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The Big Picture! (Trading Basics-Part 2 of 2)

Welcome back, in this article I would be continuing our discussion on how to trade Cryptos.

The prerequisite to read this post is to going through the first article of this series, please read it before understanding these further steps.

****** Part 2 continues… ******

Post registering on any of the Domestic/Indian platform and exchanging your fiat currency against cryptocurrencies, you must have almost got a feel for how it works.

In case you are wondering what else is left, your domestic platforms are not the only platforms. There are more and there are platforms with more number of coins which help you gain on arbitrage opportunities, better prices and opens a plethora of new coins to you. Binance is one such platform & Kucoin being the other.

Making an account on these is highly recommended:

https://www.binance.com/

https://www.kucoin.com/

An account on Binance & Kucoin would help you leverage better margin/growth/arbitrage opportunities.

These are not your fiat currency exchanges. These exchanges work to let you exchange some of your coins (Bitcoin-BTC, Ethereum-ETH, Neo-NEO, Tether-USDT) against any other coin available on the platform.

 

Your trading platform on Kucoin would look this way. You need not look at everything at once, but concentrate on the two market portions:

  1. Point 1 (marked in above picture) gives you the coins against which you can trade. They can be considered as your base coins. So any coins you deposit and available on the platform can be traded against either of these base coins. These base coins either can then be kept in wallet or can be further traded to get any other coin.
  2. Point 2 (marked in above picture), Let’s consider an example: Here as you can see the coin Dent-DENT is trading at 0.000040 Ethereum-ETH per coin. You can also see the value of the coin in blue. It is showing a value of INR 3.33. It means you can buy one Dent-DENT coin for 0.000040 of Ethereum-ETH. If you have one ether, you would be able to buy 25000 Dent-DENT.

Now consider you made commendable profits. You bought dent at INR 3.33 (i.e. against 0.000040 ether per coin @ when  Ethereum- ETH was INR 90000). When you bought dent you had put up a sell order at 0.000080 Ethereum-ETH per Dent-DENT i.e. you wanted to sell your dent at twice the price you had purchased them or at INR 6.66 per dent. You saw that at one point in time Dent-DENT crossed INR 6.66 but your order was not executed. Now the price per Dent-DENT is INR 4.

Well, there can be numerous reasons for the same. Dent-DENT crossed INR 6.66 at a given time and there were buyers who were ready to pay a high price to sellers and the sellers were ready to sell for low. Technically your order never got into the line of execution. The other reason might be Dent-DENT also doubled during the same time leaving the ratio of Dent-DENT to ether constant at 0.00040. Hence, your sell order at 0.000080 was never generated. As you can clearly observe, your buy price and sell price depend on the base coin price as well.

If I were to put it in simple terms, it would be playing football on a ship travelling at high speeds in a rough sea. You need to defend the goal post, but alas, everything moves. 😀

Coming to the next point. Your orders need to change according to the price of the base coins. As a thumb rule for beginners, I would suggest, you keep your base coin fixed. Choose a coin among the encircled ones, which have shown a constant growth trend. Once you choose a coin, all you need to do is target the number of coins you need to buy and or sell of the other coins. Eg: You have one Ethereum-ETH and you would like to buy 50000 Dent-DENT, keep your buy order of Dent-DENT against Ethereum-ETH at 0.000020. Sometime in near future Ethereum-ETH price might increase and Dent-DENT price might stay constant. Your ratio would be achieved quite early. You would have gained 50000 Dent-DENT, or a vice versa situation might also come in to play.

Keep trading and keep learning 🙂

To check on how to transfer coins from one wallet to another do check the video tutorial link below:

Coin Transfer Preview: Koinex.in Wallet

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How to Register & Start Trading? (Trading Basics-Part 1 of 2)

With a total market cap of $746,210,227,521 i.e Rs 4775.75 thousand crores, you cannot neglect the crypto movement. There has been a hype alongside a pump and dump situation currently among all the coins. People are running around asking every second person about how does one purchase cryptocurrencies. I would just say google it but since this is more than just googling data, let me give you a stepwise process on how one should register at an exchange and how does one trade.

  1. Google it 😛
  2. If you do not get the answer on the 1st page then try the 2nd page and the 3rd and you can go on,
  3. If you still cannot get the answer continue to read..

There are a number of exchanges (15 to be approximate) which are currently trading cryptocurrencies in India. Some of them are:

https://koinex.in/

https://coindelta.com/

https://www.buyucoin.com/

https://www.zebpay.com/

https://www.unicon.net/

https://coinsecure.in/

https://www.bitxoxo.com/

https://www.flitpay.in/

https://pocketbits.in/

Now hold on to your horses for a second.

Currently most exchanges have either stopped taking new registrations or would have taken your documents and kept you on hold for perpetuity. In case you still see exchanges taking new registrations viola: congratulations you are a step ahead already.

Before googling, anything just keep your KYC ready.

Scanned copies/ photographs of following documents are a necessity:

  1. Aadhar card (yes yahan pe bhi link karna hai Bhai!)
  2. Address proof which can be your passport or your bank pass book with your smiling photo on it
  3. PAN card ( I need not tell you to pay your taxes, government has already told you about the repercussions )
  4. Private/ PSU bank account, which would be already linked to your Aadhar and PAN (hopefully you must have done it. If not Hawwww!!!!)
  5. A smiling photograph of you, which should not be as old as your school ID card, photograph. There is something known as puberty which changes the way we look. If you do not know what puberty is google it!
  6. In addition, a lot of patience. These exchanges are new and you need to give them time to breathe, stop abusing them and let them help you.

To shortlist, any exchange you can read their google reviews and decide on one exchange. Look out for one, which is quick in reflecting your trades and money.

Post verification you can start trading on these platforms. There are buy windows and sell windows, which let you, put buy order and sell orders (post buy) just like normal trading exchanges. Fees might range from 0.1% of your buy/sell value to 1% of buy/sell value.

There are other platforms, for eg: https://www.coinmama.com/ is one of them, which let you buy coins using visa/master card. The fees should vary according to the platforms.

Next comes the big picture. Yes, there is part 2 for trading!

The above-mentioned exchanges accept payments in INR and have listed only a handful of coins for trading. The big game is not among these coins. The big game is going global and international…. Do read my next article for the same 🙂

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The Blood Bath Correction

In Italy , for 30 years under the Borgias, they had warfare, terror murder and bloodshed, but they produced Michelangelo, Leonardo Da Vinci and Renaissance. In Switzerland they had brotherly love, they had 500 years of democracy and peace- and what did they produce? The cukoo clock. – Graham Greene

If you are a management graduate, the first lesson of Economics points out to a free market where the price is discovered by a market, depending on the supply and demand constraints. Well the underlying idea of blockchain was to do away with a third party intervention and create a free market along with non-editable ledgers and contracts resulting in free market price discovery.  If you are a crypto maniac and you love the markets, what happened on Monday 8 January 2018 must have left you in a shock. The usual 150%, 200% returns on coins were unseen and what was more shocking was the red all over the market. Yes, there was a correction and the blame was taken up by CMC or Coin Market Cap. CMC is of the known website people refer to check the price of various coins.

The team took a drastic initiative, which was a need of the hour. They removed some Korean exchanges from their coin price calculations as all coins here were about 30% pricier than the other exchanges. Not many people knew this!

Well if it was an established global market, most of traders who are currency/stock market maniacs would use this opportunity to get arbitrage and help in price discovery on their own, and in turn, they get richer via every trade!!

Now since this step has been taken, for those who sold in a hurry thinking the market was tanking, I am sorry to say DOR. In case you were strong, held back your tears and let the market tumble for the blood bath, I am happy for you. You have learnt one of your lessons on DOR and staying strong.

We can see an even price across most of exchanges. Though the arbitrage has not been erased, with time, it will soon be erased and we might just end up with the right market price for every coin.

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Ponzi scheme or not!! What is it exactly?

In the year 1792 the major first stock exchange was the New York Stock and Exchange board. Prior to this the 1st exchange was. Amsterdam Stock Exchange. It was established in 1602 by the Dutch East India Company (Verenigde Oostindische Compagnie or VOC) which issued the first shares on the Amsterdam Stock Exchange. It was the first company to issue stocks and bonds. It was renamed the Amsterdam Bourse and was the first to formally begin trading in securities. Overall the idea of a stock exchange is a group of people or an individual who believes in his idea, his start up and or his established firm and raises money from public. In case the entity goes up the ladder chain so does your investment and in case it goes down the chain, I need not tell you what happens with your investments!!

During these 400 + years of establishment of exchanges, there were ups and downs, funds were raised for wars, education, industries, energy, human capital itself and there was middleman everywhere. The 3rd party was either the broker who would introduce you to the world of investment and now the banks which have taken the place of brokers.

What are these 3rd parties and what do they do?

Their work is to tell you which investment is good and make you understand the working of the form /entity/idea you are investing in. Like in every basket of apples, not all are good similarly among these 3rd parties some may just bullshit around about the idea and make one invest. Sole reason being the commission the 3rd party gets to raise funds. With the advent of technology and internet these bad apples have sprung like mushrooms and are manipulating the market. But you too have access to internet and technology. Do your own research (DOR).

Getting back to the title, Ponzi scheme or not?. IF you DOR you will understand about how stock exchanges were earlier unregulated followed by proper setting up of people. The companies who launched their shares were either actually upto a definite idea or were just running around the bush to raise some money. Yes stock market was a Ponzi scheme in itself before people started adopting it and investing money in it. There was a wave of change which was due to mass adoption. Government did intervene and played their role. We opened our own exchange BSE in 1875, post which it was recognized by the Indian Government in 1957. That did put up barriers in the path of companies who were in the game to raise capital and ghost out, but it never stopped them.

Now can you see the connect. We are back to the 1957-1992 phase. We will see a 2000 happen soon and may be a 2008 too. But cryptos will survive. With this here are some more stock investment basics.

  1. Invest only if your investment money is not your bread and butter. You can loose it
  2. Withdraw your principal and play with your profits.
  3. DO NOT take a loan for investment, especially in an unregulated market.
  4. There will be pumps and dumps, if you know that your white paper and invested company will deliver, hold!!
  5. Buy low, extremely low (a cent or a rupee). To buy low DOR (Do your own research).
  6. Technology is the way forward , so anything which brings in change, cuts the 3rd party and brokers, and cuts costs is worth a bet
  7. Gambling /casino coins are good, but too many casinos are already in the market. It’s literally a gamble
  8. If your coin goes boomerang 6 or even 10 times in a day, do not run around crazy. It has to get back to somewhere mid way.
  9. This industry is new and news is what makes everything rise or fall.
  10. Get your basics clear- Rise, Fall, Support Resistance, Elliot’s, Arbitrage, Fibonacci, Trend
  11. Keep definite realistic cash out targets. If the coin shoots above your target price, DO NOT GET GREEDY!!. Stick to the plan.
  12. Diversify based on platforms and exchanges
  13. Always keep some base coins handy- Bitcoin(BTC), Ethereum(ETH), USDT and the exchange coin.
  14. Use these to take risk and grow on your short terms.
  15. Distribute your funds. Long term, midterm and short term.
  16. And stay strong.!!!

Cheers!

 

Ref: https://timesofindia.indiatimes.com/Which-is-the-oldest-stock-exchange-in-the-world/articleshow/1491593.cms

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The need for clearance of arbitrage!!

Since the last fall in bitcoin and other related coins with no proper reasoning for the fall, we saw a bandwagon effect. Those who had invested for profits at high prices expecting the coin to touch $30000 exited the market with huge losses. Some even took an oath to never ever touch cryptos again.

For those who know that market corrections is not rocket science , this phenomenon was of least importance. I personally made 15% within an hour and exited the market. Not a wave rider, but who wouldn’t like to take advantage of a wave. During this period, for those who were present on multiple exchanges might have observed a huge arbitrage. Especially if you are on an Indian Exchange there was an arbitrage opportunity of approximately 20% on each coin. Another 20% made here too!!

But how long does an arbitrage last on normal stock market/share market. At-least among the NSE and BSE there are arbitrage opportunities which hardly exist for seconds. And what does a quick arbitrage clearance point to? Awareness among investors and traders resulting in fair price discovery.

In today’s date if you open any Indian crypto exchange and a global exchange in tandem, you might still be in for a surprise. Ripple as of now at 15:46 hours on 27th December 2017 is trading at 10 cents of premium on Indian Exchange. This results in an approximate value of Rs 6.41 i.e approximately 8% arbitrage over USD. This phenomenon clearly indicates lack of knowledge among traders.

The sole backbone of crypto currencies is blockchain, and according to https://en.wikipedia.org/wiki/Blockchain the definition is “A blockchain,[1][2][3] originally block chain,[4][5] is a continuously growing list of records, called blocks, which are linked and secured using cryptography.[1][6] Each block typically contains a hash pointer as a link to a previous block,[6] a timestamp and transaction data.[7] By design, blockchains are inherently resistant to modification of the data. The Harvard Business Review describes it as “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way.”

With exchanges trading at premium across the globe, the fundamental idea of introducing use case based crypto currencies to offer an equity based value (fair and impartial ) will be lost. For eg: if 1 coin “X” in future can be used to watch a movie in India, the same on an Indian exchange will cost approximately 10% premium of the actual cost in US. This itself hampers the idea of a coin and non intervention of any 3rd parties which is the sole soul of a blockchain. This also raises another question. If one dollar is Rs 64, and one ripple is trading at $1 in US and Rs 70 in India, without any 3rd party players and in the presence of an unregulated free market is $1=Rs 70 ?

So also very few people would exploit this opportunity causing disturbance in the market resulting in nonacceptance of coins. I will not be surprised if regulated exchanges and governments intervene and result in death of cryptos and one of the reason being non disclosure and or discovery of fair market price/value. Yes we are looking at global changes , but if not accepted by the current authorities/regulators, we might as well see the formation of a 2nd economy and or death of cryptos!

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Trading Crypto Currencies

There has been a hue and cry regarding cryptocurrencies. For some it is a new concept and for others this has been here for quite some time now. It all started from a simple concept of a digital currency bitcoin. Unlike the bitcoin, technology enthusiasts were more interested in the underlying technology platform for the same- Blockchain.

Before reading ahead kindly do go through the concept of blockchain – both its advantages and disadvantages ( thoroughly believe nothing comes with 100% pros). Here is a possible link for the introduction:

So now getting back to trading.

Since bitcoin or any other cryptocurrency has no fundamentals , it is quite an impossible feat to get a 1 year or even a 6 month prediction of these currencies.These markets are currently driven on sentiments. If one is to look at the actual value of these coins, or even the value at launch ( IPO) ( ICO in crypto currency) one can derive the value as actual cost of mining a coin. This can be a base value to start with, but to get this value one will need to have a balance sheet and a profit and loss statement of the company/platform launching the coin. Technically in a normal stock market such information can be found in a red herring prospectus. A red herring prospectus gives an overall introduction of the company, the shareholders of the same alongside its previous performance , board of directors and also the future plans. The same is validated by a regulator before going public.

So what does one do if you don’t have a red herring prospectus and more importantly a regulator. Well, look at the information of the company you are investing into. Have your own red herring prospectus. If they say the office is located at an address and in case you are in and around that area, do visit them. Read about the use case of the coin, What exactly are their plans? Can this coin be a disruption? Is there a need of this coin? What is the core competency? What tie ups is the coin looking at? Who is the big daddy of the coin? Who is backing up the coin? Do your research. If you are on a crypto exchange and the coin is listed there, do observe its movements. Just because a coin costs a cent, need not necessarily the coin will be legit, or need not necessarily the coin will give you 2000% returns in a year.

Do not follow the bandwagon!! Yes you got it right, just because your friend is investing, do not invest for the sake of investment purpose. Investment takes research and time.

Do remove your principal amount as soon as possible. You can risk your profit money (do not get too attached to it, especially if it was just a gamble). It is a risky field you are entering where a regulator is not present, nor are there any limits to upside and downside of the coin price.

Finally do your own technical analysis. It ain’t difficult, all you need is patience and basic maths to get it right!

Cryptos are here to stay, you cannot ignore them!! And do not forget to pay your capital gains tax, at least as income from other sources till the government comes with a proper taxation system for these.

There are more than 1500 crypto currencies currently available in the market. Choose wisely!!

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