buying Archives -
The Bank of Japan, after goosing Japanese share prices with a $ 50-billion-a-year program of stock purchases, now confronts a decision facing many other developed country central banks: when to stop.
WSJ.com: What’s News Asia
Looking to buy cannabis on New Year’s Day without a medical marijuana card? Head to Santa Ana.
Seven cannabis dispensaries there will be able to start selling pot to California adults Monday morning — and they’ll be the only such shops open for business in the greater Los Angeles area.
Sears Holdings hasn’t paid for any national TV spots for its struggling Sears and Kmart chains in December, as its CEO shifts advertising to digital channels.
WSJ.com: US Business
While I’m writing this article, the bitcoin price is crashing, but by the time you read this, it’s entirely possible that it already recovered to some extent. If you didn’t buy the dip, this article is for you.
Both the CBOE and the CME launched bitcoin futures during the past two weeks, which have been trading at unsurprisingly low initial volumes. My theory for this particular dip, as I’ve detailed in several previous posts, is that owing to the futures launch, there is no longer any investable allure of “getting in before Wall Street” anymore. However, I’m still bullish on bitcoin long-term. As for the CBOE and CME futures, there’s still plenty of time to get in before the accessibility of these instruments improves. As such, this dip presents an excellent opportunity to engage oneself in what has all but turned into a mantra in the bitcoin trading class of 2017; buy the dip.
Bitcoin has "crashed" 30% SIX TIMES in 2017. Each "crash" has been followed by an increase of: 76%, 237%, 183%, 165%, 152%. Bitcoin takes 7 steps forward, 2 steps back, 7 steps forward, 2 steps back. Every 2 steps back is heralded as the end of #bitcoin. Relax! pic.twitter.com/bV5ZFeucTp
— Robert Reid (@robertreidmd) December 22, 2017
One thing I struggled with as a novice trader buying my first dips was the fact that I didn’t always have fiat on exchanges to buy the dip with. Many times, I was already in BTC, and if I were to wire more fiat to the exchanges, the dip would oftentimes already have disappeared before the transfer completed. That meant that to buy the dip, I would also have to somehow succeed at selling the top. That was until I learned that you could buy the dip with the BTC you already have, using leverage on derivatives exchanges or exchanges that provide margin trading. For this article, I’ll write from the perspective of BitMEX trading, as this is the exchange which I am currently conducting my dip-buying activities on.
Here are the things you’ll need to be a successful BitMEX dip-buyer:
- A BitMEX account funded with a portion of your BTC
- Basic knowledge of the BitMEX platform
- A plan
- Good nerves
A BitMEX account funded with a portion of your BTC
One of the best things with high-leverage exchanges is that you can enter very large positions using only a small portion of your stash. This means you’ll be exposed to a much smaller custodial risk compared to when you’re trading on spot exchanges. Personally, I keep 90% of my BTC in cold storage and 10% on BitMEX solely for dip-buying purposes.
Basic knowledge of the BitMEX platform
The best way to get started with BitMEX is to use the BitMEX testnet. This allows you to trade with some fake bitcoin to get a feeling of how to use the interface and how the different order types work.
Before you start trading with real, large amounts I recommend that you read the info pages carefully and make sure you can explain what the following means: automatic liquidation, auto-deleveraging, difference between entry price and mark price, the BitMEX swap funding model and what the meaning of “inverse” is in “XBTUSD inverse perpetual swap”.
A plan, good nerves, discipline
Everyone who is not trading is a good trader. It’s very easy to look at the charts and imagine when you would have bought and when you would have sold. It’s much harder when it’s real. The best way to handle that is to have a plan that you simply follow. You should have an idea of the price you want to buy in at and the price you want to close your position at; both a price you’ll take profit at, and a price you’ll cut your losses at.
As you hone your dip-buying abilities, you’ll notice that your performance correlates with your ability to not get caught up in the heat of the moment while executing your strategy.
Some people believe that the fastest price movement in bitcoin is when it crashes. There’s even a saying: “Bitcoin takes the stairs up and the elevator down”. But there is one movement that is faster than the crash, and that is the bounce. In moments of true desperation, the price can fall thousands of dollars over the course of minutes. But on the bounce the order book is cleared out, so the price can jump back the same amount in a matter of seconds. That is why when you buy the dip, you do it on the way down, not on the way up.
This means that you have to make a guess at where you think the bottom is. Here’s a selection of tools bitcoin traders commonly use to guess bottoms:
- Technical analysis (TA) indicators such as RSI and MACD
- TA patterns such as inverse H&S, double/triple bottoms
- Fibonacci lines
- Trend lines
- Previous support levels
A few years ago, I backtested every TA indicator I could think of without finding very convincing results. I use a different strategy which is completely unscientific, but seems to work well for me. Here’s what I do:
Seeing as hodling is a perfectly fine strategy for bitcoin speculation, there is really no need to buy the dip unless the dip is too good to pass up. Therefore, I only buy dips if I think the price drop is really exaggerated. So I imagine a price point which would feel really brutal, wiping out several weeks or months of gains, and then some.
The second thing I do is watch the price drop in real time. During a crash, there’s going to be a point when there’ll be a red candle on the 5-minute chart that just keeps growing and growing. On BitMEX, you’ll see red numbers in the order book showing up; these are other traders’ automatic liquidations being triggered. I’ll also take a look into chat rooms and trading subreddits and make sure that everyone is talking about the crash. Lastly, I’ll monitor the notifications on my phone and wait for my brother to ask me if bitcoin is dying and if he should sell. At the point of maximum pain and desperation – that’s when I buy the dip.
Sizing: I usually use 10x leverage on BitMEX, which gives me headroom for another 10% price decrease after I’ve bought before I get automatically liquidated myself. I do not enter with my whole trading balance at once. I usually enter with 20-25% initially and keep increasing as we go down, depending on how intense the desperation feels.
Warning: The last few weeks the BitMEX trading engine hasn’t been able to cope with the trading volumes and will sometimes not accept orders during critical moments.
Do you agree buying the dip is a succesful trading strategy? Let us know in the comments below.
Images via Shutterstock
Disclaimer: Bitcoin price articles and markets updates are intended for informational purposes only and should not to be considered as trading advice. Neither Bitcoin.com nor the author is responsible for any losses or gains, as the ultimate decision to conduct a trade is made by the reader. Always remember that only those in possession of the private keys are in control of the “money.”
The post Trading Column `The Writing on the Wall´ – The Art of Buying the Dip appeared first on Bitcoin News.
Target Corp. plans to boost its same-day delivery capability by paying $ 550 million for Shipt Inc., its latest move to try to catch up with Amazon.com Inc.
Shipt delivers groceries to members who pay $ 99 a year. Target said Wednesday that it would add more products to the service next year, such…
Even in its home market of France, Unibail-Rodamco isn’t a well-known corporate name. But if it consummates a deal with Westfield, it will be the world’s second-largest mall operator by market capitalization.
WSJ.com: US Business
UnitedHealth Group Inc., the nation’s biggest health insurer, is spending nearly $ 5 billion to buy hundreds of clinics, just three days after rival Aetna Inc. announced a tie-up with CVS Health Corp.
Minnetonka, Minn.-based UnitedHealth said Wednesday that its Optum segment will buy the DaVita…
On November 29 there were quite a few bitcoin market spikes, and so-called flash crashes on exchanges, according to traders on social media and forums. One particular group of traders that really felt the storm when markets got turbulent were margin traders on exchanges like Bitfinex. In fact, if one were to visit the Reddit forum /r/bitfinex that day, they would see a whole bunch of angry customers who were burned buying bitcoin on a margin.
Buying Bitcoin On a Margin
Many people trade bitcoin on exchanges and understand how to place a buy or sell order and interact with the trading platform’s operations. However, there are other methods of exchange on cryptocurrency trading platforms and brokerage services called ‘margin trading.’ Buying on a margin is borrowing money from the exchange, so you can obtain a profit in the short term by placing a long or short bet on a specific digital asset with loaned capital.
Margin trading is far riskier than basic trading. Essentially, individuals with a limited amount of crypto-capital can add leverage to their base investment. For instance, if you hold two bitcoins the exchange allows you to open a margin position with leverage (loaned money) based on your initial capital. Exchanges like Bitfinex, Bitmex, Kraken, Bittrex, and Poloniex all offer these types of trades, and some of them allow other customers to provide the lending material. The risk a margin trader deals with is that they are gambling with loaned money and the market may not follow their predictions.
Long and Short, Liquidations, and Stop-Loss Orders
As mentioned above traders who buy cryptocurrency on a margin place positions (bets) called “long or short.” A long trade is started by purchasing the digital asset and hoping to sell it for a higher price in the future. Short trades consist of selling a digital asset and betting the price will drop in the future. The net amount is the market’s value either bought or sold; so if you play a short position, your base values will be negative. Cryptocurrency exchanges use the estimated highest bid for long positions and the lowest values to realize short bets which in turn can lead to ‘liquidation.’
A liquidated margin account means if your current balance is $ 1000 USD and a loss on the position is -$ 500 then you have lost half of your money. If the loss on the position is way lower, at say -$ 1200, your position will be forced liquidated at that market price. However, traders can utilize a tool called a ‘stop-loss order.’ This means you tell the exchange you want to sell the digital asset when it reaches an approximate price. The idea is to save someone’s assets from being forced liquidated when the market dips or for rare occasions like ‘flash crashes.’ However, a good majority of traders traditionally use the stop-loss order setting for long positions. Traders often forget to utilize this tool in short positions, and this is when traders usually get burned.
Traders Getting Burned
In addition to stop-loss orders, cryptocurrency exchanges use what’s called a ‘margin call.’ This is when a trading platform notifies the borrower when the user’s contract value goes below a specific price. All bitcoin exchanges have different formulas to how they execute margin call levels. Even though these trading safety nets are in place, traders still complain of issues during ‘flash crashes.’
“Margin call level is the margin level at which you are in danger of having some of your positions forcibly closed (or “liquidated”),” explains the San Francisco based exchange Kraken. “If this happens, your positions will be closed in the order they were created, first to last — The number of positions closed is at our discretion — we may close all your positions or only enough to get your margin level above 100%.”
Margin call guidelines for the exchange Bitfinex are as follows:
When a position is force-liquidated, the system places a limit order at the zero-equity price (rather than simply executing a market order). We do this to prevent a liquidated position creating a negative account balance for the user due to slippage during highly volatile market periods.
There was a lot of complaining about margin traders getting ‘burned’ the day many digital assets reached new all-time highs. Take for instance this post on the Reddit forum /r/btc from an individual who was liquidated for $ 200K worth of funds on Bitfinex.
“Forgive me, but English is not my first language,” explains the post. “I see that Bitfinex has been having a lot of issues and I checked the website while bitcoin’s price was falling. As the page was loading in an instant, my account went from about $ 180,000 to minus -$ 20,000.”
I don’t know what to do — I tried to contact support, but no one has responded to me and now I can’t even log into my account at all.
Who Is to Blame For Crypto-Flash Crashes?
Angriness has been the sentiment from margin traders on Bitfinex and other exchanges this week. Traders are not too pleased with the multitude of exchanges that had severe operational issues on November 29. Traders say they could not access their accounts and stop liquidations before it was too late. Looking at posts on /r/bitfinex and all across Twitter, it is safe to say traders lost hundreds of thousands of dollars that day.
The question, however, is — Who is to blame for the losses if traders did not set their stop-loss orders? Is it the trading platform’s fault for not being able to maintain consistent operations? Whatever the case may be margin traders can ‘lose their shirt’ if they are not careful with this type of trading method.
What do you think about cryptocurrency margin trading? Do you margin trade on exchanges? Let us know your thoughts in the comments below.
Images via Shutterstock, and Bitfinex.
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The post Buying Bitcoin On a Margin: Winning Big or Losing Your Shirt appeared first on Bitcoin News.
LA Weekly’s staff was gutted Wednesday as Voice Media Group completed its sale of the alternative newsweekly to a newly created company, Semanal Media.
Nine of the 13 members of the editorial staff lost their jobs, including all the top editors and all but one of the staff writers.
“To have such…