Month: March 2021

Looking to the future

| roger nunn

For about a week I have been trading futures, based on the rise and fall of bitcoin relative to the US $.

I have been using very small amounts of money with only 10 X leverage. This is because leveraging multiplies losses as well as gains. I put in stop-losses that sell your holdings automatically if the price starts to drop.

It sounds as though it should be a winner and seems to be for the professional traders.

I found that for the amount I was willing to risk, the fluctuations minute by minute were enough to very quickly move the price to my stop-loss level. This easily limited my losses and I managed to make a few gains. However I had to pay fees for every trade and I found that I was losing overall.

This last week saw an end or at least a break in the bull run so I couldn’t rely on a steadily increasing bitcoin to ensure profitable trades.

So I lost a bit but now I feel that I understand what it means to short or long a future contract so I consider the loss to be acceptable.

In the end futures trading can only be a form of gambling, we can’t know what will happen in the future.

It is exciting when you make a gain.

What are Bitcoin futures?

| roger nunn

As part of my ongoing attempts to understand the world of crypto I have been researching the idea of futures. As far as I know, it is impossible to predict what is going to happen in the future. However, I have been following a number of youtubers who consistently make profit on trading in futures.

So how can it be? Surely buying and selling in the future is either guesswork or just gambling, neither of which seems to me to be a good long term strategy.

This only scratches the surface so don’t be surprised if I miss out important parts of the action.

I have found out that I can use “leverage” to allow me to make or lose multiples of the money that I put into a cryptocurrency. A base idea is that I have to deposit enough money to cover any possible losses and then I can buy a contract that takes the change in the value (in US$) of the currency and multiplies it by the leverage factor. This allows me to make very big gains compared to the actual change in the value of the underlying asset.

I don’t like the idea that the reverse is also true as my losses are also multiplied.

The way the you make money is by allowing the multiplier to act when the price goes up and by selling quickly if the price drops. Luckily the mechanics of it is taken care of by the software on the trading site. This is called a long contract, with the reverse action being called shorting.

I have been testing out the action and so far have not managed break even. This is because there are always charges to be met, so you have to make big gains to cover the costs as well as the loss making trades.

I have to say that it feels like gambling to me, and is very time-consuming.

The ever expanding world of crypto

| roger nunn

I find that I only really understand something when I do it myself. This applies to all new things in life but at the moment I’m still trying to get my head around the constant development of crypto.

I have been trading cryptocurrencies, trying to get the feel of buying low and selling on the way up. Everything is converted to equivalent values in US $, making it easy to see when the value has risen. However, this ignores the problem of fluctuating value of the $, so it would be best to find something else to use as a baseline.

There is nothing that doesn’t fluctuate in value, so I just stick to the $, this is best until bitcoin stabilises, probably sometime in 2023.

My newest experiment is in looking at NFTs. Non Fungible Token. As I see it, the difference between an NFT and a Bitcoin is that each NFT is numbered and unique while bitcoin is seen as more generic. You can own (control) a bitcoin, but no one really cares which one it is.

To try to get my head around NFTs I decided to create a work of art and put it up for sale as an NFT. NFTs are built on the etherium blockchain so I had to work from an etherium wallet. I used Metamask.

I had to save the artwork (a sketch of a new type of car) onto the blockchain and put it up for sale on an online market place. It sounds easy and is fairly straightforward. However, nothing on the public blocckchain is free, so you have to pay (in gas, the payment system in etherium) for it. It is worth choosing the time of day as the price in gas depends on how busy the blockchain is at any moment.

Thats’s my first experience of NFTs, I will now experiment with making more and maybe selling some,