Buying Into Bitcoins

With the 21st century demand for quick and big profits, one of the most controversial new investment vehicles has been Bitcoins, the virtual currency. It's gained controversy partly because of its volatility, partly through the instability of Bitcoin exchanges and partly because their in-traceability meant they were a favored payment method for criminals.

Things are changing and after a particularly volatile spell in which one of the main exchanges, MtGox, filed for bankruptcy, the currency seems to have settled into a more stable pattern allowing investors to be able to take a measured view of whether to risk their money in a currency that technically doesn't exist.

Volatility

Although Bitcoins are becoming increasingly popular, the market is still quite small, meaning that good and bad news can have a disproportionate effect on the price. The long term outlook for Bitcoins is potentially good, meaning that the upside on price is stronger than the potential for a decline over the long term. Most brokers recommend that you consider Bitcoin a medium to long term investment because of its volatility. Think of it in terms of real estate. No one buys and sells houses many times a day and there can be significant drops in property prices but the long term trend for property prices is usually up. The same can be said for Bitcoins. Whilst there is a significant daily trade in the currency, many Bitcoins are held as investments as analysts believe that it's likely the price of Bitcoins will rise long term because they are becoming more widely accepted.

Influencers

As with all financial instruments, prices are influenced by supply and demand. Bitcoins are no different but what has caused big fluctuations in price has been the unusual nature of the news that influenced the supply and demand:

• The bankruptcy of MtGox, one of the biggest Bitcoin exchanges

• The closing down of Silk Road which allegedly accepted Bitcoins for drug trading

• The disclosure by the US government that, despite the negative uses of Bitcoins, they believed that the currency had a future

• The media has also stirred up interest by reporting on milestones in the currency's rise and fall, trumpeting the rise to over $1000 and its subsequent plummet on bad publicity.

Generally the advice on investing in Bitcoins is to sit and watch the market for a couple of weeks to get an idea of how the currency trades, its volatility and trends. It's difficult to find rumor that hasn't instantly affected the value, so many suggest investing a small amount and simply watching for opportunities, a little like setting take profit levels with shares and Forex, you can do the same on Bitcoins; it's just a bit longer process and a little less automated.

Just like with any investment, the value can fall, and events like the collapse of MtGox and the closing down of Silk Road, negatively affected Bitcoins; not just because demand was reduced but also because Bitcoins were falsely linked with the companies by urban myth. The market seems to be becoming more regular, but not necessarily regulated, as more exchanges come online. Some of the exchanges will go the same way as MtGox but others will consolidate and become stronger and more reliable. No doubt official regulation will be applied to Bitcoins in due course at which time the volatility is likely to reduce.

Bitcoins represent an exciting and potentially lucrative medium to long term investment vehicle. Exciting because it hasn't yet been accepted into the mainstream of currencies or investment vehicles. One thing investors like about Bitcoins is their conviction to prospects as was in gold

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How Much Money Do You Really Need to Start E-Mini Trading?

To read some of the success stories I see being bandied about you should be able to start futures trading with $1,000 and have it transformed within a year to a sum topping six figures. I certainly am not saying that this feat is impossible, but I have never seen it done and have never met another trader who has seen it done. As a trader who is relatively new to the markets, the chances of taking a highly leveraged account that is undercapitalized and expecting anything short of a trading belly flop is delusional thinking.

I have written on this topic before and have since changed my mind on some of the ideas I previously presented. With added volatility, at least added volatility in a scalping sense, it has become difficult to trade with tight stops and widening stops ends up violating every money management rule that has ever been written. With a $3,000 account you could well end up risking 10% of your account on a spike or trading stops that exceed your trading plan's "at risk capital per trade" rules. I recommend risking 3% and no more than 5% on any single trade. In a highly random market it's hard to stay anywhere near those parameters with a small sized account. If you set your stops at the appropriate levels you have too much money at risk, and if you decide to go the "tight stop" route you can count on becoming the "stop-out king."

So, how much money is right to start trading?

I used to feel confident recommending $5000 to start an account and restrict your trading to the $5/tick e-mini contracts, specifically, the NQ and the YM. After some time has passed, I believe a more appropriate starting trading balance should be $10,000. The traders who seem to have the least worries about profit and loss tend to succeed at a higher rate than individuals in small account, and the added cushion in the trading account seems take the pressure off. Trading an undercapitalized account puts tremendous pressure on the trader to win. Pressure is something you don't need in trading.

Further, with a small account many novice traders aren't able to distinguish a day where profit may be hard to come by versus a day when the market is moving nicely and is reasonably predictable. A couple of poorly chosen trades in a tough market can quickly drain a small account and discourage a new trader.

In summary, you have the best chance of succeeding with an account of proper size which is, in my estimation, best pegged at $10,000. This is not to say that a trader with an account half that size can't trade effectively, but rather the added cushion tends to de-pressurize the early stages of trading long enough where some confidence can develop. Extremely small accounts are tough to trade successfully, and should be avoided. Just because the brokerage will let you open an account with $1000 doesn't mean you are on your way to a highly successful trading career, just the opposite, really.

Would you like to start earning 300% every week? So would I... yet you see this type of hype on many sites these days. I don't promise astronomical returns, but 25 years of Wall Street trading experience has helped churn out solid e-mini traders for 5 years. Come see me trade. Real trading doesn't lie.

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