trading History:

At this very moment, the market capitalization of this cryptocurrency is circa $7.5 billion, which is a steep rise from its market cap $6.47 billion just a few days ago. As on December 18, 2017, Sun announced that $34.2 billion worth TRON token is locked up until January 2020. At the moment, 1 TRX is equivalent to $0.114084.

TRX Price Surge

Buying and Storing TRX

Interested traders can access TRX in exchanges like Binance and Liqui, where they can trade them for bitcoin or Ethereum. In exchanges like Bitstamp or Coinbase, TRON is also tradable.

For storing TRX, hardware wallets like Ledger Nano S or Trezor will be appropriate as TRX is an ERC-20 Token.

Conclusion

Although it’s still early days, TRON’s native Tronix token has shown significant promise to become a viable cryptocurrency of the future. The recent large upswing in its value suggests TRX could have a pivotal role to play in the overall market.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Trading 101: What is the Best Trading Software?

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Trading software

As we all know, any kind of professional activity requires its own set of tools and equipment. Trading is no exception to this. It is also true that the more demanding your use is, the more expensive the required equipment tends to get. Still, when compared to other jobs you could take up, the equipment required to trade, whether it is in crypto, stocks, or forex, is quite cheap.

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You have wide options available when it comes to choosing a platform to trade on. Cryptocurrency traders usually use an exchange with its own decent web-based trading interface, thus reducing the need for other platforms that forex and stock traders have traditionally used.

Many cryptocurrency traders instead opt to do their charting on a separate platform, and then place their orders directly on the exchange. In fact, separating trading and charting is a good practice that I usually recommend because it keeps you from making impulse trades when you are doing your analysis. If you instead do your analysis on a separate platform, and then need to log in to your broker to place the trade, chances are you will have time to reflect over what you are doing and thus reduce the likelihood of making mistakes.

Trading software packages also vary widely in price, from free basic packages to extremely expensive options designed for institutions. In this article, I will cover two of the most popular platforms for retail traders that are available for a relatively low cost.

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TradingView

Perhaps the most popular charting software for technical analysis right now is TradingView. This platform has earned the top spot over the past few years for very good reason, with the main one being its social experience.

TradingView lets users publish their own trade ideas for the rest of the community to see and rate. Ideas are usually based on technical analysis, and are drawn directly on the charts using the built-in tools for technical analysis.

While TradingView used to be a community mainly consisting of forex traders, a huge number of cryptocurrency traders have also come to the platform over the past year. The charting tool now supports a large selection of cryptocurrency trading pairs, and their “Cryptocurrencies” chat has become one of the most popular chats on the platform.

Lots of technical analysis enthusiasts will claim that TradingView is simply the best charting platform available today. It is simple enough for beginners to understand, while at the same offers all of the features an advanced trader would ever ask for.

You can start using TradingView for free today, and choose to upgrade to one of their paid plans later once you become comfortable with the platform. Although their prices have increased over the past few years, TradingView is still reasonably priced considering how powerful the platform is.

TradingView has the following subscription plans (month-to-month subscriptions):

  • FREE
  • PRO: US$14.95/month
  • PRO+: US$29.95/month
  • PREMIUM: US$59.95/month

All plans offer better prices if you opt for a 2-year subscription period. Personally, I feel that their PRO+ plan offers the most bang for the buck.

MetaTrader

While TradingView is a web-based platform that runs directly in your browser, MetaTrader is a more traditional kind of trading software that you need to download on your computer. Originally built by Russian company MetaQuotes Software, MetaTrader is by far the most popular trading software for retail forex and CFD traders in the world.

We have previously talked about how you can profit from having robots trade for you, and this is probably what the MetaTrader platform has become best known for. You have the option of tracking the trades of a free robot, or paying for access to a (presumably) better one. You can also track the trades made by other human traders in the same way, also known as copy-trading.

MetaTrader users can also put their coding skills to work and develop their own trading robots or custom technical indicators. The end result of your work can either be used by yourself or sold to other users on the built-in marketplace.

As a new trader, it is really important that you don’t blindly buy into the promises of trading robots you come across, and that you are aware of their limitations. As Jonas explained in his recent article, oftentimes these robots will perform fantastic for a short amount of time before they eventually fail miserably, causing you to lose all the money you initially gained. Trading robots are sometimes optimized to perform perfectly in past market conditions, but that does not necessarily mean that they will perform equally well in the future. This is one of the big pitfalls of algorithmic trading, often referred to by traders as “curve-fitting” or “over-optimization.”

Lastly, there is no doubt that MetaTrader has a more advanced feel to it than TradingView, and it is also more complicated to learn how to use it. That alone, however, does not mean that it is a better platform to use.

MetaTrader or TradingView – which one should you go for?

Perhaps the best way to approach this is to think of MetaTrader and TradingView as complements of each other. You could for example use TradingView solely as a technical analysis tool and a social network for staying in touch with other traders, while placing your trades in MetaTrader (if your broker supports that platform).

Many traders who used to be hardcore supporters of MetaTrader have switched to TradingView, at least for their charting work. The most obvious reason for doing that is probably that TradingView runs in the cloud, and therefore automatically backs up everything you do on the platform. If your computer breaks down while using TradingView, you can simply get a new one and continue where you left off. With MetaTrader however, everything is saved locally on your hard drive, meaning everything you have done will be lost when your computer crashes.

For those active in the forex market, most brokers will offer their own web-based trading platform in addition to the MetaTrader platform. I would recommend starting with the web-based solution to learn the game at first. MetaTrader may feel overwhelming to start with, and there is no need to make things more difficult than they already are.

Once you have gained more confidence in the markets, you can try out MetaTrader if you feel the need for more advanced functionality or want to test out trading robots. If you instead prefer to do your own technical analysis, TradingView has you covered with pretty much everything you will ever need. By doing it this way and taking things one step at a time, your learning curve will become more manageable and your odds of success greatly improved.

Featured image from Pixabay.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Done with Trading Cryptocurrency and Need an Exit? Here are Some Ways

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Exit strategies of cryptocurrency

Money management is the key to successful trades. Cryptocurrency is a highly volatile market, as asset prices are extremely unstable. Traders and investors who are trading cryptocurrency often find it difficult to determine the right time for an exit. In most cases, traders enter a trade without any valid exit plan whereby they withdraw funds at inappropriate times and run heavy losses. Traders, especially those who are new to the cryptocurrency market, need to know about the exit options available to them, so that they are better equipped to develop an effective exit strategy for maximum profitability.  A decent exit strategy not only allows traders to overcome price fluctuations but also enables them to shield against the unnecessary loss of funds.

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Types of Exit Options

There are mostly two ways of getting out of a trade, by choosing the Take-Profit (T/P) order or the Stop-Loss (S/L) order.

Take-Profit (T/P) Order

The Take-Profit (T/P) order is a lucrative strategy that enables traders to close a trade after it reaches a decent profit. Take-Profit orders, which are also known as limit orders, are often paired with stop-loss orders to define risks and rewards. Although each trader is unique when it comes to the risk profile, there are certain criteria that determine whether it is safe to use a Take-Profit order. To begin with, this order is highly effective for long-term traders who aim to take an advantage of long-term trends. Take-Profit is particularly useful when the market is ranging, as the resistance levels tend to restrict price advances and the support levels hold up price drops.

Cryptocurrency Exit

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Figure 1: Exit Trades with Limit Orders

Stop-Loss (S/P) Orders

Stop-Loss orders are usually placed with brokers when selling equities at a given point/price. When this point is successfully reached, the Stop-Loss order is converted into the market order. This strategy is used to define risks and rewards and is a good way of minimizing losses when a market moves suddenly. Before you opt for this order, it is essential to understand that Stop-Losses are always placed above the asking rate or just below the bid price. Furthermore, there are three important variants of Stop-Loss orders:

  • Good ‘till Cancelled (GTC): This order is valid only until an execution takes place or if the user manually stops the order.
  • Day Order: Generally, the Stop-Loss expires after one trading day.
  • Trailing Stop: This order adheres to a certain distance from the market price and moves downward.

Tips to Exit a Cryptocurrency Trade

Entering a trade without a proper exit plan can land you in a serious mess. Trading strategies alone do not guarantee a good profit, as traders need to be careful about potential losses. To ensure a decent profit and minimize losses, traders can consider the following recommendations.

Develop insight into the blockchain and cryptocurrencies

Before investing in cryptocurrencies, traders need to understand how the blockchain system operates. Goldman Sachs opined that blockchain technology “has the potential to redefine transactions.” But only a few people have grasped how the system really works. To put it simply, a blockchain is the list of records, also known as blocks, which are regulated by cryptography. Aside from nitcoin, there are numerous other cryptocurrencies available in the market, such as Litecoin, Ripple, Ethereum, Dash, Bitcoin Cash, IOTA, to name a few. So, before proceeding with your trades, it is important to explore all the options.

Understand the Underlying Risks

Knowing when to enter a market and when to exit can be a challenging task, especially when dealing with cryptocurrency. Even many expert traders make mistakes and lose their funds. The cryptocurrency market is relatively new and is frequently influenced by public sentiment. The price of the currencies fluctuates based on the financial decisions of corporate companies. So, it is crucial to consider the underlying risks before finalizing any decision.

Follow Cryptocurrency News

As a cryptocurrency trader, it is important to stay updated with the latest developments in the market. For cryptocurrency related news and discussions, traders have an array of sources available to them.

Use Charts to Track Price Trends

Cryptocurrency trading involves continuous price fluctuations. To make the right decision at the right time, traders need to be equipped with relevant market analysis tools. To strategize the exit point, a trader needs to depend on the price actions. Nowadays, there are many charts and indicators available that help traders take valuable financial decisions. So, it is highly recommended that you use charts and other market research tools before deciding your moves.

Place a Limit Order

Above everything else, what matters most is placing settling for the right limit order. As mentioned above, limit orders are mainly of two types, the Take-Profit (T/P) order, and the Stop-Loss (S/L) order. Limit orders offer investors and traders with the mode of entering a position. The buy limit order can be placed lower than a stock. So, if the price dips to set value, the order will be executed automatically.  In case of a GTC, the order will be open unless it is canceled by the trader.

Cryptocurrency exit

Figure 2: Set Limit Orders

After you have set your limit order, it’s time to wait for the outcome. Allow the price time to fluctuate and wait if the limit order attracts a buyer/seller. Many mature traders set multiple orders at the same time to make the most of the selloff. Limit orders, if used judiciously can work wonders, enabling traders to earn substantial profits on their investments. Apart from the Take-Profit order and the Stop-Loss order, there are multiple advanced options available, such as IOC, FOC, and Stop Orders, which professional traders use to make a breakthrough in the market. Find out about all the options and make strategic use of them to make the most of your opportunities.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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