Everything You Always Wanted To Know About Swaps* (*But Were Afraid To Ask)
Hello, dummies It's your old pal, Fuzzy. As I'm sure you've all noticed, a lot of the stuff that gets posted here is - to put it delicately - fucking ridiculous. More backwards-ass shit gets posted to wallstreetbets than you'd see on a Westboro Baptist community message board. I mean, I had a look at the daily thread yesterday and..... yeesh. I know, I know. We all make like the divine Laura Dern circa 1992 on the daily and stick our hands deep into this steaming heap of shit to find the nuggets of valuable and/or hilarious information within (thanks for reading, BTW). I agree. I love it just the way it is too. That's what makes WSB great. What I'm getting at is that a lot of the stuff that gets posted here - notwithstanding it being funny or interesting - is just... wrong. Like, fucking your cousin wrong. And to be clear, I mean the fucking your *first* cousin kinda wrong, before my Southerners in the back get all het up (simmer down, Billy Ray - I know Mabel's twice removed on your grand-sister's side). Truly, I try to let it slide. Idomybit to try and put you on the right path. Most of the time, I sleep easy no matter how badly I've seen someone explain what a bank liquidity crisis is. But out of all of those tens of thousands of misguided, autistic attempts at understanding the world of high finance, one thing gets so consistently - so *emphatically* - fucked up and misunderstood by you retards that last night I felt obligated at the end of a long work day to pull together this edition of Finance with Fuzzy just for you. It's so serious I'm not even going to make a u/pokimane gag. Have you guessed what it is yet? Here's a clue. It's in the title of the post. That's right, friends. Today in the neighborhood we're going to talk all about hedging in financial markets - spots, swaps, collars, forwards, CDS, synthetic CDOs, all that fun shit. Don't worry; I'm going to explain what all the scary words mean and how they impact your OTM RH positions along the way. We're going to break it down like this. (1) "What's a hedge, Fuzzy?" (2) Common Hedging Strategies and (3) All About ISDAs and Credit Default Swaps. Before we begin. For the nerds and JV traders in the back (and anyone else who needs to hear this up front) - I am simplifying these descriptions for the purposes of this post. I am also obviously not going to try and cover every exotic form of hedge under the sun or give a detailed summation of what caused the financial crisis. If you are interested in something specific ask a question, but don't try and impress me with your Investopedia skills or technical points I didn't cover; I will just be forced to flex my years of IRL experience on you in the comments and you'll look like a big dummy. TL;DR? Fuck you. There is no TL;DR. You've come this far already. What's a few more paragraphs? Put down the Cheetos and try to concentrate for the next 5-7 minutes. You'll learn something, and I promise I'll be gentle. Ready? Let's get started. 1.The Tao of Risk: Hedging as a Way of Life The simplest way to characterize what a hedge 'is' is to imagine every action having a binary outcome. One is bad, one is good. Red lines, green lines; uppie, downie. With me so far? Good. A 'hedge' is simply the employment of a strategy to mitigate the effect of your action having the wrong binary outcome. You wanted X, but you got Z! Frowny face. A hedge strategy introduces a third outcome. If you hedged against the possibility of Z happening, then you can wind up with Y instead. Not as good as X, but not as bad as Z. The technical definition I like to give my idiot juniors is as follows: Utilization of a defensive strategy to mitigate risk, at a fraction of the cost to capital of the risk itself. Congratulations. You just finished Hedging 101. "But Fuzzy, that's easy! I just sold a naked call against my 95% OTM put! I'm adequately hedged!". Spoiler alert: you're not (although good work on executing a collar, which I describe below). What I'm talking about here is what would be referred to as a 'perfect hedge'; a binary outcome where downside is totally mitigated by a risk management strategy. That's not how it works IRL. Pay attention; this is the tricky part. You can't take a single position and conclude that you're adequately hedged because risks are fluid, not static. So you need to constantly adjust your position in order to maximize the value of the hedge and insure your position. You also need to consider exposure to more than one category of risk. There are micro (specific exposure) risks, and macro (trend exposure) risks, and both need to factor into the hedge calculus. That's why, in the real world, the value of hedging depends entirely on the design of the hedging strategy itself. Here, when we say "value" of the hedge, we're not talking about cash money - we're talking about the intrinsic value of the hedge relative to the the risk profile of your underlying exposure. To achieve this, people hedge dynamically. In wallstreetbets terms, this means that as the value of your position changes, you need to change your hedges too. The idea is to efficiently and continuously distribute and rebalance risk across different states and periods, taking value from states in which the marginal cost of the hedge is low and putting it back into states where marginal cost of the hedge is high, until the shadow value of your underlying exposure is equalized across your positions. The punchline, I guess, is that one static position is a hedge in the same way that the finger paintings you make for your wife's boyfriend are art - it's technically correct, but you're only playing yourself by believing it. Anyway. Obviously doing this as a small potatoes trader is hard but it's worth taking into account. Enough basic shit. So how does this work in markets? 2. A Hedging Taxonomy The best place to start here is a practical question. What does a business need to hedge against? Think about the specific risk that an individual business faces. These are legion, so I'm just going to list a few of the key ones that apply to most corporates. (1) You have commodity risk for the shit you buy or the shit you use. (2) You have currency risk for the money you borrow. (3) You have rate risk on the debt you carry. (4) You have offtake risk for the shit you sell. Complicated, right? To help address the many and varied ways that shit can go wrong in a sophisticated market, smart operators like yours truly have devised a whole bundle of different instruments which can help you manage the risk. I might write about some of the more complicated ones in a later post if people are interested (CDO/CLOs, strip/stack hedges and bond swaps with option toggles come to mind) but let's stick to the basics for now. (i) Swaps A swap is one of the most common forms of hedge instrument, and they're used by pretty much everyone that can afford them. The language is complicated but the concept isn't, so pay attention and you'll be fine. This is the most important part of this section so it'll be the longest one. Swaps are derivative contracts with two counterparties (before you ask, you can't trade 'em on an exchange - they're OTC instruments only). They're used to exchange one cash flow for another cash flow of equal expected value; doing this allows you to take speculative positions on certain financial prices or to alter the cash flows of existing assets or liabilities within a business. "Wait, Fuzz; slow down! What do you mean sets of cash flows?". Fear not, little autist. Ol' Fuzz has you covered. The cash flows I'm talking about are referred to in swap-land as 'legs'. One leg is fixed - a set payment that's the same every time it gets paid - and the other is variable - it fluctuates (typically indexed off the price of the underlying risk that you are speculating on / protecting against). You set it up at the start so that they're notionally equal and the two legs net off; so at open, the swap is a zero NPV instrument. Here's where the fun starts. If the price that you based the variable leg of the swap on changes, the value of the swap will shift; the party on the wrong side of the move ponies up via the variable payment. It's a zero sum game. I'll give you an example using the most vanilla swap around; an interest rate trade. Here's how it works. You borrow money from a bank, and they charge you a rate of interest. You lock the rate up front, because you're smart like that. But then - quelle surprise! - the rate gets better after you borrow. Now you're bagholding to the tune of, I don't know, 5 bps. Doesn't sound like much but on a billion dollar loan that's a lot of money (a classic example of the kind of 'small, deep hole' that's terrible for profits). Now, if you had a swap contract on the rate before you entered the trade, you're set; if the rate goes down, you get a payment under the swap. If it goes up, whatever payment you're making to the bank is netted off by the fact that you're borrowing at a sub-market rate. Win-win! Or, at least, Lose Less / Lose Less. That's the name of the game in hedging. There are many different kinds of swaps, some of which are pretty exotic; but they're all different variations on the same theme. If your business has exposure to something which fluctuates in price, you trade swaps to hedge against the fluctuation. The valuation of swaps is also super interesting but I guarantee you that 99% of you won't understand it so I'm not going to try and explain it here although I encourage you to google it if you're interested. Because they're OTC, none of them are filed publicly. Someeeeeetimes you see an ISDA (dsicussed below) but the confirms themselves (the individual swaps) are not filed. You can usually read about the hedging strategy in a 10-K, though. For what it's worth, most modern credit agreements ban speculative hedging. Top tip: This is occasionally something worth checking in credit agreements when you invest in businesses that are debt issuers - being able to do this increases the risk profile significantly and is particularly important in times of economic volatility (ctrl+f "non-speculative" in the credit agreement to be sure). (ii) Forwards A forward is a contract made today for the future delivery of an asset at a pre-agreed price. That's it. "But Fuzzy! That sounds just like a futures contract!". I know. Confusing, right? Just like a futures trade, forwards are generally used in commodity or forex land to protect against price fluctuations. The differences between forwards and futures are small but significant. I'm not going to go into super boring detail because I don't think many of you are commodities traders but it is still an important thing to understand even if you're just an RH jockey, so stick with me. Just like swaps, forwards are OTC contracts - they're not publicly traded. This is distinct from futures, which are traded on exchanges (see The Ballad Of Big Dick Vick for some more color on this). In a forward, no money changes hands until the maturity date of the contract when delivery and receipt are carried out; price and quantity are locked in from day 1. As you now know having read about BDV, futures are marked to market daily, and normally people close them out with synthetic settlement using an inverse position. They're also liquid, and that makes them easier to unwind or close out in case shit goes sideways. People use forwards when they absolutely have to get rid of the thing they made (or take delivery of the thing they need). If you're a miner, or a farmer, you use this shit to make sure that at the end of the production cycle, you can get rid of the shit you made (and you won't get fucked by someone taking cash settlement over delivery). If you're a buyer, you use them to guarantee that you'll get whatever the shit is that you'll need at a price agreed in advance. Because they're OTC, you can also exactly tailor them to the requirements of your particular circumstances. These contracts are incredibly byzantine (and there are even crazier synthetic forwards you can see in money markets for the true degenerate fund managers). In my experience, only Texan oilfield magnates, commodities traders, and the weirdo forex crowd fuck with them. I (i) do not own a 10 gallon hat or a novelty size belt buckle (ii) do not wake up in the middle of the night freaking out about the price of pork fat and (iii) love greenbacks too much to care about other countries' monopoly money, so I don't fuck with them. (iii) Collars No, not the kind your wife is encouraging you to wear try out to 'spice things up' in the bedroom during quarantine. Collars are actually the hedging strategy most applicable to WSB. Collars deal with options! Hooray! To execute a basic collar (also called a wrapper by tea-drinking Brits and people from the Antipodes), you buy an out of the money put while simultaneously writing a covered call on the same equity. The put protects your position against price drops and writing the call produces income that offsets the put premium. Doing this limits your tendies (you can only profit up to the strike price of the call) but also writes down your risk. If you screen large volume trades with a VOL/OI of more than 3 or 4x (and they're not bullshit biotech stocks), you can sometimes see these being constructed in real time as hedge funds protect themselves on their shorts. (3) All About ISDAs, CDS and Synthetic CDOs You may have heard about the mythical ISDA. Much like an indenture (discussed in my post on $F), it's a magic legal machine that lets you build swaps via trade confirms with a willing counterparty. They are very complicated legal documents and you need to be a true expert to fuck with them. Fortunately, I am, so I do. They're made of two parts; a Master (which is a form agreement that's always the same) and a Schedule (which amends the Master to include your specific terms). They are also the engine behind just about every major credit crunch of the last 10+ years. First - a brief explainer. An ISDA is a not in and of itself a hedge - it's an umbrella contract that governs the terms of your swaps, which you use to construct your hedge position. You can trade commodities, forex, rates, whatever, all under the same ISDA. Let me explain. Remember when we talked about swaps? Right. So. You can trade swaps on just about anything. In the late 90s and early 2000s, people had the smart idea of using other people's debt and or credit ratings as the variable leg of swap documentation. These are called credit default swaps. I was actually starting out at a bank during this time and, I gotta tell you, the only thing I can compare people's enthusiasm for this shit to was that moment in your early teens when you discover jerking off. Except, unlike your bathroom bound shame sessions to Mom's Sears catalogue, every single person you know felt that way too; and they're all doing it at once. It was a fiscal circlejerk of epic proportions, and the financial crisis was the inevitable bukkake finish. WSB autism is absolutely no comparison for the enthusiasm people had during this time for lighting each other's money on fire. Here's how it works. You pick a company. Any company. Maybe even your own! And then you write a swap. In the swap, you define "Credit Event" with respect to that company's debt as the variable leg . And you write in... whatever you want. A ratings downgrade, default under the docs, failure to meet a leverage ratio or FCCR for a certain testing period... whatever. Now, this started out as a hedge position, just like we discussed above. The purest of intentions, of course. But then people realized - if bad shit happens, you make money. And banks... don't like calling in loans or forcing bankruptcies. Can you smell what the moral hazard is cooking? Enter synthetic CDOs. CDOs are basically pools of asset backed securities that invest in debt (loans or bonds). They've been around for a minute but they got famous in the 2000s because a shitload of them containing subprime mortgage debt went belly up in 2008. This got a lot of publicity because a lot of sad looking rednecks got foreclosed on and were interviewed on CNBC. "OH!", the people cried. "Look at those big bad bankers buying up subprime loans! They caused this!". Wrong answer, America. The debt wasn't the problem. What a lot of people don't realize is that the real meat of the problem was not in regular way CDOs investing in bundles of shit mortgage debts in synthetic CDOs investing in CDS predicated on that debt. They're synthetic because they don't have a stake in the actual underlying debt; just the instruments riding on the coattails. The reason these are so popular (and remain so) is that smart structured attorneys and bankers like your faithful correspondent realized that an even more profitable and efficient way of building high yield products with limited downside was investing in instruments that profit from failure of debt and in instruments that rely on that debt and then hedging that exposure with other CDS instruments in paired trades, and on and on up the chain. The problem with doing this was that everyone wound up exposed to everybody else's books as a result, and when one went tits up, everybody did. Hence, recession, Basel III, etc. Thanks, Obama. Heavy investment in CDS can also have a warping effect on the price of debt (something else that happened during the pre-financial crisis years and is starting to happen again now). This happens in three different ways. (1) Investors who previously were long on the debt hedge their position by selling CDS protection on the underlying, putting downward pressure on the debt price. (2) Investors who previously shorted the debt switch to buying CDS protection because the relatively illiquid debt (partic. when its a bond) trades at a discount below par compared to the CDS. The resulting reduction in short selling puts upward pressure on the bond price. (3) The delta in price and actual value of the debt tempts some investors to become NBTs (neg basis traders) who long the debt and purchase CDS protection. If traders can't take leverage, nothing happens to the price of the debt. If basis traders can take leverage (which is nearly always the case because they're holding a hedged position), they can push up or depress the debt price, goosing swap premiums etc. Anyway. Enough technical details. I could keep going. This is a fascinating topic that is very poorly understood and explained, mainly because the people that caused it all still work on the street and use the same tactics today (it's also terribly taught at business schools because none of the teachers were actually around to see how this played out live). But it relates to the topic of today's lesson, so I thought I'd include it here. Work depending, I'll be back next week with a covenant breakdown. Most upvoted ticker gets the post. *EDIT 1\* In a total blowout, $PLAY won. So it's D&B time next week. Post will drop Monday at market open.
https://preview.redd.it/kkhj7agzz5251.png?width=875&format=png&auto=webp&s=f47007e7923d8f40d98e3ba7d08a31c3729a0bd3 Hello everyone, thank you for your continued interest and support. In the past two weeks, various tasks of TokenClub have been progressing steadily. The product development and community operation progress this week are as follows: 1. TokenClub Events 1)TokenClub & 499Block reached strategic cooperation in live broadcasting On May 28th, TokenClub and 499Block reached a strategic cooperation to jointly build a live broadcast ecosystem in the vertical field of blockchain. 2)520e events When 520 comes, TokenClub launches live interactive interaction. During the event, participate in interactive questions in the live broadcast room or forward the live poster to Twitter and the telegram group, and upload a screenshot to have the opportunity to extract 520, 1314 red envelope rewards https://preview.redd.it/apyee28406251.png?width=1080&format=png&auto=webp&s=9c9798db931ad6611d6c258907120610ae11ff11 3)Text version of live content is abailable on Medium In order to better understand the live broadcast of TokenClub by overseas communities, we translated the live broadcast content into English and uploaded it to TokenClub’s Medium official account, so that the community’s small partners can view it. https://preview.redd.it/hhmu3pl506251.png?width=1080&format=png&auto=webp&s=fae9d42dcdee9d079219d1ffe612fc573bad01e8 4)Preview: TokenClub’s self-media grandma is invited to participate in the golden financial theme live event From May 29th to June 4th, Golden Finance will hold a five-day live broadcast of the theme of “Finding Double Coins”. Grandpa Coin will express his views on June 3, welcome to pay attention. 2.TokenClub Live 1) Summary Recently, Binance Co-founder He Yi, TRON founder Sun Yuchen, Hobbit HBTC founder Ju Jianhua, OSL chairman Dave, BlockVC founding partner Xu Yingkai, Outlier Ventures founder amie Burke, Bitribe founder SKY, CryptoBriefing CEO Han Kao , Huarai Group / Vice President, Global Market and Business Leader Ciara, Guosheng Securities Blockchain Research Institute Sun Shuang, Tongtongtong Research Institute CEO Song Shuangjie, Jin Tiancheng Law Firm Senior Partner Yu Bingguang, Binance China Jiang Jinze, principal researcher of Blockchain Research Institute, Meng Yan, vice president of Digital Asset Research Institute, co-founder of Primitive Ventures & director of Coindesk advisory board-Dovey Wan, founding partner of Genesis Capital & co-founder of Kushen Wallet Ocean Liao Yangyang, Binance C2C-Kathy, Binance OTC-Coco, Binance Contract & Options-Justin, Binance VIP-Jennifer, Binance Broker-Jess, Binance Mining Pool-Denny, Harbin Institute of Technology Blockchain Research Executive Deputy Director Xu Zhifeng, dForce founder Yang Mindao, Mars Finance co-founder Shang Silin, Cobo & Yuchi co-founder Shenyu, well-known investor Xu Zhe, CasperLabs CEO Mrinal Manohar, CasperLabs co-founder Scott Walker, Chairman of Rock Tree Omer Ozden, Nova Club incubation team leader & Waterdrop Capital partner Zheng Yushan, Rolling Stone miner founder Alex Lam, BitUniverse coin founder Chen Yong, Odaily Planet Daily founder and CEO Mandy Wang Mengdie, Binance stablecoin BUSD project responsible Helen Tu and senior expert of TokenClub blockchain and cryptocurrency investment strategy-Zao Shen talks with you about blockchain things ~ On May 18, Block 101 Binance Key Account Manager Luna talked to Primitive Ventures co-founder, non-profit bitcoin development fund Hardcore Fund executive director, and Coindesk advisory board director-Dovey Wan, to understand “C and C How is the Goddess of Crypto Assets made? “Dovey Wan shared with us on asset allocation, investment judgment, entrepreneurship, DCEP, etc. https://preview.redd.it/0dsry36906251.png?width=1080&format=png&auto=webp&s=a7f6f4b852547d2e43114f81a981f7aa6ea10f61 On May 19, Block 101 Yingge talked with Sun Zeyu, the founding partner of Genesis Capital and co-founder of Kushen Wallet, to share the theme of “Blockchain Investment Experience”. This investor, who is rated as “reliable” by insiders, recommends that novices try not to touch contracts, do not stay overnight even when making contracts, be alert to risks, refuse gambling, and rationally analyze investments. On May 20th, 499Block ’s two-year birthday carnival “Global Hot Chain, Keeping Together for Every Year” celebration was held in the TokenClub Live Room. The cross-border AMA Solitaire + popular day group anchor live video sharing, including Binance Co-founder He Yi, TRON founder Sun Yuchen, Hobbit HBTC founder Ju Jianhua, OSL chairman Dave, BlockVC founding partner Xu Yingkai, Outlier Ventures founder amie Burke, Bitribe founder SKY, CryptoBriefing CEO Han Kao, Huobi Group / Vice President Global Markets and Dozens of blockchain leaders from home and abroad, such as Ciara, the business leader, all appeared on the scene, and 499Block became a popular beauty angel group to help the interactive host. https://preview.redd.it/ga6ey51b06251.png?width=1280&format=png&auto=webp&s=d94cc1a03640538ec1e99443c8cbb7a5e77596de On May 20, Sun Shuang, senior researcher of Guosheng Securities Blockchain Research Institute, Song Shuangjie, Jin Tong, CEO of Tongzhengtong Research Institute were jointly invited by Lingang Xinyefang, Lingang Innovation Management School, and Binance China Blockchain Research Institute. Tian Bingguang Senior Partner Yu Bingguang, Binance China Blockchain Research Institute Chief Researcher Jiang Jinze, Vice President of Digital Assets Research Institute Meng Yan, and many experts talked about the “Critical Digital RMB DCEP” in the live broadcast, one A feast of intertwined thoughts is worth watching again! On May 21st, Ocean Liao Yangyang, the founder of Block 101 Seven Seven Dialogue Force Field, focused on the “big enlightenment era of digital assets”, Ocean shared with us his entrepreneurial experience, the first pot of gold, public chain, currency circle and Analysis of the current market. Regarding the future of Bitcoin, Ocean feels that he can work hard towards the direction of digital gold and become a substitute or supplement for gold. He is determined to see more, because the ceiling of the entire industry is very high, and he still cannot see its end point. The index level is rising, far from being over. On May 22, “In the name of the Pizza Festival, we came to a different live broadcast” Bringing Goods “”, which was organized by the girls in the 101-day group of the block: June 6, July 7, Sisi, Yingge, Qianjiangyue , Dialogue: Binance First Sister, Binance C2C-Kathy, Binance OTC-Coco, Binance Contract & Options-Justin, Binance VIP-Jennifer, Binance Broker-Jess, Binance Mining Pool-Denny. We have explained to us one by one about C2C, OTC, contract options, etc. If you are interested, please move to the live room. https://preview.redd.it/a9am0j5e06251.png?width=1080&format=png&auto=webp&s=7f8d0e80492027a000d4e719ec727b56cc27d94f On May 22, Block 101 Sisi Dialogue Xu Zhifeng, executive deputy director of the Blockchain Research Center of Harbin Institute of Technology, shared the theme: “Strategy of Great Powers: Seizing New Highlands of Blockchain Technology”. He expressed his views on his own currency circle experience, entrepreneurship, blockchain technology, DECP, etc. Xu Zhifeng is very optimistic about the future development of blockchain. He said: “Ten years later, blockchain will become a very common industry. We are the Internet industry and have never changed.” On May 23, the old Chinese doctor Zao Shen from the coin circle went online ~ The theme of this issue: If you want to be short, you must be able to sing first, and if you want to be long, you must be patient. If the meal is not fragrant, the game is not good, and the happiness of the past has drifted into the distance, just because the daily reading is still a loss, and the head is hurt. Don’t panic, the old Chinese doctor Zao Shen of the currency circle will adopt the Trinity Interventional Therapy and precise care to regenerate life. Don’t move quickly to the live room to see what “therapy” is. On May 25, Block 101, July 7th conversation with dForce founder Yang Mindao, talked about “DeFi opportunities and challenges.” Yang Mindao believes that the four biggest benefits of DeFi are: programmability; non-custodial nature; non-licensing; composability. He believes that the current public chain market is seriously homogenized, and the most promising public chain is Ethereum. Ethereum is the best and largest in terms of developer group, ecology, and technological evolution, and can absorb the advantages of each public chain. At the same time, he is also extremely optimistic about DeFi, “DeFi application value is gradually verified, and the value of this type of token will gradually become more prominent.” On May 26th, Mars Finance co-founder Shang Silin Hardcore Dialogue Cobo & Yuchi co-founder Shenyu and well-known investor Xu Zhe. The trend of “financialization” in the digital asset industry is becoming more and more obvious, and the friends of miners need to master more and more skills. Unveiling the mystery of hedging for everyone. On May 26th, Nova Superstar Dialogue Phase 13 focused on the Silicon Valley star project CasperLabs, specially invited CasperLabs CEO Mrinal Manohar, CasperLabs co-founder Scott Walker, Rock Tree chairman Omer Ozden, and Nova Club incubation team leader Water Capital Partners Zheng Yushan, discuss CasperLbs together. On May 26, Block 101 Sisi talked with the founder of the Rolling Stone Miner, Alex Lam, and took us into the “post-worker life” of a PhD in finance. Alex shared the reasons for entering the coin circle, the first pot of gold, mining, pitted pits, investment experience and opportunities in the digital currency industry. Alex said: Bitcoin exceeds US $ 100,000, and it will be in the second half of next year or the year after. On May 27th, Block 101 Yingge talked with BitUniverse founder Chen Yong and shared the theme: “Who” needs grid trading. Chen Yong mainly introduced the currency trading tool of Bitcoin. In his view, grid trading has changed an investor’s concept-from stud into a batch of positions and positions. Regarding the price of Bitcoin, Chen Yong believes that the price of Bitcoin may reach one hundred thousand dollars around 2030. On May 28, Block 101 Binance Mining Pool Wu Di talked to Mandai Wang Mengdie, founder of Planet Daily Odaily, to learn more about the process of “media entrepreneurs marching into the blockchain from venture capital circles”. Mandy believes that the core competence in the media industry is high-quality original content, which is the most basic but difficult to stick to. The initial focus of entering the mixed media industry of the dragon and dragon is to focus and amplify value. On May 29th, Block 101 Qianjiangyue Dialogue Hellen Tu, the project leader of Binance Stablecoin BUSD project, talked with everyone about the stablecoin “Life and Death”, Hellen shared the stablecoin in detail, and published his own the opinion of. For details, please move to the live room. On May 30th, Zaoshen came to share the theme: Dongfeng blowing, bullets flying, unlimited chase? In this issue, Zao Shen shared with you the recent international financial situation and various major events in the United States in the past week, which extended to the impact on the currency circle and answered various questions about investment strategies. Friends who want to know more details can move to the live room of Zao Shen. 3.TokenClub operation data -Live data: 13 live broadcasts in the past two weeks, with over 800,000 views. TokenClub hosted a total of 870 live broadcasts with a total of 45.06 million views. -Binary trade data: In the past two weeks, guess the rise and fall to participate in a total of 1268 times, the amount of participation exceeded 2 million TCT. At present, it is guessed that the rise and fall function has participated in a total of 1.11 million times, with a cumulative participation amount of 498 million TCT. -Chat data: In the past two weeks, a total of 19271 messages have been generated. A total of 4.85 milliom messages have been launched since the function was launched. -Mini-game data: The mini-game has participated in a total of 4212 times in the past two weeks. A total of 1,66 million self-functions have been online. -Cut leeks game data together: Since the game was launched, the total number of user participation in the game was 962612 TCT total consumption was 6,27 million gift certificate total consumption was 15,95million and TCT mining output was 161496. -TokenClub KOL data: Over the past two weeks, the total reading volume of the BTCGrandpa article has been viewed by more than 300,000 people. -Social media data: At present, the number of Weibo official accounts is 18033 and the number of Twitter followers is 1332 and we have opened the official Medium account this week, welcome to follow. -Telegram official group data: In the past 2 weeks, there were 238 chats in the group, and the total number of Telegram official groups is currently 2906. -Medium data: Medium official account u/TokenClub has published 5 excellent articles, official announcements and updates are published in English, welcome to follow. 4.Communities 1)Overseas Community TokenClub held an event for forwarding Twitter and telegram group chats for overseas users. Bitcoin halved in less than two weeks, overseas users are more active in the telegram group, and some friends are more concerned about Binance Block 101 live broadcast, aggregation exchange, TCT usage and other issues, the administrator responded in time.On May 12th, when Bitcoin was halved, TokenClub organized a forwarding Twitter, telegram group chat prize event and participating in a live question asking interactive prize event for overseas users. There are many live broadcast events in the near future. The live broadcast poster information will be released to overseas users as soon as possible. The follow-up TokenClub will translate and broadcast high-quality live broadcast content to Twitter and Medium. Bitcoin halved, overseas users are more active in the telegram group, and some partners are more concerned about block 101 live broadcast, bitcoin future price trend, TCT usage and other issues, the administrator responded in time in the group. https://preview.redd.it/2nrknnyo06251.png?width=1080&format=png&auto=webp&s=fb98b385c0caf7e65c7b3b2bb1edd782ec126905 2)Domestic community Sweet Orange Club Weekly News Last Friday, a holiday, the community opened the red envelope rain event, and brought a sincere gift to everyone while relaxing in the holiday. At the same time, it also sent the most sincere blessings to all mothers in the community on Mother’s Day. Thank you for your long-term support and help to the Orange Club community. Hundred-day scheduled investment event (Phase II) The fourth week of the second 100-day fixed investment plan held this week has been awarded, and everyone is still very active in this event. This week, the Bitcoin halving market was also opened in advance. The small partners participating in the fixed investment should now have a certain floating win, so we adopt the correct cycle investment strategy to believe that it can bring unexpected benefits to everyone. Sign in the lottery. On the evening of May 3rd and May 10th, TCT Fortune Free Academy carried out the 51st and 52nd week sign-in sweepstakes, and rewarded the small TCT partners who had always insisted on signing in. In these two sign-in sweepstakes, the lucky friends received 20–180TCT as a reward. In addition, during the lucky draw, the college friends also actively expressed their opinions on the topic of this year’s bull market. The Leek Paradise Community Conference will continue as usual every Sunday at 20:00. During the conference, members will discuss recent hot topics, including gifts and blessings for Mother ’s Day, and the halving of Bitcoin everyone is paying attention to. At the end, the friends in the group also showed a rare enthusiasm at the first sight. It seems that the market still affects the mood. The members routinely started a red envelope rain to cheer for the participating partners and encourage everyone to maintain patience and confidence. Of course, at the same time, we are encouraging ourselves to see the community meeting next week. Come on! TokenClub volunteer community, sign in red envelopes every day, as long as you sign in every day, you can get good benefits, friends join us quickly! In the past two weeks, the community has conducted active partners. Volunteer community: Change to the currency circle consultation and pass the analysis of Grandma Coin and Panda analysts, support TokenClub in action, and continue to vote for TCT. In the last month, we have worked hard to learn the rain god’s strategy. We have doubled the coins in our hands. The community WeChat group has recently injected fresh students. We look forward to more people joining! Volunteer community, will continue to work hard for TokenClub TCT has been listed on Binance、Okex、Gate.io、ZB-M、MXC、Biki、Coinex、BigOne、Coinbene、Cybex、SWFT、Loopring、Rootrex etc. TokenClub website: www.tokenclub.com Telegram：https://t.me/token\_club
How to Become Your Own Fund Manager Building It From 0
Diversification is still Key. Putting all of your money on one stock is gambling. In the end / longterm gamblers lose. I recommend a portfolio of 20 stocks.
Choose profitability over hype. There are exceptions to the rules and if you do spot the next Amazon, or Tesla, no more than 5% of your total fund investment should be placed in the next Amazon. Why? 99 times out of 100, after the hype, it falls apart, and there goes your money
Dividends. Do your choices pay dividends? Has the company increased its dividends regularly? Over the long run has the share price increased steadily?
Options. Can you buy sell calls or puts on the shares held? If yes, then writing calls and puts will generate more income. Please youtube basics on options trading. Stay away from binary trading or futures options trading. No need to use those derivatives from your mutual fund.
Currency Hedged . Can you buy that amazing stock in USD or EUR or CDN ? If your account with your broker allows it, so very cool.
ETF's. You may choose right from the get go to build a mutual fund account out of tradable ETFs instead of the share. Advantage . You don't have to stress because the ETF manager does all the trading within the ETF. When you buy, for example, a Cannabis ETF, you will own a broad base of the most popular cannabis shares instead of trying to choose the best yourself. There can be a management fee and ETFs are tradable like stocks and for many, you can buy sell options on the same ETFs. Personally, if the idea of trying to pick the right stocks seems daunting, ETFs could be the way to go. There are different kinds of ETFs. Some carry very speculative stocks. Some are 100 filled with hedged instruments for maximum yield and maximum risk. Some are focused on one sector. How to pick the best? What has been the track record of the ETF for the last 10 years? Is it in the top 20? What was its ROI ? What about liquidity? Will you be able to sell it quickly when comes the time?
How to build it. You will need to put on your telescopic lenses and ask yourself what industries will still be around in 20 years? And make your choices. Example of longterm industries.
Fertilizer companies 2. Retail chains 3. Energy as in fuel or electricity 4. High tech 5. Growing Industries that are taking off now example Cannabis, A.I., 6. Software and Security 7. Transport 8. Pharmaceuticals 9. Waste Management 10. Conglomerate
Now make our choices by criteria 1. Growing profitability 2. Growing eps 3. Growing dividends 4.can you buy sell options per company held
Purchasing the shares. Shares can be purchased in lots of 100. If your budget limits you then buy only 1 company per sector and buy the best that money can buy. If you can not buy 100 shares of Google then you try buying 10 shares or buy 1 call contract . Learn about call options 1st before you buy. Always choose an expiration date that is far away, as a leap contract.
Hedging Always a good idea to protect the value of your holdings.the With your mutual fund with every share you can write covered calls as a hedge which is explained all over youtube. You can buy puts which increase in value as a share falls. It has an expiration. Learn about puts via youtube.
You can write covered calls slightly OOTM that expire in 3 months. The income generated provides you with downward protection . Use the income to buy more shares to average out the price of your holdings. Learn about writing covered calls through youtube. Buying gold. No less than 10 % should be invested in the precious metal. .last year India, Russia, china all bought more gold than they ever did in previous years. Why did they do that? Since more and more countries are going in debt, there is concerns that currencies will lose values and so, countries with high debts and also companies who lent out money to countries are buying gold . Gold over the long run will go up as more countries opt becoming a gold backed security. Even central.banks are buying. Let's say that there is a crisis and gold jumps 5 fold. Lets say that in the same moment your fund which was worth 100 k loses 80% because of currency crash. Let's say you had invested 10% in gold or 10k. If your gold jumps to 50k Then your total portfolio would be 70k. Your total investment was 110k. Your loss would be less severe. What if gold jumps 20 times higher and your fund is totally wiped out. You would own gold whose worth would be 200 % more than your fund value was. Can there be a currency crash? Yes. Do we know when? No. That is why large countries including USA are increasing their gold reserves. Since gold will go up and since gold is rare, eventually countries with large debts will pay off all their debts with gold instead of paper.
Waiting. Once your choices are made know this. You will be receiving dividends for every stock . No need to time anything. Instruct your broker to re invest your money.
If you look at a typical chart say Proctor and a gamble. Where was it 20 years ago and where is it now. Or Microsoft? Apple? Great companies grow and prosper. They all will go through bumps but in the long run, your strategy should be buy hold and prosper. Over time you can increase stock choices or industries or decide to create a micro fund of ETFs within your own fund account.
Self education Chart reading is a skill that needs to be learned. Again. Youtube it.
Join an Investment club and learn from others
Final recommendation. Learn to control your emotions. Buy. Hold. Prosper
This post is meant as a beginner's guide . I am not a financial planner and I have no degree in it. Before beginning your personal fund plan, meet with your accountant or financial planner, share this microblog with him and adjust and add more criteria that suits your personality while maximizing returns and minimizing taxes.
As a DAO token holder, when I first heard that the DAO had been hacked I thought all the money was permanently gone. That was a bad feeling I felt not just for myself, but for the entire Ethereum community and the hope and promise of The DAO. When I heard there was a time lock, and soft and hard fork options to fix the problem, the pendulum swung the other way and I once again became overly confident in the tech, and falsely concluded there would be a painless 'fix.' However, thanks to the good work of Emin Gun Sirer, I realized just how many unexplored issues there actually were – technical, legal, social, governanace related, etc. I have posted his thoughts from his NY Meetup PPT below, and would encourage everyone to take a quick look them. We were talking about this in our Portland Ethereum meetup, and let's face it, mistakes were made by Slock.it, AND Solidity was not tested enough and ready for roll out, and we all made a mistake rushing ahead. We are all responsible for this mess. We all need to realize there are no good options here. But, if we can work together to find a distributed solution where we all share some of the pain, and come to an agreement collectively, that would be the least bad option. I first was attracted to the soft fork, but the more I learned about it, I realized it was temporary, would take extraordinary measures and cooperation from miners, which is not their original agreement and not what they signed up to do, and then it would only lock up the tokens, not recover them. Then the hacker joined the white hat draining of the DAO, which suddenly seemed like an endless loop, until we would further have to select white hats who would be allowed to transfer the tokens but nobody else would. It seemed to be a rabbit hole that became more temporary, and more convoluted, requiring an increasing number of actions that violated our core principles the further we pursued it. All of this is bad for the Ethereum Foundation and the future of the Ethereum. The idea of the soft fork quickly appeared a good temporary but bad intermediate and horrible long run option. I then felt that a hard fork was the only solution, but honestly that was strongly influenced by the idea that a hacker stealing $50m is bad short run, and it's bad long run, so the worst option. I have been involved with Ethereum for about a year, and must admit I did not come from the Bitcoin community, but from the currency mechanics and payments community, and was originally intrigued only by what might be possible using smart contracts, so that’s what I want to protect, and the real long run value for me. When I spoke with my technical friends who had come from the Bitcoin community, they really, really did not like the hard fork, and felt it would be better to let the hacker walk. I listened to them carefully, and changed my mind. I also realized that for most people in our community, either hard forking or letting the hacker walk was the worst option, with the other being the second worst option, and soft fork being the third worst option. From game theory and life, I have learned the longer this goes on, and the closer it gets to the time lock expiring, the higher probability for additional unexpected bad outcomes, unforeseen forks in the road, which I am sure the hacker is working furiously on. The quicker this is resolved, the better for everyone, maybe even the hacker. The soft fork should not lull us into complacency, but be a temporary measure of days and weeks, not longer. Ultimately, I realized the least bad option is to setup a binary outcome, where we agree to either pay a bounty to the hacker by a specific date, or if he is unreasonable, then go ahead and implement a hard fork. If it doesn't work, at least we tried, and I think the effort will count for something in the long run. As long as this decision happens before the time lock expires, the hacker knows a hard fork has been agreed to and is definitely coming, and the decision date is firm, the hacker's best outcome is to accept the bounty in exchange for releasing the rest of the ETH. Maybe the hacker would prefer to force the community into a hard fork due to antisocial or anti-Ethereum motives, but money is a powerful motivator. I know, people will not like negotiating or appeasing a hacker, but if we take responsibility collectively for this problem, our problem, that we all created, then this is the least bad solution, for the following reasons:
It avoids the worst (or second worst) option of a hard fork.
It avoids the second worst (or worst) option of the hacker walking away with $50m ETH.
It makes everyone pay a price, so avoids in some measure the moral dilemma problem.
It's the only negotiated solution, which can’t be understated how valuable and important that could be for our leaderless community.
It protects the Ethereum foundation and the miners from having to violate core principles to save slock.it's bad coding, or from being tempted to collude with the hacker.
Paying for bounties is part of the software ecosystem, and although the number is big in real terms, it's still just a number.
It solves the problem quickly, and as cleanly as possible. Again, there are no good options.
The key to negotiating is not focusing on what the hacker gets, which in this case will just make you frustrated and angry, but rather focus on what the community gets, the least bad option that maybe prevents the community from splitting into two camps. That alone is maybe the most important thing to me personally, and to others I know. Ethereum is still young, and as a community we have important challenges ahead; let’s put this behind us with minimal damage ASAP. That’s what taking responsibility collectively in practice really means. If you agree, then we simply need to set a price. I think I read someone else had proposed 5%, which is a relatively painless learning lesson for each of us individually, but a sizable and potentially life changing bounty for the hacker(s). Remember, it won't work unless the incentive to play nice is substantial. We have all had time to think about this and mull over the options, but now we need to find the will to come together and create a solution, the least bad solution. I say pay the bounty in exchange for returning the DAO tokens, kill the DAO 1.0, and be done with it. What say you? Gaming the DAO Emin Gün Sirer Department of Computer Science Cornell University Posted with permission. Thx Emin! DACs • Decentralized Autonomous Corporations/Orgs are incredibly powerful and promising • A computer program, with its own code and state, that can programmatically manage money flows • The entire behavior of the program is pre-ordained • Brand new era, with brand new functionality DAO Promise • Automate and eliminate the middlemen • Achieve far higher efficiencies o A hedge fund with 0% overhead? • Self-policing and/or self-arbitrating o Can’t eliminate the legal system, but can handle simple cases • Bring complete transparency to the operation of a company or trust o Insurance o Finance • Killer apps are yet to come... DAO Unknowns Is it actually possible to build secure, functional smart-contracts? • What about the fine print you see on regular contracts? • What’s in the fine print? • How to form the contract covenant The spirit of the agreement How to resolve disputes • How to modify the contract • How to terminate The DAO, as we will see, messed up almost all of these Enter The DAO • Usurped the phrase “The DAO” for a specific investment fund • Part kickstarter, part Andreesen-Horowitz o Built by Slock.It, a company originally intended to kickstart an IoT bike lock, but built a kickstarter instead • How it is supposed to work o We all buy into The DAO with ether o The DAO amasses a fund o Contractors come before The DAO with proposals o We all vote on the proposals o If we achieve a quorum, and there is support, proposals get funded o Proposals then return rewards, distributed back out The DAO Complications • Buying in • Voting • Exiting • Modifying the Contract • Payouts The DAO Buy-In • 27-day creation phase • Buy in with ether o 1.00 ether for 100 DAO Tokens for 14 days o +0.05 ether every day for 10 days o 1.50 ether for the last 3 days • Additional gains accumulate in “extraBalance” • Why is there a rising scale? • Do “viral features” have any place in sound investments? The DAO Proposals • Anyone can submit a proposal • Curators pick proposals o Requires a 5 out of 11 signature o 11 members of the Ethereum community, unrelated to SlockIt • The curators’ job description is unclear o Is it to just check identity? o Is it to “protect the DAO”? o The curators are not paid, but they are under substantial legal risk The Voting • Any DAO token holder can vote on a proposal • A proposal is funded if o There is a quorum (sufficient votes) o The majority of the quorum is in favor (voted YES) • Required quorum sizes vary by size of contract o Largest required quorum is 53% • Votes are weighted by a voter’s holdings • But a voter commits The DAO funds (i.e other people’s money) to proposals • Someone who voted cannot exit The DAO The Exit • Cannot just take money out of The DAO o Why? Because of viral/social reasons • To exit, you need to follow a 62-step process: o Initiate a proposal to make yourself a curator o Anyone can vote YES or NO on this proposal o It will likely fail o You can call splitDAO on a failed proposal o A new child-DAO will be created where you are the curator o You can now propose to withdraw funds, approve it as curator, vote on it, and then take the ether back out • Takes 27+7 days • Takes 27 + 7 days Upgrades and Rewards • There is no provision to modify The DAO in place o o No kill switch o No security upgrades o Cannot preserve the full state and change code • The extraBalances can only be spent after The DAO has spent an equivalent amount on proposals • Unclear about the intended behavior with regard to • rewards o Inherited into childDAO’s, but not into grandchildren The DAO Token Markets • DAO tokens can be bought and sold on open markets • Their price will reflect the expected value of future ether flows • Until The DAO funds a proposal, 1 token = 0.01 eth • But in USD terms, the price will fluctuate • The price difference will reflect the uncertainty in the • value of 1 eth, 34 days from now o o E.g. 1 eth = $15 o But 1 dao = $13 • This is a normal consequence of decisions in DAO design Taking Stock • Why was The DAO designed the way it was? o To avoid legal meddling? o To help fund illegal operations? o To create Ponzis? o “Sunny-day thinking” • Aspirational system design • Does The DAO idea even make sense? The Questions • Are the crowds even able to pick winning strategies? o Do fund managers really bring 0 value to the world? • Will we ever reach the quorums required? o Most token holders are passive o The risks of “going with the crowd” without voting • Are the mechanisms in The DAO suited for the tasks that need to be carried out? The Questions • Are the crowds even able to pick winning strategies? o Do fund managers really bring 0 value to the world? • Will we ever reach the quorums required? o Most token holders are passive o The risks of “going with the crowd” without voting • Are the mechanisms in The DAO suited for the tasks that need to be carried out? NO! The Call for a Moratorium • My colleagues and I were alarmed that The DAO managed to collect 11M eth, $220M USD • The internal mechanisms were broken • We rushed a manuscript that detailed the failures, called for a moratorium • The DAO community was convinced and wanted to upgrade The DAO The Hack • While we were in a holding pattern, someone emptied out a substantial fraction of The DAO • The hacker took $50+M worth of ether into a child-DAO called the Dark-DAO • Hacker took advantage of multiple attack vectors o A reentrancy bug in the DAO code o Additional tricks to avoid getting his balance reset o He also voted YES on every other split proposal, to reserve the right to pursue everyone who wanted to split • Hide your kids, hide your pets, there is no safe place The Hack Technicalities What If The DAO Had Not Been Hacked • It still would have been hacked • It was and is deeply broken • The design of voting mechanisms that capture the will of the crowds is a difficult nuanced task • Everybody on the Internet is an expert at three things: o Economics o Game theory o Distributed Systems • The DAO team, and others like it, full of hubris and the Dunning-Kruger effect, are easy targets Guiding Principle • DAO-1.0 is irredeemably broken, but let’s examine how one might build DAO-2.0 in light of what we have learned • The DAO voting mechanisms have to be truthful and strategy-proof o Truthful: token holders vote their true opinion o Strategy-proof: token holders fare best by voting their true opinion • The current mechanisms are broken in multiple ways Affirmative Bias • Every voter has a unique valuation for every proposal o o “Prop #37 will bring in 3% yearly over 3 years” o “Prop #37 will be a net loss, that team can’t pull it off” o “Prop #37 will take us to the moon!” • Ideally, you want everyone to vote their conscience o Positive Expected Value: +EV o Negative Expected Value: -EV • +EV folks are incentivized to vote early • Not so for -EV!!! o Negative votes lock people in • Early votes will be positive, feedback loops work against -EV folks Stalking • A stalker can vote YES on a split proposal and follow a splitter into the child-DAO • Stalker is not going to be the curator, but he can be the dominant (53%) shareholder in the child • Stalker can keep the splitter from taking out his funds • Stalker can then blackmail the splitter • If the splitter splits again, he loses his rewards from the original DAO • SlockIt claimed that the splitter could counterattack, but do you want to play corewars? Ambush • A -EV voter has a disincentive to vote, especially if his vote is not needed • So a big bloc of YES votes can come in at the last possible minute to pass a proposal that initially looked unpassable • This commits other people’s funds to a proposal, even though large fraction is against that proposal • Possible remedy: add time to the clock when the vote outcome changes Token Raid • An attacker can move the price of DAO tokens by o Incentivize people not to split but to sell their tokens o Keep the public from snapping up tokens • She can do this by o Creating social media panic, via stalker attack o Passing a -EV proposal, via ambush attack • The price of tokens will drop, she can short on the way down, and snap up when the attack is over • This is a legitimate manipulation strategy, often seen with penny stocks, except the mechanisms make it easy extraBalance Raid • Attacker forces people to split from The DAO, which leaves behind the extraBalance amount • Currently at 275,000 ether • DAO tokens should trade at 1.02 • If the attacker scares away 95% of investors, DAO will trade at 2.00 Majority Takeover • SlockIt identified and worried about a majority takeover • A voting bloc of 53+% can fund 100% to a 1 proposal • Curators are expected to guard against this o This scenario is specifically cited • But a voting bloc of 53+% can fund 10 proposals of 10% • No principled way to even define the attack, let alone defend against it o DAO defenseless against Soros-style attacks Reward Dilution • The DAO issues reward tokens as proposals pay back into the DAO • Akin to dividends • But the reward token math does not follow any accounting principle • In particular, reward tokens can be diluted even after someone has split off from the DAO Risk-Free Voting • One of the many “race conditions” • Investor votes YES on a proposal, committing funds • Then invokes “unblockMe” before the proposal is executed, and splits off • This allows her to commit the DAO to a proposal without committing her own funds • An attack amplification vector Concurrent Proposal Trap • Voting on any proposal commits the voter until the end of the voting period • Attacker poses a proposal o We have seen “do you believe in God?” for 0 ether • Everyone who votes is banned from splitting until the end of the voting period • Attack amplification vector: push an incendiary proposal with a long voting period, then launch short-fuse attack Independence Assumption • All of the discussion until now assumes that all proposals are independent • Yet in real life, proposals are linked o Funding a cluster of proposals might yield much higher returns than funding them individually • Not an attack, but undesirable • This can yield strategic behavior (i.e. people voting down worthy proposals) even when everyone means well What Have We Learned • The DAO is a fantastic experiment • The experiment has been a huge success • Enormous demand for smart contracts • The Ethereum core has some (well-contained) issues that need to be fixed o The design of a secure smart-contract language is very different from the design of a web-programming language • The DAO is a hot mess Methodological Issues • Why was The DAO designed the way it was? o To avoid legal meddling? o To help fund illegal operations? o To create Ponzis? • Carefully thought-out viral features • Common behaviors were purposefully made difficult • “Sunny-day thinking,” aspirational ideas about best case behaviors • Irresponsible design, no safety mechanisms • Flawed methodology Takeaways • Can we build a $1.2B ecosystem, while spending $0 on basic research and science of smart contracts? • How do we build and vet trustworthy smart contracts? IC3, Initiative on Cryptocurrencies and Smart Contracts http://initc3.org
Binary option trading is a relatively new development in the retail trading world. Five years ago, no one had even heard of it. Since 2012 however, the popularity of binary options surged as a result of aggressive marketing by binary option brokers, and the promotion of binary trading software by the trading "gurus". Right now, interest on the topic continues to grow at record levels. Given its current popularity, binary options are likely to be the first "asset" that beginners start trading with. However, just because something is new and popular... doesn't mean it's worth doing. (Who remembers the fuss over bitcoin trading?) Opportunities come and go all the time in the retail trading space... and it's important for us to tell the difference between sustainable business models and short-lived fads. So let's take a moment to examine binary options, and see if it's something we should be paying attention to. But before we do that, let's first take a quick look at traditional (i.e. vanilla) option contracts. VANILLA FOREX OPTIONS Traditional option contracts were initially introduced for people to hedge against future uncertainty. For example, a German company selling cars in the United States would worry about high EUUSD exchange rates in the future. Why? Because then they would be getting revenue in a weaker currency (USD) while having to pay expenses in a stronger currency (Euro) in their home country. This results in a significantly lower net profit, or even worse, a net loss. Forex option contracts were thus introduced to solve this problem, as any losses stemming from currency fluctuations could be offset by profits made from buying options contracts. To continue with the example, the German car company may choose to buy EUUSD call options, which would profit from an increasing EUUSD rate. Thus, any operational losses in the future (due to a high EUUSD rate) can be offset by the profits gained from those option contracts. This is, and continues to be, the main purpose of Forex option contracts. Now of course, in order for the German company to buy call options, someone has to be willing to sell it to them. Perhaps, a financial institution in France does not believe that the EUUSD will continue to strengthen over the next 12 months, and so is willing sell call options to the German company. (This, by the way, is how financial markets work. Participants have varying views of the future, and so trade against each other in line with their own expectations.) In this transaction, the German company pays a fee (in buying call options) to protect against future currency risk, while the financial institution gets paid to take on that risk. To summarize:
- The German car company looks to limit future currency risk by buying call options - The financial institution (or speculator) collects a fee from selling call options and assumes the currency risk
- Option buyers pay a fixed fee for the potential of a very large profit - Option sellers collect a fixed fee for the potential of a very large loss
FOREX BINARY OPTIONS In a vanilla option trade, the buyer does not know in advance the amount of money he stands to win. Similarly, the seller does not know in advance the amount of money he stands to lose. The amount is ultimately determined by how far the market price moves. In a binary option trade however, the trader will know in advance the exact amount he stands to win or lose, before taking the trade. Binary options are named as such because there are exactly only two possible outcomes: you either win a fixed amount, or lose a fixed amount. Binary options ask a simple question: will the price be above [price level] at [time]? For example: will the EUUSD be above 1.3000 at 4.30pm? If you think so, you buy the binary option. If you don't, you sell. That's pretty much all there is to binary options. UPSIDE OF BINARY OPTIONS As you can see, binary option trading can be simply explained and is easily understood. This is a big benefit to new traders, as they can quickly learn the basic mechanics and start trading right away. A related benefit of this, is having to make fewer trading decisions. In spot forex trading, for example, one has to decide:
- Where and when to enter the market - The appropriate trading lot size to use - How to manage the trade - Where and when to close the trade
In binary option trading however, there are only 2 decisions to make:
- Whether the market price will be above a certain price level at a certain time - How much to risk on the trade
As such, binary options offer a much simpler trading process. You don’t have to think about (or calculate) leverage and margin at all. And, since the potential loss on each trade is fixed, you will never get a margin call. Lastly, options offer traders the unique ability to make money by predicting where prices will NOT go. (This goes for all types of options, not just binary options.) This can’t be done in the spot Forex market. So… does binary option trading sound good? Sure it does! Well... at first glance, anyway. Now let’s take a look at the downsides of binary option trading. These are the things your binary option broker won’t tell you. DOWNSIDE OF BINARY OPTIONS TRADING The most obvious downside of binary option trading is the lack of flexibility. For example, if the market price moves even one pip against you upon option expiry, you’ll lose your entire stake. You can’t choose to defer your trade exit under any circumstances. Also, with some binary option brokers, you can’t change your mind and close or modify a trade before expiry. In this sense, a binary option trade is typically an all-or-nothing proposition. These points on inflexibility can be summarized by the following comment (found in the Forex Factory forums): "I once traded a forex news item where I closed a wrong call with a 20 pips loss, and ended up making 350 pips on the reverse trade, giving me a net profit of 330 pips. This scenario cannot be replicated in binary options.” Lastly, the value of a binary option is fixed between 0 and 100, with the broker charging a bid-ask spread and often, a commission as well. The implication of these factors is that the average loss per trade will always be larger than the average profit. This is a structural (i.e. inherent) characteristic of the binary option game. Thus, in order to break even, a binary option trader would have to win at least 55% of the time. Compare this to spot Forex trading, where a trader can be profitable by winning just 40% (or less) of the time. MY PERSONAL OPINION On paper, binary options are an opportunity seeker’s wet dream. The promise of regular fixed payouts and a focus on short-term profits are exactly the characteristics that appeal to people looking for a quick buck. Unfortunately for them, what feels good in trading is typically a losing approach. You see... the only way to keep making money with binary options is to accurately predict market prices at least 55% of the time, AND get the timing right. This is an exceptionally difficult feat to accomplish. In other words, you can correctly predict future market prices AND STILL LOSE because you got the timing wrong by a few minutes. HOWEVER All this said, there may be a genuine opportunity here… and that is to be a seller of binary options. Why? Because it’s a lot easier to estimate where prices will 'not go', rather than trying to predict where it will. Whenever the market settles at a particular price level, it is not settling at a dozen other price levels. Does this make sense? This root concept may then be expanded to form a complete binary option trading strategy that you can use. Note however, that this is a benefit available to all types of options, not just binary options. SO, ARE BINARY OPTIONS JUST A FAD? One reservation I have about binary options is that they do not serve a major commercial purpose. Unlike the spot and derivatives markets that serve to benefit society, binary options exist solely for speculation purposes. In other words, it can be reasonably argued that binary option trading is not much different than a casino game. Without a commercial purpose, binary options could be banned tomorrow and not impact anyone else other than the brokers and speculators. Compare this to spot Forex trading, or Forex futures trading, upon which global commerce relies. These markets are unlikely to be closed or banned, because they serve a useful purpose beyond speculation. As a retail trader for the past 10 years, I’ve seen all sorts of gimmicks and fads come and go. Some years ago, expert advisors were the hot topic. Slowly but surely, people are now gradually realizing that "automated trading" isn't as amazing as it's cracked up to be. Will binary options follow suit? My opinion is yes, I think they will. Binary options do not provide any major benefit to serious traders, and I think that once the opportunity seekers get bored or lose enough money, they’ll lose interest and turn their attention to the next shiny object. WHAT DO YOU THINK? So... do you particularly agree or disagree with any of the points I’ve mentioned? Did I miss mentioning any important points? Let me know what you think! The original article is published here
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You handle risk and pressure well, and you don't let your emotions guide your decision-making. Professional Poker and TCG players often develop this skillset.
You have experience working with stocks, bonds, derivatives, foreign exchange, or other financial instruments. If you have a strong mathematical background, that would also likely fulfill this.
You can invest significant capital into trading while remaining financially secure if it all suddenly vanishes.
You are capable of constantly monitoring a situation, waking up in the middle of the night if an alarm goes off, etc. It requires serious dedication.
You are good at keeping up with news, understanding market psychology, and "feeling" shifts in attitude and perception among other market participants.
Of those, I'd be most cautious if you don't meet no. 3. Going bust is a real possibility--day-trading a volatile commodity is inherently extremely high-risk. Nos. 2 and 4 are the easiest to learn or force through routine. No. 1 requires a person who approaches things in an emotionally detached manner. No. 5 is something that comes with investing enough time.
Second question: I'm answering this after that big block of text because this answer will come off like a get-rich-quick scheme. Yes, you can hop into it very quickly, and you can start making very high profits very quickly. I put in a small initial investment to test the waters, and made 10% on it in a few days. If you have the right skillset, composure, and resources, yes. It is a potentially very lucrative and exciting stay-at-home job. It is not for everyone, though.
Regardless, that's all a little irrelevant. We're not playing the house, and we're not flipping coins. We're playing other investors, and we're making actual decisions. You keep saying things like "98% lose money" and "Go onto any FOREX forum, and you will see from the users posts that they pretty much all lose money" but you don't back it up. Cool, yeah, it's a zero-sum game with a rake: a little more than half of the players will lose. That's expected. They'll probably complain about it, too, huh?
I only have and need one: I have chosen not to disclose my personal valuation for privacy reasons. Same reason I've had all along. I instead publicly disclose my trades, as they happen, on my website. The posts are timestamped, and the ones that are the start of a position contain the price I entered at. Go check the posts, then go check the charts, then go check my archive. But feel free to continue to arbitrarily call my credibility into question--that makes your argument better!
First, our argument so far has had nothing to do with risk. Second, I told you I am leveraged 2.5:1, two posts ago. Third, you realize I'm trading Bitcoin, not ForEx, correct? And that no one in their right mind would offer 100:1 leverage on Bitcoin due to its volatility?
A year ago I was finishing up college and extricating myself from the TCG business I'd co-founded. I took very little in take-home pay over that period, but kept part ownership of the continuing business. Money isn't just about the number on your bank account--it's also about residual future income.
Coins that offer something different or that have a strong community to them can be valuable prospects.
LTC is the first-mover scrypt coin - DOGE has the most non-techies interested in its success and is spreading quickly as a result - NXT is a cool generation two coin that has a lot of features BTC doesn't have - VTC is ASIC-resistant
Nope. That's a false equivalence. It is possible that 4.95% of the market loses. It is not feasible, that, say, 99% of people with blue eyes lose. What, exactly, in empirical terms, is the difference between retail investors and hedge/institutions that causes this INCREDIBLE disparity? Would you care to respond to my above empirical argument that demonstrates that a zero-decision system is flipping a losing coin? Do you consider it feasible for 99% of people playing a 45-55 game to lose?
Not really yet, but there will be more prominent ones soon. I hear about a new one pretty regularly, it seems, but nothing that seems truly legitimate has come out. I'm certainly excited for them, though.
Eventually, once Mr. Lawsky and co. get things sorted out, I'm certain we'll see a big-name investment bank start offering them.
I think Mage needs basic, class-level tuning. I'm not sure what needs to be done exactly, but I don't like what the Mage class power does to gameplay. I've thought some about how different it would be if it could only hit minions, and I'd want to know if Blizzard had tried that out. The Mage power is too versatile, and over the long-term I think it will prove to be problematic.
I'm currently short, but I don't expect to be so for a lot longer. I don't think we'll get past 550. I also don't expect this drop to hold on for a really long time.
I haven't seen a good, substantive rationale for what the MtGox situation really has to do with Bitcoin price. Yes, it looks bad, it certainly doesn't help with our legitimacy, but is it really worth the incredible price declines we continue to see? I don't think so. I think we are seeing these impressive declines because the price on MtGox (which is a reflection of trust in MtGox relative to Bitcoin price, not just Bitcoin price) has been declining heavily. I don't expect it to continue forever, especially not with things like the Winkdex and the accompanying ETF launching.
MtGox is basically dead to me, for now at least. The sooner everyone stops paying attention to it, the sooner we can all get back on track, which I, for one, will be quite happy about.
It can be. I don't want the developers metaphorically over my shoulder outlawing strategies, but I don't mind if the strategies that are "less fun" for your opponent (Draw/Go, Mill, or Hard Combo from MTG, for example) are also less powerful. Most players prefer a game where the best decks are also among the most fun, because it means that they are playing against fun decks more often. Clearly the 2-cost 3/3 will be played most often. If you fix this by making both 2-cost guys 2/2s or 3/3s, or by making one a 2/3 and the other a 3/2, then you've done something--but it's not that interesting. If you instead make the 2-cost 2/2 have text that says "While you control the 3-cost 3/3, this gets +2/+2" and you give the 3 cost 3/3 text that says "While you control the 2-cost 2/2, it has Taunt" you now have more complex cards that reward players for doing something other than just playing the best stand-alone card.
This is obviously a very simplistic example, but I hope it makes the point. Games are more fun when you give players more relevant choices: buffing and nerfing cards tends not to do that as well as promoting synergies does.
You might need to rephrase your question for me to understand what you're asking. If you're asking why a Bitcoin has value, the answer is the same as any other good: because someone is willing to pay it.
If you're asking why someone is willing to pay that amount, my answer would be utility.
If I'm not going to be able to check my computer for a day or two, or I'm uncertain of what's going to happen the next few days, I do use the liquidity swap function. It's actually very profitable, relative to traditional investments. And you're right, it is low-risk. I'm a fan. Good job selecting it if you were intimidated--that's a good place to start. As far as actually starting trading, do science. Start with a hypothesis. If you were up at 5 AM today when MtGox published their announcement, a good hypothesis might have been something like: "This announcement is going to be a blow to their credibility, and might panic the markets. We'll probably drop by some amount as a result." Invest based on it, figure out around what price you want to take profits, and at what price you'll cut your losses and get out. Stick to those determinations unless something substantive changes. The time you tell yourself you can afford to not close your position because it will "rebound" back to where you want is also the time you lose your shirt.
Bitcoin isn't anonymous. That's actually a common misconception. It's actually pseudonymous, like Reddit. You end up with an online identity--a wallet address--that you use with Bitcoin.
If I walk up to you on a street corner and buy Bitcoin with cash, then I'm pretty much anonymous. If I buy it from a large institution like Coinbase or some other company, they will have records of the address my Bitcoin was bought for. As a result, you can trace them down, generally speaking.
The biggest hurdle for Bitcoin to overcome is governments. Governments have a variety of reasons not to want an alternative currency. We seem to have done pretty well on that front here in the US, but for other countries (China) that is not the case. Past that, the other major hurdle is something I consider an inevitability: consumer adoption. Business adoption has begun in earnest, consumer adoption hasn't. It will when enough businesses take Bitcoin to give it sufficient utility for the average customer.
I currently have no other holdings, but I've held DOGE and LTC at points and am considering VTC and NXT. DOGE is probably my favorite, because if the community can keep this up for a little longer it will snowball into amaze.
I do use relatively strict stop losses, but they're not stop loss orders. My conditions usually aren't just the price hitting a certain point, but instead it sustaining for a brief period, or hitting it with a certain volume, or with a certain amount of resistance to retreat. I don't want my stop loss to be triggered by some idiot who dumps 300 BTC and temporarily drops the price 15, but only ends up really dropping it 3. I am very strict with myself about this, though, generally speaking--if I can't trust promises I make to myself, what good am I?
100% of funds in every trade, so long as all funds are easily moved into the position. Common exceptions are lack of liquidity and funds being on other exchanges. My reasoning for being all-in all-the-time is that it's a profit-maximizing move. It is also risk-maximizing. My risk tolerance is infinite; most people's isn't. Only ever one. Generally BTC if I'm long, dollar if I'm short. I prefer to double-dip, as otherwise it would be in contradiction to the 100% plan. I use everything I have for trading. Again, profit-maximization, infinite risk tolerance.
I decide a closing price when I'm near either my stop loss or my profit aim. I place a limit order or multiple limit orders wherever I need to. I avoid market orders whenever possible. Enough is when I hit my goals or my loss tolerance. I decide these at the start, but I frequently re-evaluate them as news and market conditions develop.
I would suggest just running around shouting "You get to be your own bank" is probably the best way.
In all seriousness, though--we don't need to try. It's going to happen on its own from now on, as the news media slowly starts to pick up the story. People will start appearing on TV talking about it with more and more frequency. Things like the Dogelympic teams are great PR and help boost it up, as well, of course, but in general it's just going to follow the adoption curve of every other technology.
If it picks up in a few developing nations that have stable internet, it will be a massive revolution for them. Self-banking can do a huge amount of good for an economy like theirs. We might see reports on that. If a major newspaper decides to run a permanent paywall like what the Sun-Times tested recently, that could be big as well. The slow PR from tipping on Reddit is another way, to be honest. Every bit helps, but the cryptocurrency community is now large enough that we're going to do a significant amount of organic, word-of-mouth style growth.
Having a currency be tracked has negatives and positives, but it's overwhelmingly positive for the average consumer. Because it's tracked, you don't need to pay someone to move your money for you. There also are no chargebacks, which means merchants aren't getting scammed and passing those costs onto consumers. Theft costs everyone money. It's also very fast--transactions confirm in just 10 minutes, regardless of size or where it's going. Transferring dollars from here to China is very difficult--transferring Bitcoin? Just as easy as from anywhere else to anywhere.
MtGox (which originally stood for Magic the Gathering Online eXchange) was the first prominent Bitcoin exchange. They've been going through some rather rough times lately, some of which I was an early cataloguer of here. In short, everyone is freaking out because the exchange may be insolvent. It's not really a big deal to Bitcoin as a whole, but it's certainly an obvious blow to credibility. In my view, people are primarily upset because MtGox has been a part of Bitcoin for a very long time, and it can be hard to let go of what we're used to. I expect that they will either fix the issues or will go out of business officially very soon.
Unless my positions are on different exchanges or in different coins, they're all always 100% of what I'll put into that trade at entrance and exit. As a result, I end up with a binary choice: stay or reduce/close. I very rarely reduce position size, nearly always preferring to just end the position instead.
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De cookie-instellingen op deze website zijn ingesteld op 'toestaan cookies "om u de beste surfervaring mogelijk. Als u doorgaat met deze website te gebruiken zonder het wijzigen van uw cookie-instellingen of u klikt op "Accepteren" hieronder dan bent u akkoord met deze instellingen. Binary options hedging strategy can be used in any financial market unlimitedly. You can apply it to commodities binary options trading, Forex currency binary options trading, cryptocurrencies binary options trading, etc. However, currency as one of the most heavily traded assets is commonly subjected to hedging. Currency pairs such as EUR/USD ... Options Trading Binary Options Wednesday, 21 March 2012. Choosing Appropriate Currency Options Hedging Strategy to Manage Risk Currency options are derivative instruments which give the trader an option to purchase but not the obligation to perform a particular transaction in the fundamental currency pair. These options give the trader the flexibility to perform settlement of option or not ... Hedging currency risk is a useful tool for any savvy investor that does business internationally and wants to mitigate the risk associated with the Forex currency exchange rate fluctuations. In this currency hedging guide we’re going to outline a few standard and out of the box currency risk hedging strategies.. If this is your first time on our website, our team at Trading Strategy Guides ... Hedging has been used as a general trading strategy but is relatively new to binary options trading which introduced to the markets a few years ago. Hedging strategies quickly gained momentum for the reason that it is easy to understand and implement. One of the major features of hedging is their ability to extract the maximum benefits from the fundamental structure of binary options while ... The similar concept applies in the options trading market, too. With the Binary Options Hedging Strategy, you are to execute both put and call options on the same asset, at the same time. This is mostly used in volatile markets, sensitive to the surrounding and easily affected by the accompanying events. For these reasons the binary option hedging strategy with call and put options is a good method of minimizing the risks in a fast paced market. Since the binary trading has expiry times that are hourly or daily, these hedging strategies are easier to understand comparing to other types of strategies which are applied in other options tradings. Advanced Hedging Binary Options Strategy. The Advanced Hedging Strategy is another binary trading strategy that enables the traders to make slow but safe profit by giving them the chance to either enlarge their profits, or reduce the loss by opting for purchasing another Call or Put option in the opposite direction. In this money management technique, the percentage of loss is reduced to a ... Trading Binary Options with Currency Pairs Correlation. Correlation is a statistical measure of the relationship between any two assets (currency pairs, commodities, stocks, etc.). The correlation between any two currency pairs in a Forex market can be either positive or negative. If two currency… Trading Binary Options Using FOMC Rate Decisions. The Federal Open Market Committee ... Hedging can be a powerful strategy for trading binary options. There are numerous creative ways you can reduce the risk of your trades and maximize your profits. If you are new to hedging, look up different hedging ideas online, open up your charts, and start testing the strategies you find. For some, hedging only complicates trading, but for risk averse personalities, hedging can make trading ...
BINARY OPTION HEDGING! Secret strategy to earn money.
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