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Bitcoin Trading Tutorial Serie

Discussion in 'CryptoCurrency' started by Troad77, Dec 3, 2015.

  1. Troad77

    Troad77 Newbie

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    Over the next few weeks, I will be adding new posts to this thread and help you learn everything there is to know about bitcoin trading. I will show you everything from creating an account at an exchange to technical trading. The following is the table of content for what is coming up:


    History of Bitcoin
    Pre-history
    Creation
    Growth
    Prices and value history
    Timeline
    Charts
    Candlestick Explanation
    Volume Explanation
    Order Book Explanation
    Indicators
    MA (Moving Average) / EMA (Exponential Moving Average)
    MACD (Moving Average Convergence Divergence)
    SAR (Stop and Reversal)
    RSI (Relative Strength Index)
    Strategies
    Short Term Trading (2 days or less)
    Long Term Trading (2 days or more)
    Moving Average Crossover Trading
    Momentum Trading
    Technical Trading
    Fundamental Trading
    Trading
    Trading diversity
    Risk
    Do not invest more than you can afford to lose
    Set goals for each trade
    Learn how to read charts
    Do not set stop losses too low
    Close unprofitable & leveraged positions within 24 hours
     
  2. Troad77

    Troad77 Newbie

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    HISTORY OF BITCOIN
    Bitcoin is a cryptocurrency, a form of money that uses cryptography to control its creation and management, rather than relying on central authorities. However, not all of the technologies and concepts that make up Bitcoin are new; the presumed pseudonymous Satoshi Nakamoto (the creator of Bitcoin) integrated many existing ideas from the cypherpunk community when creating bitcoin.

    PRE-HISTORY
    Prior to the release of Bitcoin there were a number of digital cash technologies starting with the issuer based ecash protocols of David Chaum and Stefan Brands. Adam Back developed hashcash, a proof-of-work scheme for spam control. The first proposals for distributed digital scarcity based cryptocurrencies were Wei Dai's b-money and Nick Szabo's bit gold. Hal Finney developed RPOW. Bit gold, b-money and RPOW all used hashcash as their proof-of-work algorithm.

    Independently and at around the same time Wei Dai proposed b-money and Nick Szabo proposed bit gold. Subsequently Hal Finney implemented and deployed RPOW a reusable form of hashcash based on IBM secure TPM hardware and remote attestation (centralized but with no issuer inflation risk).

    In the bit gold proposal which proposed a collectible market based mechanism for inflation control, Nick Szabo also investigated some additional enabling aspects including a Byzantine fault-tolerant asset registry to store and transfer the chained proof-of-work solutions.

    There has been much speculation as to the identity of Satoshi Nakamoto with suspects including Wei Dai, Hal Finney and accompanying denials. The possibility that Satoshi Nakamoto was a computer collective in the European financial sector has also been bruited.

    CREATION
    In November 2008, a paper was posted on the internet under the name Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System. This paper detailed methods of using a peer-to-peer network to generate what was described as "a system for electronic transactions without relying on trust".

    In January 2009, the bitcoin network came into existence with the release of the first open source bitcoin client and the issuance of the first bitcoins, with Satoshi Nakamoto mining the first block of bitcoins ever (known as the "genesis block"), which had a reward of 50 bitcoins. The value of the first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of 10,000 BTC used to indirectly purchase two pizzas delivered by Papa John's.

    On 6 August 2010, a major vulnerability in the bitcoin protocol was spotted. Transactions weren't properly verified before they were included in the transaction log or "block chain" which let users bypass bitcoin's economic restrictions and create an indefinite number of bitcoins. On 15 August, the vulnerability was exploited; over 184 billion bitcoins were generated in a transaction, and sent to two addresses on the network.

    Within hours, the transaction was spotted and erased from the transaction log after the bug was fixed and the network forked to an updated version of the bitcoin protocol. This was the only major security flaw found and exploited in Bitcoin's history.
     
  3. Troad77

    Troad77 Newbie

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    GROWTH
    WikiLeaks and other organizations began to accept bitcoins for donations. The Electronic Frontier Foundation began, and then temporarily suspended, bitcoin acceptance, citing concerns about a lack of legal precedent about new currency systems, saying that they "generally don't endorse any type of product or service." The EFF's decision was changed in 17 May 2013.

    On 22 March 2011 WeUseCoins published the first viral video which has had over 6.4 million views. On 23 December 2011, Douglas Feigelson of BitBills filed a patent application for “Creating And Using Digital Currency” with the United States Patent and Trademark Office, an action which was contested based on prior art in June 2013.

    In January 2012, Bitcoin was featured as the main subject within a fictionalized trial on the CBS legal drama The Good Wife in the third season episode "Bitcoin for Dummies". The host of CNBC's Mad Money, Jim Cramer, played himself in a courtroom scene where he testifies that he doesn't consider bitcoin a true currency, saying "There's no central bank to regulate it; it's digital and functions completely peer to peer".

    In October 2012, BitPay reported having over 1,000 merchants accepting bitcoin under its payment processing service.

    In February 2013 the Bitcoin-based payment processor Coinbase reported selling US$1 million worth of bitcoins in a single month at over $22 per bitcoin. The Internet Archive announced that it was ready to accept donations as bitcoins and that it intends to give employees the option to receive portions of their salaries in bitcoin currency.

    In March the Bitcoin transaction log or "block chain" temporarily forked into two independent logs with differing rules on how transactions could be accepted. The Mt. Gox exchange briefly halted bitcoin deposits and the exchange rate briefly dipped by 23% to $37 as the event occurred before recovering to previous level of approximately $48 in the following hours. In the US, the Financial Crimes Enforcement Network (FinCEN) established regulatory guidelines for "decentralized virtual currencies" such as bitcoin, classifying American "bitcoin miners" who sell their generated bitcoins as Money Service Businesses (or MSBs), that may be subject to registration and other legal obligations.

    In April, payment processors BitInstant and Mt. Gox experienced processing delays due to insufficient capacity resulting in the bitcoin exchange rate dropping from $266 to $76 before returning to $160 within six hours.

    Bitcoin gained greater recognition when services such as OkCupid and Foodler began accepting it for payment.

    On 15 May 2013, the US authorities seized accounts associated with Mt. Gox after discovering that it had not registered as a money transmitter with FinCEN in the US.

    On 23 June 2013, it was reported that the US Drug Enforcement Administration listed 11.02 bitcoins as a seized asset in a United States Department of Justice seizure notice pursuant to 21 U.S.C. § 881. It is the first time a government agency has claimed to have seized bitcoin.

    In July 2013 a project began in Kenya linking bitcoin with M-Pesa, a popular mobile payments system, in an experiment designed to spur innovative payments in Africa. During the same month the Foreign Exchange Administration and Policy Department in Thailand stated that bitcoin lacks any legal framework and would therefore be illegal, which effectively banned trading on bitcoin exchanges in the country. According to Vitalik Buterin, a writer for Bitcoin Magazine, "bitcoin's fate in Thailand may give the electronic currency more credibility in some circles", but he was concerned it didn't bode well for bitcoin in China.
    On 6 August 2013, Federal Judge Amos Mazzant of the Eastern District of Texas of the Fifth Circuit ruled that bitcoins are "a currency or a form of money" (specifically securities as defined by Federal Securities Laws), and as such were subject to the court's jurisdiction, and Germany's Finance Ministry subsumed bitcoins under the term "unit of account"—a financial instrument—though not as e-money or a functional currency, a classification nonetheless having legal and tax implications.

    In October 2013, the FBI seized roughly 26,000 BTC from website Silk Road during the arrest of alleged owner Ross William Ulbricht.

    Two companies, Robocoin and Bitcoiniacs launched the world's first bitcoin ATM on 29 October 2013 in Vancouver, BC, Canada, allowing clients to sell or purchase bitcoin currency at a downtown coffee shop.
    In November 2013, the University of Nicosia announced that it would be accepting bitcoin as payment for tuition fees, with the university's chief financial officer calling it the "gold of tomorrow". In December Overstock.com announced plans to accept bitcoin in the second half of 2014.

    In January 2014, Zynga announced it was testing bitcoin for purchasing in-game assets in seven of its games. That same month, The D Las Vegas Casino Hotel and Golden Gate Hotel & Casino properties in downtown Las Vegas announced they would also begin accepting bitcoin, according to an article by USA Today. The article also stated the currency would be accepted in five locations, including the front desk and certain restaurants.

    In September 2014 TeraExchange, LLC, received approval from the U.S.Commodity Futures Trading Commission "CFTC" to begin listing an over-the-counter swap product based on the price of a bitcoin. The CFTC swap product approval marks the first time a U.S. regulatory agency approved a bitcoin financial product.

    PRICES AND VALUE HISTORY
    The price of a bitcoin reached an all-time high of US$1124.76 on 29 November 2013, up from just US$13.36 on 5 January at the start of the year; the price subsequently dropped into the $200-$300 range.
    Among the factors which may have contributed to this rise were the European sovereign-debt crisis—particularly the 2012–2013 Cypriot financial crisis—statements by FinCEN improving the currency's legal standing and rising media and Internet interest. The current all-time high was set on 17 November 2013 at US$1216.73 on the Mt. Gox exchange.

    As the market valuation of the total stock of bitcoins approached US$1 billion, some commentators called bitcoin prices a bubble. In early April 2013, the price per bitcoin dropped from $266 to around $50 and then rose to around $100. Over two weeks starting late June 2013 the price dropped steadily to $70.

    The price began to recover, peaking once again on 1 October at $140. On 2 October, The Silk Road was seized by the FBI. This seizure caused a flash crash to $110. The price quickly rebounded, returning to $200 several weeks later. The latest run went from $200 on 3 November to $900 on 18 November. Bitcoin passed a US$1000 all-time high on 28 November 2013 at Mt. Gox.

    Prices fell to around $400 in April 2014, before rallying in the middle of the year. They then declined to not much more than $200 in early 2015. Until 2013 almost all market with bitcoins were in US $.
     
  4. badaz

    badaz Regular Member

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    let me get this right ! you bought somehow an old BHW account somewhere , so you can advertise your website ,"bought a donor badge" how ! by creating threads related to the ad in your signature . which is basically your website .
    please do not try to bump other threads related to BTC
     
    • Thanks Thanks x 1
  5. faithjhung

    faithjhung Jr. VIP Jr. VIP

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  6. freedomcoach

    freedomcoach Newbie

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    Bitcoin seems like a great concept, I just hope it stays together for the long term....
     
  7. goodperson

    goodperson Elite Member

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    I'm investing in bitcoin, I think it's will grow in the future.
     
  8. bojan92

    bojan92 Regular Member

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    that is a very great initiative there to give information about bitcoin. I believe by that, the coin gets more appreciated by many and gets to be used world wide and thus that will accelerate it replacing other forms of currency. keep up and all the best in that wonderful journey. And please dont start the thread and then give up on the way.Cheers
     
  9. Troad77

    Troad77 Newbie

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    TIMELINE

    August 2008
    Three individuals, Neal Kin, Vladimir Oksman, and Charles Bry file an application for an encryption patent application. All three individuals deny having any connection to Satoshi Nakamoto, the alleged originator of the Bitcoin concept. The three also register the site Bitcoin.org in the same month, over on anonymousspeech.com - which allows people to buy domain names anonymously.

    October 2008
    Despite the above, Satoshi Nakamoto releases his white paper, revealing his idea for a purely peer-to-peer version of electronic cash to the world. In his vision, he manages to solve the problem of money being copied, providing a vital foundation for Bitcoin to grow legitimately.

    January 2009
    The first block, nicknamed ‘Genesis' is launched allowing the initial ‘mining' of Bitcoins to take place. Later that month, the first transaction takes place between Satoshi and Hal Finney, a developer and cryptographic activist.

    October 2009
    Bitcoin receives an equivalent value in traditional currencies. The New Liberty Standard established the value of a Bitcoin at $1 = 1,309 BTC. The equation was derived so as to include the cost of electricity to run the computer that created the Bitcoins in the first place. Hong Kong's First Bitcoin Counter Opens To The Public.

    February 2010
    The world's first Bitcoin market is established by the now defunct dwdollar.

    May 2010
    A programmer living in Florida named Laslo Hanyecz sends 10,000BTC to a volunteer in England, who spent about $25 to order Hanyecz a pizza from Papa John's. Today that pizza is valued at 1,961,034 and stands as a major milestone in Bitcoin's history.

    August 2010
    Bitcoin is hacked. A vulnerability in how the system verifies the value of Bitcoin is discovered, leading to the generation of 184 billion Bitcoins. The value of the currency - from a high of $0.80 to $1 in June drops through the floor.

    October 2010
    Bitcoin goes under the spotlight. After the hack in August - and a subsequent discovery of other vulnerabilities in the blockchain in September - an inter-governmental group publishes a report on money laundering using new payment methods. Bitcoin, it suggested could help people finance terrorist groups.

    November 2010
    Bitcoin reaches $1 million. Based on the number of Bitcoins in circulation at the time, the valuation leads to a surge in Bitcoin value to $0.50/BTC. Utah Software Engineer Mints Physical Bitcoins.

    January 2011
    The Silk Road, an illicit drugs marketplace is established, using Bitcoin as an untraceable way to buy and sell drugs online.

    February 2011
    Bitcoin reaches parity with the US dollar for the first time. By June each Bitcoin is worth $31 giving the currency a market cap of $206 million.

    June 2013
    The first major theft takes place. Bitcoin Forum founder, allinvain reports having 25,000 BTC taken from his digital wallet, which had an equivalent value of $375,000. In the same month, a major breach of security sees the value of the currency go from $17.51 to $0.01 per Bitcoin.

    March 2013
    The US Financial Crimes Enforcement Network (FINCEN) issues some of the world's first bitcoin regulation in the form of a guidance report for persons administering, exchanging or using virtual currency. This marked the beginning of an ongoing debate on how best to regulate bitcoin.

    March 2013
    Bitcoin market capitalization reaches $1bn.

    August 2013
    Federal Judge Mazzant claims: "It is clear that Bitcoin can be used as money" and "It can be used to purchase goods or services" in a case against Trendon Shavers, the so-called ‘Bernie Madoff of bitcoin'. Bloomberg begins testing bitcoin data on its terminal. Although alternative tickers exist, endorsement from Bloomberg gives bitcoin more institutional legitimacy.

    November 2013
    Bitcoin price climbs to $700 in as the US Senate holds its first hearings on the digital currency. The Federal Reserve chairman at the time, Ben Bernanke, gives his blessing to bitcoin. In his letter to the Senate homeland security and government affairs committee, Bernanke states that bitcoin "may hold long-term promise, particularly if the innovations promote a faster, more secure and more efficient payment system".

    December 2013
    China's central bank bars financial institutions from handling bitcoin transactions. This ban was issued after the People's Bank of China said bitcoin is not a currency with "real meaning" and does not have the same legal status as fiat currency. The ban reflects the risk bitcoin poses to China's capital controls and financial stability. Today China remains the world's biggest bitcoin trader, with 80% of global bitcoin transactions being processed in China.

    January 2014
    Bitcoin custodians Elliptic launch the world's first insured bitcoin storage service for institutional clients. All deposits are comprehensively insured by a Fortune 100 insurer and held in full reserve. This means Elliptic never re-invests client assets; instead they secure them in deep cold storage. Overstock.com becomes the first major online retailer to embrace bitcoin, accepting payments in the US. Overstock was the first in what is now an expeditiously growing list of large businesses that accept bitcoin.

    February 2014
    HMRC classifies bitcoin as assets or private money, meaning that no VAT will be charged on the mining or exchange of bitcoin. This is important as it is the world's first and most progressive treatment of bitcoin, positioning the UK government as the most forward thinking and comprehensive with regard to bitcoin taxation.

    June 2014
    The US government auctions off more than 29,000 bitcoins seized from the Silk Road, the illegal online marketplace. The sale and closure of the marketplace marks growing institutional understanding of the potential use cases of bitcoin. Additionally, the closure and auction of the Silk Road has helped bitcoin gain legitimacy as it demonstrates that bitcoin is not an easy way for online criminals to avoid the rule of law.

    From this point onwards bitcoin can no longer be considered as a currency for criminals. The use of the bitcoin blockchain means that the identity of users can often be established.

    July 2014
    The ‘Bit Licence' edges towards reality as the New York State Department of Financial Services releases the first draft of the agency's proposed rules for regulating virtual currencies. The European Banking Authority publishes its opinion on ‘virtual currencies'. Their analytical report recommends that EU legislators consider declaring virtual currency exchanges as ‘obliged entities' must comply with anti-money laundering (AML) and counter-terrorist financing requirements.

    The EBA report is important as it acts as a catalyst to launch bitcoin into the financial mainstream by highlighting the fact that virtual currencies require a regulatory approach to strive for an international coordination to achieve a successful regulatory regime.

    Also that month GABI (Global Advisors Bitcoin Investment Fund) launches the world's first regulated Bitcoin Investment fund. This is important to the bitcoin ecosystem as the launch of this investment vehicle adds further legitimacy to bitcoin in addition to allowing regulated investors a way to invest in bitcoin.

    August 2014
    The Chancellor of the Exchequer, George Osborne, demonstrates his and HM Treasury's positive outlook on bitcoin when he purchases 20 worth of bitcoin and announces HM Treasury's Call for Information on digital currencies, offering digital currency businesses the chance to comment on the risks and benefits and potentially influences future government policy.

    October 2014
    TeraExchange announces that the first bitcoin derivative transaction was executed on a regulated exchange, adding a new hedging instrument to bitcoin and instilling credibility and institutional confidence in the entire bitcoin community.

    December 2014
    Tech giant Microsoft begins accepting bitcoin payments.

    January 2015
    The New York Stock Exchange is a minority investor in Coinbase's $75M funding round. The NYSE aims to tap into the new asset class by bringing transparency, security and confidence to bitcoin.

    March 2015
    The results of the UK Treasury's call for information on digital currency are announced.
     
  10. Troad77

    Troad77 Newbie

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    CHARTS
    Before you start trading Bitcoin you have to first understand what Bitcoin is. Of course Bitcoin is a cryptocurrency, but because cryptocurrencies are so new and the lack of general knowledge about them makes it difficult to trade them as such. In my opinion there are two ways one can consider Bitcoin when trading: a commodity (gold, silver) or a fiat currency (Dollar, Pound, Euro). This makes it easier to trade because you can look at it like you are trading in a Forex market (i.e. buying and selling dollars for euros or vice versa). This also allows you to see your financial gains and losses easier, as well as keeping everything simpler.

    First things first, before buying or selling you must know what the price is. There are many great indexes to see the price, here's a couple:
    • http://www.coindesk.com/price/
    • http://winkdex.com/#/

    After you know the price, you need a place to buy and sell your Bitcoins. There are some good and not so good options out there, here are a few that we like:
    • https://www.bitstamp.net/
    • https://www.kraken.com/
    • https://www.bitfinex.com/

    Word to the wise, do not put more Bitcoins than you're willing to lose in any exchange!

    Once you have created and funded an account in one or more of the exchanges, you need to learn when to buy and sell. This is where it gets complicated for newcomers, but don't fret, we'll help you every step of the way. To know when you need to buy or sell you have to have an idea of what is happening in the market. Whether the price is rising or falling, if we are in a bearish market (down trend) or a bullish market (uptrend), etc. To find out this information you have to look at market data or charts as their called in the investment world.

    Here are a few:
    • https://bitcoinity.org/markets
    • http://bitcoincharts.com/markets/

    But in our opinion, the most inclusive and less overwhelming to learn with is:
    • https://bitcoinwisdom.com/

    After you click, you are probably thinking, "......ughhhhh......I'm lost." Don't worry; we'll walk you through it.

    First thing you need to know is that there are generally three types of charts when trading.
    1. Line charts (simplest, but don't tell you much)
    2. Bar charts (good, but they all become a blur after a while)
    3. Candlestick charts (This is the chart type that most traders prefer and also the one we'll be talking about)

    Candlestick charts provide the most information possible in the smallest amount of space.
     
    CANDLESTICK EXPLANATION

    The individual candlesticks generally tell you 4 things. What the price was when it opened and closed. Also, how high the price became during the time frame, as well as, how low the price dropped too. If the candlestick is green, the open is on the bottom of the body and the close is on the top, showing that the price closed higher than when it opened. If the candlestick is red, the open is on top of the body and the close is on the bottom, showing that the price closed lower than when it opened.

    The upper and lower shadows show us the difference between the high, the low, the open and the close. Now that you have a good understanding about Candlestick charts you can start to form an idea of what is happening in the market. If the chart is mainly green and going upward, we are in a bullish (up) trend. If the chart is mostly red, we are in a bearish (down) trend.

    The second important thing is the time frame you are looking at. Each bar is a time frame. If you are look at a chart that is for 10 minutes, each bar represents 10 minutes on the chart. You cannot day trade when looking at a chart that goes back for months and vice versa. For short term day trades you want to look at charts anywhere from 1 minute to 30 minutes. For long term trades you want to look at charts from 1 hour and up. Always make sure your chart is adjusted accordingly as you can make massive financial mistakes if it isn't.

    The third thing you want to pay attention to is the volume.
     
    VOLUME EXPLANATION

    Volume plays a huge part in trends that are happening. It can tell you whether a trend is here to stay or if it is just a false trend. If the price goes up but there is very little volume to support it, odds are the price will go back down. However, if the price goes up and there is a high amount of volume supporting it, you have good reasons to believe that the price / trend will stay.

    Volume can also tell you if the price is trending up or down. If the volume bar is green, that signifies the price is trending up and if the volume bar is red, that means the price is trending down.

    Last thing you need to worry about when watching charts is the order book.
     
    ORDER BOOK EXPLANATION

    There are two parts to the order book, Bids (red / bottom) and Asks (green / top). The Bids are how much people are willing to buy Bitcoins for and the Asks are how much people are will to sell Bitcoins for.
    The order book also gives you a good idea of how much support the current trend has. In a perfect world the difference between Bids and Asks should be equal although, this is almost never the case.
     
  11. Troad77

    Troad77 Newbie

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    INDICATORS

    There are 4 common and basic indicators. There are many, many, many more, but these will give you a nice base.

    • MA (Moving Average) / EMA (Exponential Moving Average)
    • MACD (Moving Average Convergence Divergence)
    • SAR (Stop and Reversal)
    • RSI (Relative Strength Index)

    I have chosen these for two reasons, they are all very common and they vary greatly in what they can tell you.

    MA (MOVING AVERAGE) / EMA (EXPONENTIAL MOVING AVERAGE)

    Moving Averages are exactly what the name implies; they are "moving averages". A simple way to explain it is that they smooth out the price fluctuations over time. How they work is that they take the average closing price over a certain amount of time (which you can change). This allows you to see more clearly what is happening to the price over a period of time thus creating an easier way to see the potential direction of the market.

    Because it's an average that needs inputs to calculate it generally moves slower and less dramatic than the actual price. Normally, when using MA or EMA, there are two or more lines. These lines each have different parameters to show the price average. Generally speaking, when these two lines cross most traders buy or sell, depending on which way the trend is going.

    Exponential Moving Averages are the same as regular Moving Averages except they react quicker to what the market is doing, which could be good and bad. They change more rapidly, allowing you to see a trend forming faster than you would with a regular Moving Average.

    That means you can buy or sell quicker and take the most of the opportunity. However, because they move quicker they also make mistakes. They could lead you to buy or sell into a false signal.
    Deciding on which one to use is like picking which child you love the most, you can't. But they both have pros and cons that when used together can create miraculous results.
     
  12. Troad77

    Troad77 Newbie

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    I have been a member here since 2007 and a close friend of Diamond Dave the guy that created that forum my friend so you are way off on that one.

     
  13. Troad77

    Troad77 Newbie

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    MACD (MOVING AVERAGE CONVERGENCE DIVERGENCE)

    MACD is a great indicator to tell if a trend is starting, normally way before the MA or EMA will tell you one is. This allows you to get that extra jump you need to ride the trend longer. But be wary, just because it's moving doesn't mean the price is.

    1.png

    A MACD indicator has three important indicators rolled into one. There are two moving averages, a slow and a fast one as well as a histogram. The moving averages are just like the ones mentioned before, except the almost always move faster (but you can change the parameters).

    The histogram shows the difference between the two moving averages. The farther apart the moving averages are the bigger the histogram is. When the histogram is trending down this is a good indication that the price will also begin trending down but it could also work the other way. When the Histogram is trending up it is a good indication that the price will also trend up. You should note that when the two moving averages on the MACD cross, the histogram will always be at zero (or in the center of the line).
     
    SAR (STOP AND REVERSAL)

    My favorite thing about the SAR indicator is that it is so simple that even your cat can use it. Stop and Reversal literally means the trend has stopped and is reversing the other way. When the dots are below the candlesticks: buy. When the dots are above the candlesticks: sell.

    It?s that simple! Personally, I only use this to confirm my suspicions about what the market is doing.

    2.png

    RSI (RELATIVE STRENGTH INDEX)

    The RSI is an identifier that can tell you if the market is oversold or overbought. The RSI reads on a scale from 0 to 100. If the line is below 30, you can easily assume that too many people sold and the price will start to come up. If the line is above 70, too many people bought and the price will surely come down.

    The big question is how much, that is something that this indicator cannot tell you. But it can definitely help you see if a trend is on the way. If the RSI line is showing below center (50) for a while it is very probable the price will start trending up.

    3.png
     
  14. Troad77

    Troad77 Newbie

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    STRATEGIES

    Now that's out of the way, let's get down to business with trading strategies. I am neither a medium nor a guru and there is no magical formula that will allow you to make perfect trades. If you want to make good or even great trades you must put in the time and effort it takes to gather the information, look at the patterns, follow the news and finally make the trade.

    But even when all of those things fall into place, you still can make horrible trades. Sell when Bitcoin is at the lowest it's been in weeks or buy when it's at its highest. Remember speculation is speculation, it should never be considered something else.

    The basic trading strategy is: Buy low, Sell high. Saying that is 100 times easier than actually doing it.

    We'll be looking at some ways we can maximize this possibility.
    • Short Term Trading (2 days or less)
    • Long Term Trading (2 days or more)

    We'll also be looking different approaches to trading.
    • Moving Averages Crossover Trading
    • Momentum Trading
    • Technical Trading
    • Fundamental Trading

    SHORT TERM TRADING (2 DAYS OR LESS)
    The basic idea of short term trading is to take advantage of small gains and losses throughout the day. This type of trader normally trades a few times during the day or at least once every two days. Generally speaking day traders lose out on big long term changes in the market, because they are so focused on the day instead of the month but make profit when volatility is high during the day.

    LONG TERM TRADING (2 DAYS OR MORE)
    Long term trading is the idea that big changes happen over time and to take advantage of those changes you need to wait. An average long term trader, at most, trades once every 2 days. They can also go years without making a single trade. This style of trading is a lot more relaxed and less stressful than short term trading.

    You can relax and watch the price slowly zig-zag up or down depending on the market and only worry when it changes direction. Because this type of trading does not take advantage of the small or even medium changes you can miss out on that 5% gain. Long term trading is by far the safest way to trade. It is very hard to lose in long term trading, as long as you react when the time is right.

    You should get to know what kind of trader you want to be so that you can choose the best strategy for you. There are many to choose from and I think its best that all new traders try a bit of each. Some are emotional, some are logical but they all work when in the right hands.
     
  15. Troad77

    Troad77 Newbie

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    MOVING AVERAGE CROSSOVER TRADING

    Remember when we talked about indicators, specifically MA and EMA. Well moving average crossover trading takes advantage of these two indicators. You may recall that there are two lines, a fast moving line (blue in this case) and a slow moving line (orange in this case). When these two cross, a moving average crossover trader will buy or sell.

    If the blue line crosses over the orange line at an upward angle the trader will buy. If the blue line crosses over the orange line at a downward angle this signals to the trader that he or she needs to sell. It's that simple. The MACD indicator is a great help when trading the moving averages. It will allow the trader to see the trend sooner than the MA or EMA will show.

    1.png

    MOMENTUM TRADING

    Momentum trading is probably the simplest here, but the least effective in making profits. The basic idea is you wait for a trend to have some momentum behind it and jump on or off. This is a very good and safe way to trade. However, it only works on long term trades and one should not expect huge gains from this style of trading.

    2.png

    TECHNICAL TRADING

    This type of trader is addicted to charts and graphs. Every move in the market is ?showing? a different sign. ?I bet the price will do this because my chart says so?, if you have ever said that, you are a technical trader.
    Personally, this is what I am. Technical traders rely on math, triangles, history and a plethora of other things. There are both good and bad sides to this type of trading. The bad side is there is no relaxing; we constantly need to make a new chart that fits in with what the price is doing.

    We always need to find a reason behind what the price is doing, which can create massive headaches and an addiction to coffee, but there are benefits. Believe it or not 70% of the times, markets really do follow trends and technical traders are normally the first to profit from it.

    However, that other 30% of the time, that markets do not follow trends, we lose, massively in most cases. If you don't like math or geometry technical trading is probably not for you. But everyone should have a bit of knowledge about it. It can only help you.

    FUNDAMENTAL TRADING

    Fundamental trading doesn't really apply to Bitcoin; however I am covering it, because... it's fundamental. This type of trading takes a look at company analysis (earnings reports, acquisitions, debt, etc.) and then trades according to whether or not the company is doing well or not so well.

    Like I said this doesn't really apply to Bitcoin, maybe a little. For example, last year Apple announced that they were allowing Bitcoin apps into the App Store (not in those words, but that's the idea). This caused the price to rise slightly but it could be for other reasons of course, but I'm pretty sure it was because of that.

    If it is true you could say that Apple allowing Bitcoin apps is like an acquisition for Bitcoin. I know it's a stretch, but bear with me. That is the basis of fundamental trading, when the company is doing good, buy. When it's doing bad, sell.
     
  16. Troad77

    Troad77 Newbie

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    TRADING

    We will now cover two very important things when trading; how to have diversity in your trades and the risks that comes with trading. These are serious topics and they can save your life, literally.

    TRADING DIVERSITY

    The simplest way to explain trading diversity is in a saying, "Don't put all of your eggs in one basket". Do not spend your entire bitcoin fund on one trade. Maybe it will be a great trade, but even if it's a sure thing don't do it. One mistake and all of your bitcoins are gone, and no one wants that. I suggest staggered trading.

    When the price starts to come up or go down, start buying or selling in increments. For example, at the first sign of an up-trend, start going in with only 5% or 10% of your total capital. After the trend looks like it will be staying for a while, go in with another 5% or 10%, so on and so forth until you are comfortable with the amount that is in. Word to the wise though, never go in 100%.

    Another way to go about this is different profiles all together. One long term, one medium term and one short term (ie. One you trade daily, one you trade once a month, and one you trade once or twice a year). This the best way to minimize you losses while still maintaining the ability to make money. It will keep you sane and lower your overall stress when trading. Which brings us into to the next part.

    RISK

    With great opportunities comes great risk and Bitcoin is no different. Trading is serious business. It is not for everyone and should never be taken lightly. When you break the trading concept down, the only word you wind up with is gambling. Traders are basically gamblers. There is a fine line that separates us. Gamblers don't have the same formulas and tools that traders have.

    When we buy $50,000 USD worth of Apple or Microsoft shares, no one bats an eye. But if you were to go to a casino and put even $10,000 USD on red at a roulette wheel, I am sure your family would have a heart attack. I know many people think there is a big difference. But is there really?

    Trading, just like gambling can become a serious addiction with life changing consequences. That first time you increase your holding by 10% is like no other. You just want more and more until you can never get enough. Most addicted traders feel such a drive to get that extra .1% that they will risk vast fortunes just to get it. I have to tell you, it's not worth it.

    Being overly consumed by anything is just bad for your mental health. I learned rather quickly that I didn't want to be consumed by my desire to maximize my profits to the furthest extent; it just simply wasn't worth it. If the price of Bitcoin and trading begin to overly consume your thoughts, take a step back and examine if it is really worth it to you.
     
  17. Troad77

    Troad77 Newbie

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    TIPS

    1. DO NOT INVEST MORE THAN YOU CAN AFFORD TO LOSE

    Any financial investment can produce losses, rather than returns. With a highly speculative investment, such as Bitcoin, there is a high chance that you can see very large gains or losses. By trading Bitcoin, there is also further scope to lose money from poor decision-making.

    One should invest such an amount that they feel comfortable with losing completely ? be prepared for the worst eventuality. There are two reasons for this.

    Firstly, successful investors diversify their portfolio. Allocating too much money to an asset class will increase risk and exposure. This makes it harder for gains in other assets to cover losses in another asset. You cannot lose more than you put in, so don?t put in more than you can afford to lose and you?ll be all right, even in the most negative case.

    Secondly, investing more than one can afford to lose reduces an investor?s ability to make good decisions. In particular, there is a risk of ?panic selling? when the market declines slightly. Instead of holding throughout a market dip, one who is over-invested may panic and sell-off their holdings for a low price ? attempting to cut their losses. This tends to lead to losing more money when the market recovers and the trader buys back at a higher price.
     
    2. SET GOALS FOR EACH TRADE

    Setting goals helps traders remain level-headed during periods of extreme volatility. This is highly important for Bitcoin trading. When placing a trade, determine what price to take profits or cut losses in advance.
    The benefit of this is that it is easier to prevent trading decisions based purely on emotions. For example, a trader with no target price may make a profitable trade, become greedy, and then fail to realize their profits while the market is still on their side.

    This chart shows the typical emotions an investor may go through and how they make it harder to ?buy low and sell high?.

    3.jpg

    The use of goals / price targets can prevent traders becoming greedy when experiencing euphoria and despondent after a market crash.
     
    3. LEARN HOW TO READ CHARTS

    Although technical analysis is a difficult skill to develop, new traders at a minimum should know the basics of chart reading to identify market trends.
    The most widely used Bitcoin charting tools are available inside BitRaiders for your convenience. Despite looking overwhelming at first, it is actually very intuitive. Here are the basics a new trader should understand:

    Candlesticks - these are the rectangles and lines that resemble a candlestick shape. They are used to show what the price has done within a chosen time interval, which in this example will be one day.

    1.png

    Take a look at the candlestick highlighted by the blue box. There are several pieces of information we can gather from this single candlestick:

    Opening price ? this is the part of the rectangle that is horizontal to the candlestick to the left. On this day, the price opened at approximately $400 (which was the closing price of the day before).
    Closing price ? this is the part of the rectangle that is horizontal to the candlestick to the right. On this day, the price closed at approximately $378 (which was the opening price of the day after).
    Price direction ? as the closing price is less than the opening price, the price of Bitcoin fell, therefore the candlestick is red.
    Highest price ? the highest point of the stick shows that, during this day, the price reached approximately $407.
    Lowest price ? the lowest point of the stick shows that, during this day, the price fell to approximately $368.
    Trading range ? the difference between the highest price and the lowest price shows the range that the price was trading in.
    Order book ? this is a list of the prices and quantities traders are willing to buy and sell Bitcoin.

    2.png

    The ?asks? (sell orders) are listed in the top half, and the ?bids? (buy orders) are the listed in bottom half. The differences between the lowest ask ($361.95) and highest bid ($360.95) is known as the ?spread?.
    The second section with the scroll bar shows live trades, which can be used to see what is happening in the market right now.

    How can a trader use this information? It allows short-term support and resistance levels to be identified quickly.

    For example, if there is an order to sell 5,000 Bitcoin at $362, the price will have a lot of resistance at this level. This is because buyers will fulfil the cheapest sell order available to them and, given that 5,000 Bitcoin is a huge quantity, this will be sufficient to satisfy buyers for a few days. It is only when this order has been fulfilled, that there is potential for the price to move above $362.

    It is worth watching the live trades and bids / asks being fulfilled to get a feel for how an exchange works. Keep in mind that a buyer will want to buy at the cheapest price for their desired quantity. So they will buy as many Bitcoin as possible at the cheapest price, and then the next cheapest price if the original ask contains an insufficient quantity of Bitcoin. It is this scenario that increases Bitcoin?s price ? or decreases Bitcoin?s price in an opposite scenario.

    4. DO NOT SET STOP LOSSES TOO LOW

    A stop loss is an automatic trigger to liquidate your position if your losses reach a certain value ? essentially stopping you from losing any more. They are a good tool to take advantage of.

    However, I recommend that traders do not use a stop loss that is too small. Choosing 10:1 leverage means that your deposit is 1/10th of the position size. This deposit determines the stop price, the price at which a position can drop to until the deposit can no longer cover the position?s loss. At $200, the default stop will be $20 away (or 10% of $200). Anything less than the position?s default stop will increase the risk of a position closing out very quickly because of minor fluctuations in the price of Bitcoin.

    It is important to note that lower leverage options result in a larger stop and as a result is considered a much safer way of exploring the basics of trading.

    5. CLOSE UNPROFITABLE & LEVERAGED POSITIONS WITHIN 24 HOURS

    Leverage is borrowing or lending an asset in hope that it appreciates or depreciates, respectively. If a trader shorted 1 Bitcoin at 5:1 leverage, for example, the total investment is 6 Bitcoin. To make a profit the price must fall, allowing the owner to reclaim ownership at a lower price.

    However, the price of a Bitcoin must fall sufficiently to cover the trading fee and the interest fee charged on borrowing the 5 Bitcoin.