Archive | Currency News & Analysis

What You Need to Know about Cryptocurrency Trading

The rise of cryptocurrencies was slow and then the market exploded, sending the price of Bitcoin soaring before they ultimately crashed again. The growth in popularity and trading platforms has led to wider acceptance of cryptocurrency and a growing number of people becoming involved with cryptocurrency trading.

When people become interested in cryptocurrency trading, it is easy to get overwhelmed with the process and feel unsure of where to start. Fortunately, there are many resources available for you to learn to navigate the process. To get started with cryptocurrency trading, you will need to choose a cryptocurrency wallet and an exchange for trading.

What You Should Know before Getting Started

Before you get started with cryptocurrency trading, it is useful to know a bit about crypto and how the process works. Bitcoin is the original, and best known, cryptocurrency. Since 2011, countless new cryptocurrency have appeared, each seeking to challenge Bitcoin’s dominance. These cryptocurrencies are called “altcoins” and have been gaining market share at a staggering rate.

The standard currencies in the world, such as the US dollar, are referred to as fiat currencies. When you start trading, you will need to use fiat currency to purchase your cryptocurrency. You can then begin trading among different types of coins, such as from Bitcoin to other types of altcoins.

Cryptocurrency has more in common with stocks than with fiat currencies. When you purchase cryptocurrency, you are actually buying shares of tech stock, a part of the blockchain, and a piece of the network. There are two basic ways to accumulate cryptocurrency, through mining or by buying and selling cryptocurrency on an exchange.

If you have decided to buy crypto, rather than mining, you have some options. There are a few ways to invest in cryptocurrency, including through the GBTC trust sold on the stock market, by choosing an exchange to buy coins on and a wallet for storing coins, or an exchange-broker-wallet hybrid, such as Coinbase/GDAX.

Cryptocurrency Exchanges

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The exchanges are the most common places where cryptocurrency is bought and sold, similar to a stock exchange or a currency exchange in foreign airports. Fiat currency is used to buy and sell cryptocurrency. As with trading on the stock market, you will need a bank account and access to the exchange for cryptocurrency trading.

Although the process is similar, the cryptocurrency exchange is not part of the regular stock exchange. However, GBTC is a trust that owns Bitcoin and sells shares on the stock market. Some people prefer to start investing here since they can buy shares without engaging directly in cryptocurrency trading. It should be noted that bitcoins are cheaper than buying shares of the GBTC trust.

When choosing an exchange, there are several factors to consider to make sure you are choosing a reliable exchange. Information that can signal the quality of an exchange includes liquidity, fees, spread, trading volume, purchase and withdrawal limits, security, insurance, and the user interface.

Cryptocurrency Wallets

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Your cryptocurrency wallet is where you store the encrypted passwords that represent your coins. Coinbase and other exchanges have built-in online wallets that may be used to store your cryptocurrency. However, there have been several high profile hacks that have made people wary of keeping their cryptocurrency holdings on the exchange.

The other options for cryptocurrency wallets include paper wallet services, such as myetherwallet.com or a hardware wallet. Both paper wallets and hardware wallets remove the risk of keeping your crypto on the platform. You can send funds to your paper or hardware wallet from Coinbase, but there is a small transfer fee for this service

Market Volatility

Before you start cryptocurrency trading, it is important to understand the extreme volatility of this market. Fortunes are made and lost in a moment with bitcoin and other altcoins. It is important to consider mitigating your risks and choose the coins you want to trade. There is less risk of losing everything with bitcoin or the bigger altcoins, such as Ethereum than with some of the others.

How To Get Started in Cryptocurrency Trading

When you are ready to get started with cryptocurrency, you need to decide how you want to start. Do you want to try mining or go straight to investing in cryptocurrency by trading on the exchanges? The time and technology required for mining are thrilling for some people, but many prefer cryptocurrency trading on the exchanges.

It is essential to choose a company with a good reputation. If you are a beginner, you may want one that offers an exchange and a wallet, such as Coinbase. The convenience and ease of use have made Coinbase the most popular cryptocurrency website in the United States. They offer a single platform for a wallet and currency exchange, which is great for beginners. You can put money into your wallet and buy coins instantly without the wait time that is associated with buying directly from your bank account.

After you become comfortable with buying and selling cryptocurrency on Coinbase, you may be ready for some cryptocurrency trading among different currencies. You can try their GDAX exchange and then move on to other exchanges, such as Binance, Bittrex, or Kraken as you become more comfortable and confident.

Consider the coins you want to trade. Prominent coins are less risky, such as Bitcoin and Ethereum. However, large profits have been made on a good day with the lesser-known and newer coins.

Setting Up an Account

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Image via: Pixabay

You will need to set up an account with Coinbase or another exchange site before you start cryptocurrency trading. Your bank account, debit card, or credit card will need to be connected to your account so you can exchange digital currency in and out of your fiat currency. Yes, this requires providing personal information, such as your ID and bank account information.

The need to provide personal information can make some people uncomfortable, but it is necessary and other traders all had to go through the same process. This is another reason to select a reputable company. Using your bank account is often the best bet since fees are lower than when you use a credit card or debit card for transactions.

Once you have linked your bank account, you will have to wait for about three to five business days for your bank’s approval before you can start cryptocurrency trading. For this reason, you should verify your account and supply the required information and documents as soon as possible, as you won’t be able to start trading until the verification is complete.

Strategies and Tips for Trading Cryptocurrencies

For the beginner, purchasing a major cryptocurrency first, such as Bitcoin, is the safest bet and easiest to navigate. Once you get comfortable buying and selling one type of cryptocurrency, you can try trading Bitcoin or Ethereum for other cryptocurrencies.

There are limits to how much you can buy or sell in a week. These limits can increase in a few ways, such as by adding a photo ID and other payment methods to your account. In addition, the limits increase quickly as you engage in cryptocurrency trading. You will find that your limits increase fairly quickly once you start trading.

There are fees involved with cryptocurrency trading. These can vary, depending on the exchange you are using. Always be sure to read and understand the information about the fees that will be charged before you start trading, so there are no surprises.

You should also be aware of the tax implications of cryptocurrency trading. The tax implications can vary depending on whether you are buying, selling, or investing. Making a mistake in this area can be very expensive.

Keep your cryptocurrency safe. There have been several big hacks in various exchanges and once cryptocurrency is lost, you can’t get it back. For this reason, be sure to take the necessary steps to protect your account. One way to do this is to set up two-factor authentication. This secures your account by sending a code to your phone when you log in, which adds another layer of protection.

Bitcoin is expensive, but remember that you don’t have to buy a whole coin to get started. You can buy fractions of coins if you don’t have a lot of money to invest initially. As you continue cryptocurrency trading, these small fractions of coins can quickly add up.

Spread your investments among cryptocurrency. Some people purchase only Ethereum or Litecoin because they feel like Bitcoin is too expensive. However, you should also consider which cryptocurrencies are more likely to increase in value or retain their value over time. Pick a couple and buy them in equal dollar amounts, so you can enjoy the returns offered by each type of coin.

Conclusion

Cryptocurrency trading has increased in popularity, as crypto has become more widely accepted. The market is highly volatile, so it is important to start off slowly until you learn to navigate the process. By taking the time to learn what you need to know before you start and following some tips and strategies, you can learn to invest wisely and have a great time in the process.

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How to Use Binance

Mobile phone and Binance logo on dollars

​Image source: flickr

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Binance is one of the most powerful cryptocurrency exchanges in the world. Since its founding in 2017, it has remained influential and popular for a wide variety of reasons, including low fees and very high speeds for exchanges.

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Whether you want to learn how to use Binance simply to manage the trading of other supported cryptocurrencies or you want to use Binance's own digital currency, binance (BNB), understanding the basics of this platform will be essential to your success.

We will go into detail about why those things matter and how to use Binance for your specific cryptocurrency investing and trading needs in this tutorial.

An Introduction to Binance

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As we mentioned above, the term Binance may be used to refer to a cryptocurrency, Binance Coin or BNB, or the platform on which more than 140 digital currencies are currently traded. The key is to look at the capitalization. Technically, “binance” usually refers to the currency and “Binance” refers to the platform.

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However, many investors use the two interchangeably. In most cases, they will be referring to the Binance exchange when using the word alone. If they mean the digital currency, they are more likely to employ the Binance Coin abbreviation, BNB.

Readers should note that while these conventional methods for distinguishing between BNB and the exchange itself are practical, Binance itself capitalizes both Binance and Binance Coin, which is why we do so here as well.

Cryptocurrencies Supported By Binance

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Image source: flickr

Binance supports 143 different tokens and coins. However, not all cryptocurrencies may be traded for one another. For example, Ethereum has 140 different trading pairs on Binance because three of the currencies may not be exchanged for Ethereum on that platform.

Popular Digital Currencies Binance Supports

A Meteoric Rise to Success

Trading Pair Options on Binance

How to Use Binance

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Once you know how to use Binance, it is time to set up your account and take action. Setting up a Binance account is relatively straightforward. You simply create your account by providing an email address and password, then verifying your information and agreeing to Binance's terms of use. You cannot learn how to use Binance if you do not agree to the terms of use, so make sure you are okay with this “fine print.”

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Binance will verify your email and then send you instructions on setting up a security process called 2FA, or two-factor authentication. This essentially creates a second password that the platform sends to your mobile phone or other mobile device when you log in.

It provides an extra layer of security, which is very important with cryptocurrency trading since there is little or no recourse if your cryptocurrency wallet is hacked and your digital coins stolen.

Funding Your Account

A Meteoric Rise to Success

Trading In Binance

Traders can combine these strategies or only focus on a single method. It will soon become clear to you why it is so important for the Binance platform to operate so quickly. When you are trading cryptocurrency, value can easily rise or fall across a benchmark in a matter of seconds. If those seconds pass while you are delayed trying to trade, you could end up losing money instead of making it!

Binance Offers Traders Huge Advantages

One thing you will discover as you learn how to use Binance is that the platform offers low trading fees and reduced transactional fees. Cryptocurrency platforms make their money through fees. They may charge for using the platform to make a trade or charge a part of the total volume of your trade in fees for making it.

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On Binance, cryptocurrency trading fees are about a quarter of what they are elsewhere, and users can reduce those fees by half by paying their account fees in BNB.

By the time you have paid your fees in BNB, you could pay five times less than what other popular exchanges charge, so learning how to use Binance may already have paid off.

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How To Buy Bitcoin Cash

bitcoins, bitcoin white paper and phone with screen showing bitcoin cash wallet

In an age where cryptocurrency is the investment medium favored by traders, it's difficult to keep up with the waves of new cryptos hitting the market. Bitcoin has become a household name in recent years, with the cryptocurrency having several of its own individual currencies. Confusing, right? For Bitcoin enthusiasts everywhere, one thing you need to learn to be in the know is how to buy Bitcoin cash.

Learning how to buy Bitcoin cash and trade it on the crypto market it is not as hard as you may think, but it requires head knowledge to get started. Today, we will teach you the ins and outs of Bitcoin cash, how to buy Bitcoin cash, and offer trading tips that every beginner in the world of cryptocurrency needs to know.

What Is Bitcoin Cash?


Bitcoin Cash logo

Image Source: Wikimedia.org

Overview

Bitcoin cash is a kind of altcoin that is fast surpassing its predecessor, the initial Bitcoin. Bitcoin cash is a currency of the original Bitcoin if you will. The closest comparison would be the US dollar and the Canadian dollar. Both are dollars, but they both serve different purposes as individual currencies.

Things are more complicated in the blockchain universe, but this is a rudimentary assessment to acquaint you with the idea. Bitcoin cash first originated back in August 2017 after a division occurred in the original Bitcoin blockchain. Crypto traders frequently argue and voice their diverse opinions as to the best way to develop cryptocurrency. This is where Bitcoin cash was born.

Breaking the Crypto Down

Before you learn how to buy Bitcoin cash, it is important to break this crypto down and understand where it came from. Bitcoin cash was born because of the explosive growth of the original Bitcoin in recent years and the issues of scale that resulted.

The initial blockchain had developed to such proportions that increasing numbers of users were flooding the market with more transactions than ever before. This put a strain on the Bitcoin network, with blocks being filled faster than users could mine them. This slowed transactions, making them more expensive for users too.

Bitcoin cash is an improvement on the original Bitcoin, with some new accouterments of its own. For one, Bitcoin cash has a block size of 8 MB now, meaning it allows each block more data. This also means that the number of transactions done in each mined block is higher. Many users have hailed Bitcoin cash as a step in the right direction to manage the increasing scale of this cryptocurrency.

Some users are unsatisfied with the results, stating that it is a band-aid to a bigger problem and there is still not a protocol in place to divide transactions into smaller sections. One major ramification of the blockchain division is identical currency. So, the data from the original Bitcoin was copied over and users in possession of those Bitcoin were given Bitcoin cash instead.

Essentially, for anyone that owned Bitcoin before the division occurred in August 2017, this means you are in line for free Bitcoin cash. Considering Bitcoin cash is worth hundreds of dollars, this is good news all around.

How To Buy Bitcoin Cash


graphic illustration of a wallet with bitcoin logo

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Select Your Bitcoin Cash Wallet

If you want to learn how to buy Bitcoin cash, you must first select your Bitcoin cash wallet to keep it in. Some platforms are still warming up to Bitcoin cash. They may think there are better methods to deal with the problems of scale Bitcoin was facing or feel that honing in on one category of the crypto is best.

That said, an increasing number of wallet platforms accept Bitcoin cash, so you will have options to choose from. Hardware wallet platforms like Trezor and Ledger are solid options, both allowing you to utilize your Bitcoin cash like any other crypto. If you owned Bitcoin before the division occurred in August 2017, these platforms will now let you claim your cash.

You can choose amongst a plethora of software wallets, and you might already have a good one on hand if you had the original Bitcoin. Exodus is a worthwhile software wallet to consider, and they offer plenty of fluidity to move your cryptocurrencies around as you desire.

When learning how to buy Bitcoin cash, if you want to move your cryptos around, you can go back and forth between the blockchain and another one like Ethereum Classic. Jaxx allows you to use several currencies, Bitcoin cash being one.

A sister software wallet of Electrum, Electron Cash is another good one to consider. There are quite a few exchanges that deal with Bitcoin Cash, but it may not be ideal to keep your cash in their wallets for long, as this could pose a real security threat.

Coinfloor has a good wallet where you can trade on the UK exchange while keeping your keys securely offline. You can also access your funds with little notice for trading purposes. A few other wallets to consider are Coinomi, Bitpay, BTC.com, and Keepkey. For a full list of wallets, go to Bitcoincash.org and see what options are available to you.

Find An Exchange

The next step in learning how to buy Bitcoin cash is to find an exchange. There are fewer Bitcoin cash exchanges than original Bitcoin exchanges, but there are still some solid contenders for you to pick from.

Some of the best exchanges are Bithumb, Coinone, Bitfinex, Poloniex, Binance, Bittrex, CEX.IO, Kraken, Livecoin, and Tidex. eToro is another good one, but you cannot gain access to your Bitcoin Cash or send it to other individuals.

If you use eToro, your only choice is to buy and sell Bitcoin cash for hard currency like dollars or euros. You need to live outside of the continental USA to use this approach.

Coinmama is truly the mother of all crypto exchanges. You can use it to for how to buy Bitcoin cash with your credit card. You can live just about anywhere in the world with this platform, so Coinmama is a good option for users everywhere.

London-based CEX.IO is another good choice, letting you use an array of currencies, including your Bitcoin cash. You can buy using a credit card on this exchange too if you are short on time. Using a credit card is much more costly, but you can move in both USD and euros. If you want to enjoy a lower fee, you can transfer the funds, make a deposit, and openly trade on CEX.IO for a small fee.

Coinbase is one of the best exchanges there is, and they recently incorporated Bitcoin cash into their approved currencies. Coinfloor is an open exchange for Bitcoin cash, so you could look into that one too. For experienced traders, Kraken meets the mark.

Transfer Your Bitcoin Cash

This final step is optional but advised for all traders as it is best not to leave funds sitting on the open exchange. After proceeding with how to buy Bitcoin cash, transfer the funds to your wallet so you can access them with your private keys.

You can keep on eye on the transfer with your Bitcoin cash block explorer. Wait until you have 3 confirmations for the cash, and then you can rest easy that the transfer is complete.

Trading Tips Every Beginner Needs To Know


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Selling Bitcoin Cash For Bitcoin Or Altcoins

Now you know how to buy Bitcoin cash, you should learn how to sell it. There are fewer exchanges for how to buy Bitcoin cash than the original Bitcoin, and even less for selling it.

One option you have is to trade the Bitcoin cash you have for other cryptos. Exchanges like Bittrex or Poloniex will let you trade your Bitcoin cash for Tether, Ethereum, or the original Bitcoin.

If you would prefer to avoid an exchange platform altogether or do not want to risk making your bank account vulnerable, you could utilize service providers like ShapeShift or Changelly. They do immediate exchanges between currencies, including Bitcoin cash.

Selling Bitcoin Cash For Real Cash

Three main exchanges discussed when learning how to buy Bitcoin cash are also good marketplaces to sell Bitcoin cash for solid currency. These are CEX.IO, Kraken, and Coinbase.

On Coinbase, you can sell your Bitcoin cash for USD only. Kraken allows Euros and USD. CEX.IO allows USD, Euros, and the British Pound Sterling.
If you exchange the Bitcoin cash for real cash, you will have to verify your identity and link your bank account to the exchange. After that is done, you can take out the Bitcoin in cash.

The Peer-To-Peer Method

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Image Source: Pixabay.com

If learning how to buy Bitcoin cash on an exchange was not your cup of tea, you can sell it peer-to-peer instead. This means you sell it straight to another trader. Services like LocalBitcoinCash allow you to trade with other users by putting up an offer or responding to another user’s offer.

LocalBitcoinCash functions as an escrow provider, allowing you to sell immediately and make the transaction, provided you and the other user have enough cash in your accounts. The platform even allows face-to-face interaction with the other individual if you want to work the details out in person. If you opt for this approach, play it safe and meet at a public location like a coffee shop.

Conclusion


When learning how to buy Bitcoin cash, always remember to keep your coins secure and do not keep too much money in an exchange wallet. Whenever you use a wallet given by an exchange, you are handing over rights to your private keys, so keep most of your cash secure in your own private wallet with private keys.

When learning how to buy Bitcoin cash and sell it, remember that once done, you cannot reverse a transaction. So, take your time and double check the amount of the funds being traded. Before long, you will know how to buy Bitcoin cash like a pro.

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How to Trade Bitcoin

Posted on 31 July 2019

Bitcoin is an electronic or digital currency that exists solely online. It is most commonly known these days as a “cryptocurrency” and, of all the cryptocurrencies out there, Bitcoin is commonly acknowledged to be the most valuable currency in use today. Today one Bitcoin is still worth thousands of dollars, making it highly attractive for cryptocurrency investors who believe the currency will appreciate in value in the future. As cryptocurrency becomes increasingly part of today's trading environment, more and more investors want to know how to trade Bitcoin. This article will walk you through the basics.

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What Is Bitcoin?

Likely one of the biggest questions a new investor wanting to know how to trade Bitcoin will ask is simple: “What is Bitcoin?” Bitcoin is a type of electronic cash that was created by a programmer or group of programmers operating under the name “Satoshi Nakamoto.” The true identity of Nakamoto has yet to be established, but historians trace the origin of Bitcoin to the registration of the domain name “Bitcoin.org” in 2008.


Mining Bitcoin

In the early days of Bitcoin, the currency could only be accessed if someone knew not just how to trade Bitcoin, but also how to mine it. Nakamoto's Bitcoin code was open-source and released in 2009, thereby enabling other programmers to mine the currency and, by understanding the code and process correctly, create more of it.

The cryptocurrency quickly gained popularity because it offered a way to transact anonymous but reliable business deals, making it perfect for the black market. Bitcoin was used at its earliest stages primary to launder money and transact drug deals, but soon more conventional investors became involved in the process.


Bitcoin Has High Volatility

It was not until the foreign exchange (forex) traders became involved in mining and collecting Bitcoins that the currency really took off. Values hovered between $0.30 in early 2011 and $13.30 in 2012. The value rose and fell within those boundaries for several years, demonstrating to investors who wished to learn how to trade Bitcoin that timing would be everything unless they were mining or trading for the long-term. Those who waited on long-term payoffs likely reaped their rewards over the years between 2013 and 2017, when one Bitcoin could have been valued anywhere between $13.30 and nearly $20,000.


Increasing Bitcoin Regulation

After Bitcoin's value started to skyrocket, the U.S. Department of Justice, the U.S. Financial Crimes Enforcement Network (FinCEN), and a multitude of global banking systems began to watch the cryptocurrency more closely. One of the biggest attractions for individuals hoping to learn how to trade Bitcoin so that they could use it for anonymous transactions because less appealing as financial bodies began to peel back the layers of anonymity surrounding Bitcoin transactions. In China, buying virtual currency was outlawed as early as 2009, and by 2013 the People's Bank of China prohibited Chinese financial institutions from using the digital currency at all.


A Short History of Bitcoin Hacks

Bitcoin is highly attractive because it is anonymous. However, it can also be very dangerous for investors because it is anonymous. If an investor's “wallet” holding their electronic currency is hacked and the Bitcoin stolen, there is little recourse available. When an entire cryptocurrency exchange is hacked, the problem is magnified exponentially.

Over the course of the first half of 2018, $761million in cryptocurrencies (not all Bitcoin) were stolen from various exchanges. This hurt a number of cryptocurrency values, including Bitcoin, even though it was not the only digital currency stolen. The result of these hacks was to drive the value of a Bitcoin down to around $3,000 at one point during 2018, which actually motivated investors to learn how to trade Bitcoin because most believe the value will not remain that depressed permanently.

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Source: Pexels

Cryptocurrency Advantages

Having read the relatively short, volatile, and dark history of this founding cryptocurrency, you may be wondering why anyone would want to learn how to trade Bitcoin. However, there are many advantages to trading this digital currency and to investing some portion of your capital in either mining it or acquiring it for future trading purposes. Here are some of the most commonly cited advantages associated with Bitcoin and, to a lesser degree, with other cryptocurrencies:

  • Decentralization, meaning that no one institution can control the digital currency and transactions are very difficult to manipulate
  • Limited supply, which means that Bitcoin values are difficult to manipulate because, like gold, the only way to get more Bitcoins into circulation is to mine them
  • Anonymous transactions, which protect the identities of the people involved
  • Irreversible transactional nature, meaning that a payment made in Bitcoins cannot be reversed later by any entity, unlike a payment made with a credit card
  • Microtransactions, which are possible because Bitcoin can be divided to the one-hundred-millionth degree
  • International trading, because if both users agree to accept Bitcoins then the currency may be sent and received quickly and in nearly any location
  • Low fees, as at present there are very low fees or no fees, depending on the platform, associated with payments in Bitcoin

 

How to Trade Bitcoin

If you are ready to learn how to trade Bitcoin, take a deep breath. The process is not particularly complicated, but there are a number of steps and, furthermore, there may be different pieces to the process depending on the route you opt to take in your trading.


Opening Your Trading Account

The first piece of the puzzle in learning how to trade Bitcoin is opening an account with the right type of forex trader. You may choose to use:

  • AvaTrade
  • eToro
  • Litefox
  • Some other platform

Fund that account with money from your investment capital. You will either need to already have Bitcoins in place in your digital wallet linked to the forex account, or you will need to make a payment into the platform's associated digital wallet. Depending on the platform, you will need to deposit a fraction of a Bitcoin, which is good for new traders learning how to trade Bitcoin, since one Bitcoin may be worth thousands of U.S. dollars.

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Monitor Your Deposit's Value

Once your Bitcoins are in the forex account, you monitor the value of Bitcoin compared to the initial investment that you made into your digital wallet, cashing out when you feel that your coins have appreciated to the point at which you are seeing an acceptable return.

For example, say you deposited two Bitcoins into your forex account on December 17, 2018, when one Bitcoin was valued at $3,424.65. That would mean that your initial deposit was $6,849.30. For the purposes of our scenario, imagine you decided you would leave your deposit in your electronic wallet in your forex account until Bitcoin values doubled, rising back to about $7,000 USD where they were in February 2018.

In that case, you simply monitor the value of your two Bitcoins until they meet your predetermined standards or you feel that your goals are best served by cashing out your account. Once you reach that point, it is time to finish the trading process.

Some traders complicate the process by monitoring Bitcoin appreciation not just against their initial currency investment, but also against other international currencies. There are times at which trading Bitcoin against a third currency, then trading that currency for a fourth or back to the original currency may be more beneficial than simply waiting for the direct relationship between your native country's currency and Bitcoin to be helpful to you.


Cashing Out Your Bitcoin

When you are ready to exchange your Bitcoins for another currency, you leverage your forex account to make the trade, and then, depending on the wider scope of your investment strategy, you can either cash out completely or trade into another currency. Just remember that the more currencies factor into your Bitcoin-trading strategy, the more exchange rates you must monitor and, beneficially, the more options for generating wealth you may have.


how to trade bitcoin

Source: Pexels

Conclusion

Now that you understand how to trade Bitcoin, you are probably eager to get started. After all, the process seems pretty simple on paper. Just be careful to bear in mind the risks as well as the rewards. Forex trading with Bitcoin has all the potential risks of forex trading with fiat currency, compounded by the risk that your digital wallet could be hacked.

Be alert to shifting global economic conditions that could affect the value of your digital currency, your preferred fiat currencies, and your native currency. Also, monitor the cybersecurity measures your preferred forex platform and digital wallet servicer are providing in terms of volume, effectiveness, and flexibility. Hackers work fast, and Bitcoins make an attractive target for the very same reasons you want to learn how to trade Bitcoin in the first place. Keeping a close eye on your investment is the best way to benefit from the exciting evolution of this cryptocurrency.

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Buy The Rumor Sell The News: Risk Control

Posted on 08 April 2019

For many, the art of investing seems like an elusive phenomenon; lucrative if you can take hold of it but difficult to carry into action. Well, we are here today to dispel that myth. One key element of learning how to invest is understanding the concept of buy the rumor, sell the news.

Perhaps you have heard the phrase buy the rumor, sell the news before, or this could be your first time being acquainted with the idea. Either way, allow us to delve into what buy the rumor, sell the news means, why the strategy works in practice and not just in theory, and offer you some useful tips and tricks to invest like a pro.

What Does "Buy the Rumor, Sell the News" Mean?

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Overview

First off, what does buy the rumor, sell the news even mean, anyway? To break it down into succinct terms, this phraseology refers to the choice to purchase a security on the foundation of a rumor. Then, you move to sell the security once the news releases the rumor to the general public.

This is a common financial strategy to capitalize on securities before they hit the news, then turn around and make a profit once the story strikes. Many traders incorporate the concept of buy the rumor, sell the news into their market strategies by basing their actions on what they believe could happen in the future.

This technique is broken down into two parts. The first is buy the rumor. When a trader buys the rumor, they are still speculating on the future event by purchasing an asset.

After the future event occurs or hits the news, it is a matter of public knowledge. At this point, the trader discards the asset. They sell the news, so to speak. By doing so, the market continues to move.


Understand the Power of the Rumor

To grasp the idea behind buy the rumor, sell the news, it is imperative to understand the power of the rumor. For investment markets not a part of the foreign exchange, also known as Forex, investors and traders commonly purchase assets solely based on forecasted events and cash profits.

For example, if a company is projected to have a greater revenue flow to their shareholders than was anticipated, the traders will purchase stock all at once to capitalize on stock price or heightened dividends. Forex traders do the same thing, but they usually purchase assets because of projected interest rate movements.

If you want to learn how to invest like a pro with the strategy to buy the rumor, sell the news, it is best to look for diminished markets. This is the approach of seasoned Forex traders.

Case in point: when a rumor hits the sound waves, it shows that an asset will enjoy increased cash flow soon. This means the asset is projected to have a higher worth within a couple of weeks or months. Investors will buy the asset until the point where the asset is no longer diminished and is worth more.

Now, if the rumor was untrue, the news will break and traders will sell the asset in droves. If the news hits and the asset far exceeds the expectations of the initial rumor, the stock might remain at the point it was before the story hit or even higher.


Potential Outcomes

One issue with the strategy of buy the rumor, sell the news that frequently frustrates investors is the potential of buying a strong asset that is sold off and depreciates. This can lead to the recency bias.

Recency bias is when a trader responds slowly to the rumor while his fellow traders take action immediately. The slow moving trader may end up being the source offering liquidity for other investors after the news story either confirms or disproves the rumor.


What It Means For You

So, what does buy the rumor, sell the news mean for you as a budding investor? For starters, when a rumor is confirmed and the news story hits investor sound waves, elevating asset prices, that can be the absolute worst point to get into the market.

This is because that point in time is when all the people who purchased the stock at its initial lower price are selling off for cash flow. You never want to be the liquid source for other traders. The best thing you can do is wait for the price to retreat after a positive news event and purchase the asset at a more optimal price.

Why Does This Strategy Work?

The Future Is Key

By now, you are probably wondering if the buy the rumor, sell the news strategy works or not. Why do traders engage in this strategy? One key characteristic of the stock market is it always looks to the future.

For instance, the share prices of a particular stock do not reflect the value of a company's performance previously. Rather, the price of the stock reflects the value traders associate with its projected performance in the near future.

stock exchange graph

When you look at it that way, buy the rumor, sell the news is logical. You buy stock only if you expect that its performance will be greater in the future. While you can look at the previous performance to get an idea of what the stock will do, the future performance is most relevant to traders.


Market Assessments

Since the stock market depends on the future, it is important to understand the role of market assessments in the buy the rumor, sell the news strategy.  When stock reacts to an event in the news, it reacts to the projected market expectations, not the news story.

For instance, if you have done your research on investing you know if a company's earnings increase by double-digits, things are looking good. If, however, the news hits that a company only enjoyed a 10 percent increase in earnings rather than the market projected 15 percent, their stock will probably go down. This does not mean that 10 percent is bad for the company, it means that the earnings increase did not match market projections for stock prices.

Tips and Tricks to Invest Like a Pro

Have a Plan

The first thing you want to do to invest like a pro, whether you utilize the buy the rumor, sell the news investment strategy or not, is to have a solid plan. You need to understand the place you are in financially and where you intend to go from there. Make a plan that includes a contingency for if your investment strategy goes awry and have sufficient insurance to meet your financial planning needs.


entrepreneur

Identify Your Core Investing Values

Before you decide where you want to move your assets to or what stock investments you want to make, identify what your personal set of investment values will be.

These values will determine the investing strategy you use and keep you on a steady course throughout the duration of your investing career. If you do not have a set of values in place, you may be prone to buy into nonviable investment opportunities and get burned out quickly. For instance, the strategy of buy high, sell low is adhered to by many novice investors but fails time and time again.

Research and read the investing values of seasoned traders. If you know someone already in the market, talk to them and get their advice for curating a winning investment strategy that meets your needs and future goals.


Trading Philosophy: How to Buy the Rumor, Sell the News

Now you understand how buy the rumor, sell the news works, we would like to offer tips for applying this strategy to your investing life. The first part is buying the rumor. If you have a solid notion that a company will produce an excellent earnings report, you would buy their stock well before the earnings date.

According to this train of thought, fellow traders will also purchase assets before the earnings date, which increases the price of each share. Once the earnings date hits, you can sell for a profit. Seasoned traders that can project positive news may even sell the asset for considerable cash flow before the news story ever breaks.

Once the news story hits the market and the earnings report is released, there could be a chance for short selling. If an asset's value has been increasing in the weeks before the report, the market is projecting a high stock value. This can cause a pressure to sell that brings the price of shares down, even if the news was great, leading to short selling.

Conclusion

While the concept of buy the rumor, sell the news may seem complicated at first glance, it is based on a simple premise. By purchasing assets on the rumor of their projected value, and selling them once the news story hits for cash flow, you can achieve great success as an investor. With time and patience you can fine tune your technique and determine the trading philosophy that works best for you.

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Loonie and Aussie Share Downward Bond

Posted on 30 June 2011

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Tide is Turning for the Aussie

Posted on 29 June 2011
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“Australia is about to enter a boom that should last decades…The Australian dollar is unlikely to go back to where it was, and manufacturing will shrink in importance to the economy, perhaps even faster than it has been.” This, according to Martin Parkinson, Treasury Minister of Australia. While 30 years from now, Mr. Parkinson’s prognosis might probe to be accurate, I’m not so sure it applies to the period 3 months from now. Here’s why:

First of all, the putative economic boom that is taking place in Australia is being driven entirely by high commodity prices and surging production and exports. Since peaking at the end of April, commodity prices have fallen mightily. You can see from the chart above that there continues to exist a tight correlation between the AUD/USD and commodities prices. As commodities prices have fallen over the last two months, so has the Australian Dollar.


In addition, while demand will probably remain strong over the long-term, it may very well slacken over the short-term, due to declining economic growth across the industrialized world.  Consider also that Australia’s largest market for commodity exports – China – may have difficulty sustaining a GDP growth rate of 10%, and at the very least, new fixed-asset investment (which necessitates demand for raw materials) will temporarily peak in the immediate future.

Finally, the mining sector directly accounts for only 8% of Australia’s economy, which means that only to a limited extent to high commodities prices contribute to the bottom line of Australian GDP. This notion is reinforced by the 1.2% economic contraction in the second quarter – the biggest decline in 20 years – and the fact that GDP is basically flat over the last three quarters. Many non-mining economic indicators are sagging, and the number of corporate bankruptcies is 10% higher than in 2010. In the end, then, the ebb and flow of Australia’s fortune depends less on commodities, and more on other sectors.


Mr. Parkinson’s optimistic forecasts might also be undermined in the short-term by a looser-than-expected monetary policy. The Reserve Bank of Australia last hiked its benchmark interest rate in November 2010, and may not hike again for a few more months due to moderating economic growth and proportionally moderate inflation. Given that an attractive interest rate differential may be driving some of the speculative activity that has girded the Aussie’s rise, a decline in this differential could likewise propel it downward.

That’s because anecdotal reports suggest that the Australian Dollar remains a popular long currency for carry traders, funded by shorting the US Dollar, and to a lesser extent, Japanese Yen. Given that many of these carry trades are heavily leveraged, it wouldn’t take much to trigger a short squeeze and a rapid decline in the AUD/USD. For evidence of this phenomenon, one has to look no further back than May 2010, when the Aussie fell 10-15% in only three weeks.


Ultimately, as one commentator recently pointed out, the Aussie’s 70% rise since 2008 might better be seen as US Dollar weakness (which also catalyzed the rise in commodity prices). The apparent stabilizing of the dollar, then, might let some air out of the currency down under.

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Emerging Market Currencies Brace for Correction

Posted on 28 June 2011
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“It was the spring of hope, it was the winter of despair,” begins Charles Dickens’ The Tale of Two Cities. In 2011, the winter of despair was followed by the spring of uncertainty. Due to the earthquake/tsunami in Japan, the continued tribulations of Greece, rising commodity prices, and growing concern over the global economic recovery, volatility in the forex markets has risen, and investors are unclear as to how to proceed. For now at least, they are responding by dumping emerging market currencies.


As you can see from the chart above (which shows a cross-section of emerging market forex), most currencies peaked in the beginning of May and have since sold-off significantly. If not for the rally that started off the year, all emerging market currencies would probably be down for the year-to-date, and in fact many of them are anyway. Still, the returns for even the top performers are much less spectacular than in 2009 and 2010. Similarly, the MSCI Emerging Markets Stock Index is down 3.5% in the YTD, and the JP Morgan Emerging Market Bond Index (EMBI+) has risen 4.5% (which is reflects declining growth forecasts as much as perceptions of increasing creditworthiness).

There are a couple of factors that are driving this ebbing of sentiment. First of all, risk appetite is waning. Over the last couple months, every flareup in the eurozone debt crisis coincided with a sell-off in emerging markets. According to the Wall Street Journal, “Central and eastern European currencies that are seen as being most vulnerable to financial turmoil in the euro zone have underperformed.” Economies further afield, such as Turkey and Russia, have also experienced weakness in their respective currencies. Some analysts believe that because emerging economies are generally more fiscally sound than their fundamental counterparts, that they are inherently less risky. Unfortunately, while this proposition makes theoretical sense, you can be assured that a default by a member of the eurozone will trigger a mass exodus into safe havens – NOT into emerging markets.


While emerging market Asia and South America is somewhat insulated from eurozone fiscal problems. On the other hand, they remain vulnerable to an economic slowdown in China and to rising inflation. Emerging market central banks have avoided making significant interest rate hikes (hence, rising bond prices) – for fear of inviting further capital inflow and stoking currency appreciation – and the result has been rising price inflation. You can see from the chart above that the darkest areas (symbolizing higher inflation) are all located in emerging economic regions. While high inflation is not inherently problematic, it is not difficult to conceive of a downward spiral into hyperinflation. Again, a sudden bout of monetary instability would send investors rushing to the exits.


While most analysts (myself included) remain bullish on emerging markets over the long-term, many are laying off in the short-term. “RBC emerging market strategist Nick Chamie says his team has recommended ‘defensive posturing’ to clients since May 5 and isn’t recommending new bullish emerging currency bets right now….HSBC said Thursday that it isn’t recommending outright short positions on emerging market currencies to clients but suggested a more ‘cautious’ and selective approach in making currency bets.” This phenomenon will be exacerbated by the fact that market activity typically slows down in the summer chart above courtesy of Forex Magnates) as traders go on vacation. With less liquidity and an inability to constantly monitor one’s portfolio, traders will be loathe to take on risky positions.

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NO QE3: What are the Implications for the Dollar?

Posted on 25 June 2011
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The verdict is nearly in; there will be no QE3. The second round of quantitative easing (“QE2”) will expire at the end of this month, and while it will not be unwound for quite some time, the Fed has indicated that it will not be followed by yet another round. The question on the minds of forex traders, of course, is what does this mean for the Dollar?

In his most recent press conference, Ben Bernanke, himself, indicated that QE3 was unlikely. According to a survey conducted by Bloomberg News, the majority of FX analysts (65%) believe him. Simply, the circumstances don’t support further easing. To be sure, the unemployment rate remains high, and the economy is teetering on the verge of double-dip recession. However, the last two rounds did little to address either of these problems, and companies have hoarded cash rather than investing in new plant and workers.

Interest rates are still hovering around record lows, and there isn’t anything to be gained from trying to lower them further. Besides, given that inflation is now above 3% – due to an explosion in good and energy prices – QE3 would simply be too risky. Economist Ken Goldstein summarized the situation as follows: “We will come to the end of QE2 and largely we mark about how little happened when it ended and that’s also an argument about why there may not be persuasive argument to do a QE3.”

On the other hand, there are some analysts who think that QE3 is inevitable (29%). PIMCO’s Bill Gross, manager of the world’s biggest bond fund, recently indicated that, “Next Jackson Hole in August will likely hint at QE3/interest rate caps.” (Personally, I think that he’s probably just bitter that his forecast of a decline in Treasury Bond prices hasn’t materialized). One columnist wrote that the Fed’s arm will be twisted by the ongoing collapse of the housing market, while others have argued that the recent decline in the S&P 500 will spur the Fed into action. Most of us, however, believe that the Fed will adopt a wait-and-see approach before ultimately conceding that more easing is necessary.

For now at least, then, the prevailing assumption is that there will not be a QE3. As for how forex markets have digested this news, they have taken it in stride. The Dollar is now holding its value, and as I wrote in a previous post, it may even have bottomed out. Of course, it doesn’t hurt that the Euro is being punished by another flare-up in the sovereign debt crisis and investors are getting nervous about bubbles in emerging market currencies, all of which provide support for the dollar.

The fact that QE2 will soon end without having triggered financial apocalypse or hyperinflation – as some cassandras initially predicted – is something that is worth nothing. Of course, the proceeds of QE1 and QE2 will be recycled indefinitely into the markets, and forex investors can’t completely put quantitative easing behind them. Still, that there won’t be any more additional cash injected into commodities markets and emerging economy asset markets means that one of the main sources of downward pressure on the dollar has been eliminated.

Ironically, it is possible that the unveiling of QE3 could actually cause the dollar to rally. The reason is that there is still a tremendous amount of uncertainty in the markets, which provides the dollar with some safe haven demand. If the Fed were to concede that all is not well on the economic front and respond by more money printing, it could drive some safe haven flows into the US, even to the extent that it would overwhelm outflows driven by concerns over inflation.

Personally, I think the dollar will continue to hold its value, and perhaps even appreciate slightly in the near-term, as forex markets dither over the way forward.

http://www.forexblog.org/2011/06/has-the-us-dollar-hit-bottom.html

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Swiss Franc is the Only Safe Haven Currency

Posted on 23 June 2011
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According to conventional market wisdom, there are three safe haven currencies: the Swiss Franc, Japanese Yen, and US Dollar. It is to these currencies that investors flock whenever there is a crisis, or merely an outbreak of uncertainty, and for much of the period following the collapse of Lehman Brothers, the three were closely correlated. As you can see from the chart below, however, one of these currencies has begun to distinguish itself from the other two, leading some to argue that there is now only one true safe haven currency: the Swiss Franc.


What’s not to like about the Franc? It boasts a strong economy, low inflation, and low unemployment. Unlike the US and Japan, Switzerland is not plagued by a high national debt and perennial budget deficits. Its monetary policy has been extremely conservative: no quantitative easing, asset-purchases, or any other money printing programs with euphemistic names.

Ironically, the only thing that makes investors nervous about the franc is that it has already risen so much. Remember when it reached the milestone of parity against the dollar in 2010? Since then, it has appreciated by an additional 20%, and seems to breach a new record on an almost weekly basis. The same goes for the CHF/EUR and CHF/JPY. The President of Switzerland’s export association is expecting further gains: “Parity is a realistic scenario. Given the indebtedness of the eurozone and the strong attraction of the franc, the euro is likely to continue to lose value.”


Given that Swiss exports have surged in spite of (or even because of) the rising Franc, however, he has very little to worry about at the moment. As you can see fromt he graphic below (courtesy of the Financial Times), the balance of trade continues to expand, and has exploded in a handful of key sectors. To be sure, economists expect that this situation will eventually correct itself and are already moving to revise downward 2011 and 2012 GDP growth estimates. Then again, they made the same erroneous predictions in 2010.

The main variable in the Swiss Franc is the Swiss National Bank (SNB). Having booked a loss of CHF 20 Billion from failed intervention in 2010, the SNB is not in a position to make the same mistake again. In fact, SNB President Philipp Hildebrand has not even stooped to verbal intervention this time around, undoubtedly cognizant of the fact that he has very little credibility in forex markets.

At the same time, the SNB is not in any hurry to raise interest rates, lest it stoke further speculative interest in the Franc. Its June meeting came and went without any indication of when it might tighten. Interest rate futures currently reflect an expectation that the first rate hike won’t come until March 2012. Thus, the downside of holding the Franc is that it will continue to pay a negative real interest rate. The only upside, then, is the possibility of further appreciation. Fortunately, the SNB is unlikely to stop the Franc from rising, since it serves the same monetary end as higher interest rates. In other words, a more valuable Franc serves as a direct check on inflation because it lowers the cost of commodity imports and should (eventually) soften demand for Swiss exports.

It is possible that the Swiss Franc will suffer a correction at some point, if only because it rose by such a large margin in such a short period of time. On the other hand, given that its economy has proved its ability to withstand the Franc’s appreciation, it’s no wonder that investors continue to bet on its rise.

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