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Trading 101: How To Start Trading?

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Why should you trade?

George Soros / Shutterstock

For most of you that might sound like a silly question. After all, it’s hard to argue with the claim that in the quest for financial independence, trading and investing in financial markets are among the most intriguing opportunities. The world of trading is fascinating—the sky seems to be the limit when you encounter all the huge success stories, the Apples, Facebooks, Googles, Teslas on one side, and the great investors and traders like Warren Buffett, Paul Tudor Jones, David Tepper, George Soros, Benjamin Graham on the other side. Also, the technological advance brought this world much closer to the Average Joe, with prompt and cheap online access to all imaginable markets and assets.

That said, despite the great premise, the wild dreams of wannabe traders coupled with the unlimited realm of opportunities often leads to disasters. Without the intent of scaring off anyone, the reality is that a large number of new traders lose some, or all of their initial capital.

How could you prevent that? Well, the good news is that by trying to get informed and educate yourself, you already took one of the most important steps towards success. Blindly jumping in the market and start “day-trading” on “margin” (we will get to these, don’t worry…) to chase unrealistic gains accounts for most of the horror stories.  Before you leave, we have more good news— by following a few simple rules, you will remain in control all the way, without taking on unnecessary risks or committing some of the all-too-common-rookie-mistakes.

That’s where we step in. In our Trading 101 course, we will go through all the steps that you need to take to trade consciously and successfully. First, we ask you to be somewhat patient and realize that, in order to get closer to achieving your goals through trading, you need to learn some basic skills and acquire crucial knowledge.

You should be looking at trading as any other business that you get into; you have to put in some time and energy in order to get the wanted results. But remember, the possible reward is extraordinary—leveraging your knowledge to manage your capital is the single best way to increase your wealth.

Learning The Language Of Trading

If you look at trading as a business, at first you might think that it’s done in a language of its own. The financial jargon is vast, and often confusing for outsiders. Traders and analysts with very different levels of knowledge use words and phrases in all kinds of ways, sometimes far away from the “genuine” meaning.

What’s worse, there are those who try to hide behind the financial mumbo-jumbo to mask their inexperience, lack of expertise, or use it to profit from the insatiable hunger of the public for news and “expert opinions”. The best way to remain focused in this jungle is to learn the basics, and form your own opinion about the unfolding events and the movements in the market.

It’s a good idea to find reliable sources of information both for educational materials and up-to-date news. Getting informed about the basics of economics and financial trends will also help you in understanding the market and the intentions of the different players.

To help you, we will provide you with a compact dictionary that will kick-start your trading career, and shorten your learning curve. We will also continue giving you all the necessary information about the newest developments in the financial world.

Finding The Trader In You

When you already speak the language of trading on a basic level, you should still answer some questions before you place your first order on the market. If you don’t, you will, most likely, find them out the hard way. Here are some of the most crucial ones:

  • What are your goals with trading?
  • How much capital would you like to trade with?
  • How does trading fit in your investment portfolio?
  • How much time would you like to dedicate to trading?
  • What assets do you want to trade with?
  • What analysis methods would you like to use?
  • What strategy (or strategies) is suitable for your goals?

Of course, these questions are not independent of each other. The time that you are able to dedicate to trading will largely determine the strategies that you might use, while the amount of capital might limit the type of assets that you are able to trade with, and so on.

The idea is to be conscious about your trading goals and to know what you are looking for, even if some of the questions might seem premature, and your answers might be proven wrong later. Don’t worry, you will have several opportunities to refine your approach as you gain experience.

Choosing A Broker

If you have answered the questions, and you already have a pretty good idea of the path you prefer, the next step is to find the perfect partner for you to trade with. In practice, this means finding a good broker (or brokers) and a matching trading platform. As easy as it sounds, there are several filters that you should use before choosing your partner in trading.

The decision is not for eternity too: it’s good to stay flexible and switch brokers anytime in your trading career. This, of course, implies that you should keep an eye on the market for new trends and opportunities, but guess what; we will be here to help with that as well.

So, what are the factors to weigh and what are filters that you should apply?

  • Reputation and regulatory background
  • The available markets, assets, and account options
  • The available trading platforms and tools
  • Commissions and fees, hidden costs
  • Customer support, extra services

Some of these might seem obvious, but there are more to them than you would first think. Reputation might seem boring for example, but that’s only true until there is an extreme situation like the 2008 crisis or the infamous Swiss Franc event in 2015. Even commissions and fees can have different effects on different strategies, making a certain broker expensive for one trader and a bargain for another.

Naturally, your weights will be somewhat subjective, but in our coming posts, we will show you all the must-haves and the “strictly-no-no”-s of the business.

Practice, Practice, Practice…

After you answered the basic questions and found the perfect broker, now you are ready to trade, right? Unfortunately, the answer is most likely no, at least not with real capital. The wise decision for most traders is to start your journey with a demo, or practice account. Most brokers offer those to new traders, while also providing a great opportunity to further evaluate their services. Demo accounts are perfect to get to know a trading platform, the order types, your strategies in practice, and to face all the small decisions that are inherent in trading.

Having said all this, the idea of opening a “real” account together with a demo account is not entirely wrong. An account with a smaller amount of capital could uncover some problems with the broker, the funding process, hidden costs, and so on. It could also give you a glimpse of what real trading looks like—the thrill of facing real profits or losses, and how will you react to those.

After you reach a level of experience, you should also go back and revisit several of the questions that you answered before, as now you know much more of financial markets and, even more importantly, yourself.

The Real Thing: Dealing With Profits, Risks, And Losses

Are you feeling comfortable, or even bored, trading with paper money? Entering different types of orders and sticking to the rules of your strategies seems easy? Then it’s time to finally begin trading with real money. A whole new world will open up for you; sometimes it will be scary, sometimes it will be rewarding, but it will most certainly different from paper trading. On a side note, this doesn’t mean you should forget your demo account, though; you can still use it to test new methods and strategies, risk-free!

Before you start trading, you have to remember that risk is a natural part of this business, and that you will inevitably have losing trades. If you have sound strategies, and proper risk management, those won’t cause you much trouble, and most of the times you will be dealing with winning trades and looking for new opportunities.

The effect of compounded returns, the flexibility of trading, and the additional expertise that you will be able to harness in your business and personal life will be well worth your efforts. We urge you to join us on this exciting trip and dive into the art of trading using our comprehensive guide.

Continue with the next lesson: What Can You Achieve With Trading?

Images from 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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4.7 stars on average, based on 394 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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3 Comments

3 Comments

  1. DamonEvans

    March 31, 2017 at 12:36 am

    Thanks. Very basic 101. How about explaining the various strategies to employ?

    • DamonEvans

      March 31, 2017 at 12:40 am

      It’s a great intro for a newbie. But I’d be keen on a piece aimed at people like me that have dabbled in trading, as well as invested in equities and crypto. For me I’d like to learn more about trading strategies, something I have lacked in the past. A 101 on making charts and technical analysis would be welcome too. Thanks heaps

      • Mate Cser

        March 31, 2017 at 11:10 am

        Hi, DamonEvans! Thanks for the nice words. Don’t worry we will get to specific trading strategies soon, stay tuned!

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Analysis

Bitcoin Cash Continues To Drop Ahead Of The Hard Fork

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The past few months have been really quiet in the crypto world.  Traders are used to dealing with big stories and big drama.  And while there hasn’t been much drama over the past few months, that’s all about to change.  Bitcoin Cash (BCH) has had a crazy 30 days of trading ahead of its scheduled hard fork on November 15.

For a while, it appeared that BCH would be trading near a high as the fork commenced.  BCH had a strong rally for about a week starting on November 1.  The price soared by more than 50% as it reached its high of approximately $637.  But over the past week, the price has been tanking and doesn’t show any signs of recovering.  Since November 7, BCH has dropped in value by more than 20%.

Why Is Bitcoin Cash Falling Ahead of the Fork?

There are two possible explanations for why Bitcoin Cash is dropping ahead of the scheduled hard fork.  One reason is profit taking.  Although a 50% return wouldn’t have meant much in 2017, it certainly is a lot in 2018.  However, a second and potentially more troubling reason is the conflict between Bitcoin Cash SV and Bitcoin Cash ABC.

Craig Wright, an Australian computer scientist and the biggest proponent of Bitcoin Cash SV (BCHSV), appears to be at war with Roger Ver, the most famous name behind Bitcoin Cash ABC (BCHABC).  Wright was in the news recently after proclaiming to be Satoshi Nakamoto, the founding father of Bitcoin (BTC).

As of this writing, BCHABC is trading at $420 while BCHSV is trading at $118.  According to Coin Dance, data shows that a majority of hash power favors SV.  On the other hand, there are significantly more BCHABC nodes running on the Bitcoin Cash network than there are BCHSV nodes.  Although it’s interesting to look at this data, it’s quite simply impossible to determine what this means as far as which network will come out victorious.  Creating a BTC node is relatively inexpensive so a user could start several of them for under $1,000.  And while the hash rate is important for demonstrating PoW (proof-of-work), it’s meaningless if exchanges don’t accept the coin.

Bitfinex Support

On November 12, Bitfinex announced support for the Bitcoin Cash hard fork.  On the exchange’s twitter handle, they tweeted, “We are happy to provide full support for the upcoming Bitcoin Cash hard fork.”  While the support is certainly helpful for traders, Bitfinex wouldn’t commit to choosing a side.  Instead, the exchange said, “At the time of writing, we do not believe that there is sufficient consensus to identify a clear winner in the Bitcoin Cash hard fork.”  Bitfinex expects to release an additional statement on November 16.  Traders should certainly pay attention to that as it could be material.

Final Thoughts

There is an incredible amount of information to digest regarding the hard fork.  As of this writing, it’s unclear which side will prevail as both certainly have their positives and negatives.  Given the recent slide of Bitcoin Cash, BCH holders should certainly be paying very close attention as the hard fork nears.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

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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“The Core of Any Blockchain Project is Decentralization” – Jack Zhang, Lightning Bitcoin

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Lightning Bitcoin is a fork of the ‘first-crypto-currency’ Bitcoin about which we decided to take the opportunity recently to speak to advisor Jack Zhang (AKA DianfuDatou / 点付大头 – known best as a Founder of Chainfunder and DAF).

Discussion topics include: what makes this project unique, as well as how you shouldn’t get it confused is not to be confused with the Lightning Network upgrade which is being applied to the original ‘Bitcoin’.

Who is Jack Zhang

Jack Zhang (AKA DianfuDatou / 点付大头) is a Chinese investor, business leader, and entrepreneur whose “portfolio includes XRP, XEM, IOTA, NEO, EOS, TEZOS, VEN”.

Zhang proudly describes himself as “one of the leading advocators of Ripple in China” having “translated Ripple into Chinese as ‘ruibobi’” – as well as the co-founder of NEO. Please note that most sources ascribe this latter achievement regarding NEO to an ‘Erik Zhang’ and so this claim requires further confirmation – however this writer sees no reason for him to lie in this respect.

He claims that his first experience with cryptocurrency was in 2011, when he entered the industry himself having previously worked as an investment banker at companies such as Zhejiang investment bank.

“I bought more than 10 thousand bitcoins at the price of 5 dollars and sold all of them out at the price of 7 dollars. At that time, I remember how I was reading posts on Bitcointalk about blockchain for several months and got fascinated by the genius design of the technology.”

Zhang says that the Lightning Bitcoin team members “come from a diverse cultural background, including China, the United States, Canada, the UK, Russia, Germany, and India.” And that:

“Currently Lightning Bitcoin has four core developers (listed on the website) with a team of 6 specialists. Eason Zhao is a CTO and H.H.Wang is a leading developer.

“Lightning Bitcoin also has an operational team of 8 outstanding and hardworking people managed by Wasley together with a community manager James Vuitton… We have independent leaders for each directions of the business;”

What is Lightning Bitcoin?

According to Zhang, Lightning Bitcoin is “a coin that takes the best from existing blockchain titans and adds advanced consensus mechanism.”

“Lightning Bitcoin forked from Bitcoin blockchain at block height 499,999… Lightning Bitcoin (LBTC) is a fully decentralized Internet-of-value protocol for global payments.

“The specific applications include peer-to-peer transactions and exchange platforms. Any users that operate on the LBTC protocol can enjoy instant, secure and nearly free global financial transactions of any size.”

Lightning Bitcoin is far from the first (nor will it be the last) fork from Bitcoin. A number of observers have claimed that the correlation between new forks and over inflation of Bitcoin. Jack Zhang however sees it as follows…

“Back in 2017, Bitcoin blockchain started to face network congestions, and a lot of other problems, that is one of the reasons why there were so many hard forks popping up. However, all of them changed either size or difficulty adjustment, what in my opinion did not improve the situation. That is a consensus that makes the difference. Pow and PoS are easily centralized, while DPoS represents true decentralization. Moreover, DPoS has the benefit of high efficiency, with little resource consumption.”

This mechanism utilises the relatively young Distributed Proof of Stake (DPoS) protocol which this writer has written about in a recent article, despite its basis upon the Proof of Work (PoW)-based ‘Bitcoin’.

Zhang states that Distributed Proof of Stake “allows separation of the voting power and block production, with no risks of a hard fork.” In fact, the aftermath of the announcement of DPoS adoption coincided with the company taking on another of its advisors “Stan Larimer a founding partner of Bitshares… we found mutual interests, as a result Stan joined Lightning Bitcoin advisory board.”

“Lightning Bitcoin uses DPoS, with the forging interval of 3 seconds, and the block size of 2M. We have achieved the TPS of thousands of transactions.

“Anyone can use LBTC, without censorship. The transaction fees are charged only for preventing network security issues, like DDoS attacks. It is not an off-chain solution on top of the Bitcoin blockchain as Lightning Network. I personally believe that Lightning Network will face the problem of centralization eventually.”

Furthermore,

“Lightning Bitcoin’s on-chain governance system enables LBTC holders to vote for the blockchain improvement proposals and the delegates who maintain the network as Lightning Nodes. It solves the problems of centralization of bitcoin by incorporating all participants in the Lightning Bitcoin ecosystem into the decision-making process.”

Lightning Bitcoin vs Lightning Network

Due to the similarities in naming, it seems natural that there may be a little confusion on behalf of the public and crypto-investment community with regards to the differences between ‘Lightning Bitcoin’ and ‘Lightning Network’.

“There is some confusion, you are correct.

When Lightning Bitcoin forked in December 2017, for Lightning Network it was still unclear when it is going to be launched, since it was still at the internal testing stage; only after four months later, in March 2018 when Lightning Network released its beta, both projects started to be confused by users in some countries.”

This, according to Zhang, is actually a problem more specific / limited to region,

“In other countries, like China, lightning network is not that well-known, as well as it has different Chinese name, that gives us more room for the development in Asia.”

Present and Future of LBTC

“Currently, Lightning Bitcoin network is stable, we constantly improving its functions and adding more products.

“The next big step for LBTC that we are working on right now is the development of on-chain governance, that will allow the network to self-improve and self-upgrade.

“In the future, stable upgrades of Lightning Bitcoin network in combination with chain governance, and decentralized transactions will allow cross-chain flashovers and smart contracts… the exploration of the on-chain governance model will become one of the most important tasks in the current stage of LBTC.”

Zhang continues to discuss the future for the coin in-detail as well, including that:

“In short, after complete integration of on-chain governance, next milestone is the development of new decentralized exchange. It will be an important component of the LBTC payment function.

“This exchange will have both basic functionality such as flashovers function of the gateway, as well as a system to guarantee the ease of cross-chain operations. Additionally, it will have the function of early crowdfunding of project under the necessary supervision.”

Finally,

“After implementing and perfecting the decentralized exchange, the development of intelligent contracts based on the UTXO model will be carried out, and a high-concurrence-based public chain ecosystem will be established to guide the flow of DAPP traffic.”

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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Encrypgen Offers A Low Risk, High Reward Opportunity

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Since the start of the year, crypto valuations have been collapsing faster than Kevin Spacey’s career.  For investors who entered the market a few years ago, it’s been painful but not deadly.  For those who entered the market at or near the highs, this bear market may have turned them off of crypto for a very long time.  However, one bright side of the current market is that some incredible values exist.  And one day these compelling values are going to make today’s investors boatloads of money.  While I’m keeping my eyes on several tokens, perhaps the most exciting crypto company is Encrypgen (DNA).

Investors love to claim that projects they are following or investing in are the most likely to succeed.  But despite the bear market, many coin price collapses have been the fault of the companies themselves.  Many companies have missed their own deadlines and/or adjusted the roadmaps to something less ambitious.  Encrypgen has done just the opposite.  They are meeting their deadlines and are on the verge of releasing a revolutionary platform in the field of blockchain genomics.

It’s well known that small cap healthcare/biotech stocks have the potential of generating the highest returns in the equity markets.  Of course, those high returns come with astronomical risk.  So what if I told you that Encrypgen could generate those kind of returns with only a fraction of the risk that typically comes with start-up science companies?  Well, I fully expect Encrypgen to do just that.

I mentioned the risk is only a fraction typically associated with these types of companies because at some point in the 4th quarter (probably much sooner rather than later), Encrypgen will release the full working version of the Gene-Chain.  The beta version is already live.  The Gene-Chain will allow researchers and scientists to purchase data directly from consumers using Encrypgen’s token, DNA.

In addition, a buy-now feature will be implemented in the platform.  This is expected imminently.  This game-changing functionality will allow researchers to convert FIAT to DNA tokens directly on the Gene-Chain.  Researchers will receive DNA tokens and Encrypgen will receive funds that will be converted to BTC so that the company can continue to operate, expand, and enhance their product offerings.

Anther reason why I consider the risk to be much lower than usual is that the company has already done a tremendous job of navigating the complicated regulatory hurdles.  Because of the sensitive nature of the information being uploaded to the Gene-Chain (consumer genetic data), it certainly is necessary for regulation to exist.  Nevertheless, Encrypgen has already dealt with that while other competitors, such as Nebula Genomics, Shivom and LunaDNA, are significantly behind.  I always prefer to invest my hard earned money in market leaders rather than followers.  And there is no question that Encrypgen is the current leader in this space.

Investors should also take note that Encrypgen currently has an ICO cap of approximately $3.1 million.  Based on some of the other valuations I’ve seen in the crypto space, that is a significant undervaluation.  A $3.1 million valuation for a market leader in one of the fastest growing spaces that is about to release game changing technology doesn’t make much sense to me.  I am expecting a sharp and rapid increase once the Gene-Chain is being used by researchers.  The opportunity to accumulate at these prices won’t exist for much longer.

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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