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Cryptocurrency Trading Guide: "Trading the Decentralization of the Financial System"

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-----WHAT IS ABOUT
A complete cryptocurrency trading guide for beginners and advanced cryptocurrency traders.

-----PREFACE
"A decade ago, the issue, exchange, and use of digital money without the intervention of a centralized bank was a dream for the financial industry. That dream came true faster than anyone could have predicted. The global penetration of the Internet works as an accelerator to the acceptance of every new technology that aims to serve the emerging needs of people. This is the ultimate goal of every technology, to better meet the needs of people, and nothing else matters."

-------TABLE OF CONTENTS
CHAPTER-1: INTRODUCTION TO CRYPTOCURRENCIES
CHAPTER-2: STORING CRYPTOCURRENCIES
CHAPTER-3: PROMISING CRYPTO PROJECTS
CHAPTER-4: TECHNICAL ANALYSIS THEORIES
CHAPTER-5: TRADING PLATFORMS
CHAPTER-6: TECHNICAL INDICATORS
CHAPTER-7: MONEY MANAGEMENT
CHAPTER-8: CRYPTOCURRENCY EXCHANGES

■ George Protonotarios (April 2018)

Published in: Economy & Finance
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Cryptocurrency Trading Guide: "Trading the Decentralization of the Financial System"

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  3. 3. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 4 / 87 CCHHAAPPTTEERR--55:: TTRRAADDIINNGG PPLLAATTFFOORRMMSS.................................................................................................................................................. -- OOnnlliinnee CCrryyppttooccuurrrreennccyy PPllaattffoorrmmss -- MMTT44//MMTT55 PPllaattffoorrmmss -- CCFFDD AAccccoouunnttss CCHHAAPPTTEERR--66:: TTEECCHHNNIICCAALL IINNDDIICCAATTOORRSS................................................................................................................................ ««TTeecchhnniiccaall AAnnaallyyssiiss IInnddiiccaattoorrss»» -- CCrreeaattiinngg CCuussttoomm IInnddiiccaattoorrss -- MMAACCDD -- MMoovviinngg AAvveerraaggeess CCHHAAPPTTEERR--77:: MMOONNEEYY MMAANNAAGGEEMMEENNTT......................................................................... ......................................................... ««TThhee IImmppoorrttaannccee ooff aann EEffffeeccttiivvee MMoonneeyy MMaannaaggeemmeenntt SSyysstteemm»» -- TThhee TTwwoo BBaassiicc QQuueessttiioonnss ffoorr SSuucccceessssffuull TTrraaddiinngg -- TTrraaddiinngg LLeevveerraaggee && FFoorrmmuullaa CCHHAAPPTTEERR--88:: CCRRYYPPTTOOCCUURRRREENNCCYY EEXXCCHHAANNGGEESS........................................................................................ -- EEvvaalluuaattiinngg EExxcchhaannggeess -- LLiisstt ooff CCrryyppttoo EExxcchhaannggeess  AAPPPPEENNDDIIXX -- TTrraaddiinngg OOrrddeerrss -- WWeebbssiittee RReessoouurrcceess  RREEFFEERREENNCCEESS  BBIIBBLLIIOOGGRRAAPPHHYY .........
  4. 4. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 5 / 87 PREFACE: Since 2009, cryptocurrencies have changed the rules of the global financial game. A decade ago, the issue, exchange, and use of digital money without the intervention of a centralized bank was a dream for the financial industry. That dream came true faster than anyone could have predicted. The global penetration of the World Wide Web works as an accelerator to the acceptance of every new technology that aims to serve the emerging needs of people. This is the ultimate goal of every technology, to better meet the needs of people, and nothing else matters. There are many academics considering cryptocurrencies as a bubble ready to burst, paying a lifetime lesson to everyone involved. These academics simply cannot understand the magnitude of the financial revolution emerging from cryptography. It should be irrelevant for academics if the price of Bitcoin moves from $20,000 to $3,000 and then back to $20,000. What really matters is the technology behind the cryptocurrency ecosystem. Actually, cryptocurrencies themselves are just a simple application of the Blockchain technology, just the top of the iceberg. Cryptography, Scalable Blockchain, Smart Contracts, Smart Assets, Decentralized Apps, Directed Acyclic Graph, and other technologies are here to stay, and promise to change our financial universe for good. Nevertheless, from a trader’s point of view, price matters, and this ebook includes a wide variety of useful resources and tips in order to help traders understand the behavior of the cryptocurrency market and explain the extreme fluctuations of cryptocurrency asset prices.
  5. 5. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 6 / 87 Graph-1: Currency is only the top of Iceberg As in the case of every other major revolution, there are many scammers in the crypto industry, who are trying to take advantage of the lack of regulation and make money by deceiving the public. The World Wide Web includes a great variety of website resources and especially forums (APPENDIX) that may help cryptocurrency traders to avoid these scammers. George M. Protonotarios, Athens Financial Analyst -Msc in “Int. Banking & Finance” Salford, UK Linkedin: » https://www.linkedin.com/in/qexpert/
  6. 6. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 7 / 87 Chapter-1: Introduction to Cryptocurrencies The New Decentralized Financial Era Cryptocurrencies are virtual currencies operating as a decentralized network, using cryptography for security, and a public ledger (the Blockchain) to record all transactions. Cryptography is an encryption method that uses advanced techniques to verify and secure transactions, the Blockchain refers to a database that records all coin transfers. The History of Crypto at a Glance Bitcoin is the first decentralized peer-to-peer payment network. The first ever Bitcoin started in a cryptography mailing list sent by the nickname Satoshi Nakamoto in 2009. This is the short history of cryptocurrencies: □ 1983: The American cryptographer David Chaum conceived an anonymous cryptographic electronic money called eCash
  7. 7. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 8 / 87 □ 1995: The implementation of Digicash, an early form of cryptographic electronic payment requiring user software and encrypted keys in order to withdraw notes from a bank □ 1996: Laurie Law, Susan Sabett, and Jerry Solinas (NSA Cryptology Division) published a paper entitled “How to Make a Mint: the Cryptography of Anonymous Electronic Cash”, describing a Cryptocurrency system □ 1998: Wei Dai published a description of "b-money", an anonymous, distributed electronic cash system □ 2009: Bitcoin creation by Satoshi Nakamoto (nickname) using a SHA-256 cryptographic hash function as its proof-of-work scheme □ 2011: The release of Litecoin, using for the first time scrypt instead of a SHA-256 cryptographic hash function □ 2012: The official release of Ripple (Ryan Fugger conceived Ripple in 2004) □ 2013: Mastercoin is the world’s first initial coin offering (ICO). In November, the world's first Bitcoin ATM opens □ 2014: The world’s largest exchange ‘Mt Gox’ declares bankruptcy. Due to a vulnerability in the protocol, 6% of all circulated Bitcoins were stolen from the “cold storage” of Mt Gox □ 2015: The release of Ethereum (proposed by Vitalik Buterin), a revolutionary platform that attracted immediately hundreds of cryptocurrency developers □ 2017: The cryptocurrency prices are booming in astronomical levels. The total market capitalization of cryptocurrencies exceeds for the first time 100 billion US Dollars. The global financial and monetary system will never be the same again
  8. 8. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 9 / 87 Cryptocurrency FAQ What are Altcoins and Forks? Altcoins are all cryptocurrencies alternative to Bitcoin. Most altcoins are Forks of Bitcoin. A Bitcoin Fork is a crypto-coin built on Bitcoin’s open-sourced protocol (i.e. Litecoin). There are also cryptocurrencies that have built their own protocols including Ethereum, Ripple, Waves, and many more. How Many Cryptocurrencies are there? Today, there are more than 1,500 cryptocurrencies available over the internet. What is the Blockchain? The Blockchain is an open-source decentralized technology that verifies and records all transactions via the use of a public ledger. After the completion of a certain number of transactions, the Blockchain generates a new block. -A block is a database entry, which stores information about the present and all previous transactions. -Each blockchain process is executed using an ecosystem of millions of community computers which store their own copy of the blockchain’s records. Only if all copies are in agreement, a block becomes a permanent link in the Blockchain. What are Tokens? The ecosystem of cryptocurrencies includes coins and tokens. Tokens are digital projects created through an Initial Coin Offering (ICO) and differ from coins due to their structure. Tokens operate on top of a Blockchain in order to create decentralized applications. These projects trade on cryptocurrency exchanges as common altcoins.
  9. 9. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 10 / 87 Initial Coin Offerings (ICOs) An Initial Coin Offering is the introduction of a new altcoin in the cryptocurrency ecosystem. It is the same as an IPO for stocks. The world’s first ICO was held by Mastercoin in July 2013. Bitcoin Mining Bitcoin mining refers to the process of verifying all Bitcoin transactions and include them in a public ledger (Blockchain). Mining is a completely decentralized process with miners operating in all over the world. Miners get new Bitcoins as a reward for their efforts. As more miners join a network, mining becomes increasingly less profitable. Note, that NOT every digital currency requires mining and miners. Delegated Proof of Stake (DPoS) As mining is too wasteful of energy, a blockchain engineer (Daniel Larimer) built the Delegated Proof of Stake, or DPoS, which is an alternative to the traditional ‘Proof of Work’ used by most cryptocurrencies. DPoS can handle up to 100,000 transactions per second, whereas Bitcoin can handle only 7 transactions and Ethereum up to 20 transactions per second. There are quite a few platforms that have adapted DPoS including EOS, Steem, Bitshares, Lisk, and Ark.
  10. 10. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 11 / 87 What are Smart Contracts? Smart contracts are small self-executed programs that aim to facilitate the exchange of anything of value on the internet. Smart contracts offer maximum security, as they operate exclusively on the blockchain. That means they can eliminate any external interference by performing 100% as they were originally programmed. Is Bitcoin Anonymous? Bitcoin is not anonymous, as a public ledger records all transactions. There are other anonymous crypto-coins such as:  Monero  Z.cash  Dash  Komodo  Zcoin  ZenCash  PIVX, and  Verge
  11. 11. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 12 / 87 What Influences the Price of Cryptocurrencies? As in in the case of every other financial-traded asset, the price of a cryptocurrency depends on the general dynamics of Demand/Supply. These are all major factors affecting directly/indirectly the demand and the supply for a particular cryptocurrency asset: I. INTERNAL FACTORS  Necessity of the Project  The Team Behind  Technological Efficiency of the Project  Security/Vulnerability  Programmability  Scalability of the Project  Management’s Ability to Achieve its Stated Goals  Partnership with a Key Player  Acceptance by an Important Online Merchant  Listing in a Large Cryptocurrency Exchange  Total Supply of Coins/Tokens (last but certainly not least) II. EXTERNAL/DIRECT FACTORS  Legislative Changes in Key Countries (new regulation)  Phycology of the Market (this is the subject of technical analysis)
  12. 12. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 13 / 87  Existence of Alternative Projects (serving the same needs)  New/Emerging Technologies (that can create alternative projects in the future)  Extreme Hacking Activity (can affect the market in many ways)  Bankruptcy of a Major Player (for example, of a large crypto exchange) III. EXTERNAL/INDIRECT FACTORS  New Macroeconomic Conditions in Key Countries  New Social and Political Conditions  Interest Rate Risk (as cryptocurrency is an alternative investment to asset classes paying an annual interest rate, such as Treasury Bills, Notes, and Bonds)  Extreme Volatility in other Financial Markets • Systemic Risk (every financial asset price includes the risk that the entire system will suddenly collapse, this is called Systemic Risk)
  13. 13. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 14 / 87 Chapter-2: Storing Cryptocurrencies Cryptocurrency Wallets & Taxation Cryptocurrencies can be stored in three (3) major types of wallets (online, software, and hardware wallets). What is a Crypto Wallet? A Bitcoin wallet is a software/hardware solution used to store, manage, and transfer Bitcoins/Altcoins. The coins are stored in the wallet as private keys (secret numbers). Moreover, a cryptocurrency wallet works as the essential mechanism behind every cryptocurrency transaction. These are the key functions of a crypto wallet: ● Storing a Variety of Crypto in a Single Place A cryptocurrency wallet can store multiple crypto assets in the same place. ● Wallets Store Public Keys Every record of a Blockchain includes the seller’s and buyer’s Public Keys. The Public Key is not confidential information and works like an email address. ● Wallets Store Public Keys with Security The Private Key is a very confidential information and works like the password of your email. If someone gest access to your Private Keys, he can also steal your coins. ● Buying/Selling Coins A wallet can send a message to another wallet using the Public Key in order to generate a unique transaction ID.
  14. 14. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 15 / 87 Types of Cryptocurrency Wallets Different types of crypto wallets offer different layers of protection. The most secure method of storing cryptocurrencies is a hardware wallet. These are all the types of crypto wallets: (i) PC-Based Software Wallets (ii) Smartphone-Based Wallets (use the phone’s camera to scan QR codes) (iii) Online Wallets in Central Servers (require online accounts) (iv) Hardware Wallets The Cost of Owing a Wallet Online and software wallets are free but offer limited security. On the other hand, a good hardware wallet costs about $100 and offers much better security. These are the dominant hardware wallets today:  TREZOR which costs $110 (Bitcoin, Ethereum, Dash, Zcash)  NANO-S which costs $99 (Bitcoin, Litecoin, Ethereum, Dash, Dogecoin, Zcash, Stratis)  KEEPKEY which costs $129 (Bitcoin, Litecoin, Ethereum, Dash, Dogecoin, Namecoin, Testnet) Image: The three hardware wallets in the same order (as mentioned before)
  15. 15. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 16 / 87 Cryptocurrency Taxation The classification of cryptocurrency assets and the taxation of gains depend entirely on the country of residence. In Europe, most countries are waiting for a common EU legislation towards cryptocurrency taxation. Examples of Cryptocurrency Taxation in an International Level  In the United States, the gain derived from a Bitcoin investment is taxed as “Property”. Cryptocurrencies can be classified as business, investment, or personal property. These are some basic tips: -Τhe best option for the American traders, is to buy and hold crypto for more than one year (taxes are much lower for over 1 year investment) -When you sell a cryptocurrency with a significant profit, keep your money in US Dollars. Do not convert from one cryptocurrency to another  In the United Kingdom, cryptocurrency money is considered ‘Private Money’ and no tax is paid if the capital gains don’t exceed the £11,300 threshold (this is valid for personal income under £100,000)  In Germany, cryptocurrency money is classified as ‘Private Money’, the same way as foreign currencies, and enjoy tax benefits. If owned more than 1 year NO capital gain tax will be paid (if you own crypto for less than 1 year a progressive tax may apply)  In Russia, citizens are expected to pay 13% on their crypto-related incomes  In Australia, crypto is classified as ‘Property’, and there is a capital gain tax
  16. 16. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 17 / 87  In Canada, cryptocurrencies are classified as ‘Commodities’, and there is a capital gain tax  In Korea, crypto trading is still tax-free but there is a timeframe for the introduction of a crypto tax law  In China, cryptocurrencies are classified as ‘Virtual Commodities’ and there is no tax yet  In Japan, cryptocurrencies are classified as a ‘Method of Payment’ and there is a capital gain tax  In Brazil, cryptocurrencies are classified as ‘Capital Assets’ and there is a 15% capital gain tax Coin Mining Activity Income from coin mining is taxable in many countries (note that the mining expenses are deductible in the taxable year).  Coin miners must report their income from mining at the market value of the coin at the time it is received  In the US, coin mining is taxable by the IRS only if the rewards emerging from coin mining exceeds $400 in any tax year
  17. 17. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 18 / 87 Crypto Tax Heavens There are many countries where there is no tax on capital gains from cryptocurrency transactions. These are some tax heavens around the world:  Europe (Denmark, Switzerland, Italy, Cyprus, Serbia, Belarus, and Slovenia)  Asia (Singapore and Hong-Kong)  Oceania (New Zeeland)  Other (Barbados, Mauritius) General Rules for Cryptocurrency Traders  Get often updates regarding the tax policy of your country  Keep a clean record of all your transactions. In that way, you will be able to estimate your taxable income with accuracy in the future  If your capital gains from cryptocurrency transactions are significant, don’t hesitate to hire a specialized crypto accountant  If your transactions look messy, don’t hesitate to hire a tax attorney
  18. 18. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 19 / 87 Chapter-3: Promising Crypto Projects Evaluating Cryptocurrencies & Promising Projects In the first part, you will find some key tips on how to evaluate cryptocurrency assets. In the second part, you will find basic information and the total supply of some important crypto assets. Evaluating Cryptocurrencies Evaluating cryptocurrencies is almost the same as evaluating stocks. The key number to take into consideration is the Market Capitalization derived from Price times the Total Supply of coins (NOT from the Circulating Supply). If you want to evaluate a cryptocurrency project like a professional investor, you always need to consider the Total Capitalization. These are some basic steps: 1. Calculating Total Capitalization Before you buy anything, you must first find out how much it is really worth. Total capitalization is derived when multiplying the current price ($) by the total number of coins/tokens (MAX SUPPLY). □ Capitalization ($) = Total Supply X Current Price ($)
  19. 19. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 20 / 87 Keep that figure in mind because you will need it later. 2. Level of Technology and Necessity of the Project Visit the website of the project, and try to answer the following questions: - Why has someone created this Coin/Token? - Is it useful for people? - Does it solve major problems? - Is it useful to many people, or only to a few? - Is this project unique? - Are there alternative projects solving the same problem? - What is the current phase of the project according to its Road Map? (Creating period, beta period, full-launch) 3. Who is Behind the Project This is maybe the most important aspect of any investment, real or digital. The Importance of an Effective Project Management When investing in equities they say that the best opportunities in life come from companies with a very bad balance sheet and a very good management. Good management will provide the best probabilities for the project’s long-term success. Any respectable project must present a full team on the official website. The questions emerging at this stage are the following: - Is there a team presented on the website will full names and detailed information? - Where does this team come from? - Are they experts in their field? - Have they been involved successfully with other crypto projects in the past? 4. What Do Internet Users Say About this project? It is always useful to check what others have to say about something. Do not focus entirely on the reviews, as a great number of these reviews are fake. Focus on crypto-forums (APENDIX) where the community validates every reviewer. 5. Using Smart Metrics to Estimate the Fair Value During my career as an investment consultant, I was involved in numerous investment/financing plans. For the evaluation of these projects, I have used a great
  20. 20. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 21 / 87 variety of alternative methods, such as DCF (Discounted Cash-Flows), P/E (Price/Earnings), P/S (Price/Sales), P/Bv (Price/Book Value), Dividends Method, and a great variety of empirical methods. Why Using Empirical Data? Accountants can easily manipulate accounting data, but it is very difficult for anyone to manipulate empirical data. In addition, most people do not use empirical data, and that means you can look ahead of the market. -Empirical metrics can serve as a tiebreaker in your decision-making process. Here are some smart metrics for comparing cryptocurrencies: (a) Volume/Market Cap Ratio The Volume/Capitalization Ratio can be used for comparing the volume activity of multiple crypto coins: □ Ratio = (Volume/Market Capitalization) % -The greater the ratio, the better If I learned anything of value, it is that the best way to estimate the ‘fair price’ of any project is by using empirical metrics. It may sound strange, but the best financial analysts in the world use empirical metrics to look far ahead of the market.
  21. 21. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 22 / 87 An easy way to compare crypto based on empirical data is by creating a table that includes the empirical performance of a variety of cryptocurrencies and compare them in respect to their capitalization. Here is an example using the Volume/Market Cap Ratio. Table-1: Comparing Coins Based on Volume/Market Cap Ratio CRYPTO TOTAL SUPPLY MARKET CAP ($) 24H VOLUME ($) VOLUME / MARKET CAP (%) Litecoin 56421838 LTC 9,165,614,683 556,358,000 6.07% Bitcoin Cash 17114538 BCH 27,886,940,839 1,476,660,000 5.30% Ethereum 99282952 ETH 72,019,257,864 3,138,120,000 4.36% Bitcoin 17019900 BTC 159,140,490,174 6,807,330,000 4.28% NEO 100000000 NEO 7,814,360,000 153,273,000 1.96% Cardano 31112483745 ADA 10,284,013,715 146,494,000 1.42% Ripple 99992263539 XRP 82,511,216,058 591,950,000 0.72% Stellar 103906864158 XLM 41,084,046,740 38,184,300 0.09% ATMCoin 10000000000 ATMC 28,084,600,000 7,300,400 0.03% SolarCoin 98034424373 SLR 41,278,570,796 108,460 0.00% Notes: - The table consists the 10 largest cryptocurrencies, in terms of market capitalization (Data: CoinMarketCap) - For this time only, it would be better to calculate Market Capitalizations based on Circulating Supply, and not on Total Supply - The above table includes 24-hour volume data, but it would be wiser to use average volume data from a 30-day period, in your own tables (b) Internet Traffic Metrics For example, check the current Alexa ranking of a project’s website, and compare it with the ranking 12 months ago, and then 6 months ago. This way you can get an idea about the growing interest of the public for a cryptocurrency project. - Keep in mind that there are ways scammers can manipulate Alexa rankings
  22. 22. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 23 / 87 (c) Google Keyword Planner or Similar SEO Tools Use enquiries such as ‘Buy Ethereum’ or ‘Ripple Exchange’ to estimate the public interest for specific coins. - How many enquires are made for particular keywords including this project? (d) Social Media Metrics The interest of people for a particular project will be obvious in the social media. These are some important social media channels for that job: - Twitter - Facebook - Reddit - Telegram
  23. 23. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 24 / 87 Promising Cryptocurrency Projects These are some important cryptocurrency projects (most of them are platforms): Ripple (XRP) ■ Official Website: https://Ripple.com/ ■ General Info/Technology: Ryan Fugger conceived Ripple in 2004, the intent was to create a decentralized network empowering individuals and communities to create their own money. In its current form, Ripple is a payment network designed to be used by international banks. Currently, the organization partner with more than 100 banks worldwide. The project aims to connect exchanges, banks, and corporations via the RippleNet to provide a global payment system. According to Ripple: “In a world where three billion people are connected online, cars drive themselves and appliances can communicate, global payments are still stuck in the disco era...” Strong Pros: (√) Cost per transaction is only 0.00003 USD (√) High speed of transaction (currently can handle 1,500 transactions per second, but according to Ripple, that number can grow significantly in the future) (√) Holds a clear competitive advantage against traditional bank services (√) Adopted already by a great number of financial institutes Strong Cons: (x) The total supply is huge, almost 100 billion XRPs (x) It is a centralized/private network where the organization holds 70% of all XRPs ■ Key Exchanges: BITHUMB | UPBIT | BITBANK ■ Total Supply: 99.992.334.929 XRP
  24. 24. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 25 / 87 EOS (EOS) ■ Official Website: https://Eos.io/ ■ General Info/Technology: EOS is an alternative platform to Ethereum, which supports thousands of dApps. The platform separates authentication from execution and uses DPoS (Delegated Proof of Stake) instead of Proof of Work. You can find more information about DPoS in Chapter-1. EOS requires no mining and instead of miners, there are 21 delegates, voted on by all EOS stakeholders. -EOS partner with Bitfinex, Bitfinex has announced a new decentralized exchange built on EOS technology Strong Pros: (√) Advanced and (so far) stable technology (√) No need for mining (√) Fully programmable and fully scalable network (√) Great speed (every second can handle more than 50,000 transactions) (√) Crypto democracy (21 delegates, voted by all EOS stakeholders) Strong Cons: (x) New platform (cons will be discovered in the future) ■ Key Exchanges: BITHUMB | UPBIT | OKEX ■ Total (Max) Supply: 1.000.000.000 EOS
  25. 25. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 26 / 87 IOTA (MIOTA) ■ Official Website: https://www.IOTA.org/ ■ General Info/Technology: Created in 2015, IOTA is a ledger technology promising to function as the backbone and the main payment system of the Internet of Things (IoT). The platform uses Directed Acyclic Graph (DAG) for storing transactions instead of the classic Blockchain. IOTA is the first open-source distributed ledger that is being built upon the ‘Internet of Things’ with microtransactions and data integrity for machines. Notes: -IOTA funded via an Initial Coin Offering (about 1,340 Bitcoin were invested) -The ‘Internet of Things’ is expected to be worth over $260 billion by 2020 Strong Pros: (√) IOTA (MIOTA) is the dominant currency of ‘Internet of Things’ (√) Designed to scale in a vast level (√) No transaction fees (√) No miners are required as there are no blocks (√) Currently can handle maximum 1,000 transactions per second (that number can grow to 1,500 in the near future) Strong Cons: (x) New project, currently undeveloped ■ Key Exchanges: BINANCE | BITFINEX ■ Total Supply: 2.779.530.283 MIOTA
  26. 26. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 27 / 87 Ethereum (ETH) ■ Official Website: https://Ethereum.org/ ■ General Info/Technology: Ethereum is an extremely popular platform providing coders with all the essential tools to build decentralized applications and self-executed smart contracts. The EVM (Ethereum Virtual Machine) runs on the Ethereum network and enables coding any program no matter the programming language. The Ether cryptocurrency (ETH) plays the role of a payment system for programs to run in the Ethereum network. Ethereum has introduced smart contracts to the world, an enormous innovation for the crypto industry, but without predicting the need of scalability. Currently, the network’s dApps are fully programmable but not fully scalable. Ethereum developers are working on solving the scaling problem in future versions of the network. Furthermore, there is NO predefined set block limit, meaning we cannot currently estimate the total supply of Ethers in the future. That may be good news for the network’s future funding capabilities, but it is bad news for pricing the coin today. Pros & Cons □ Strong Pros: (√) Revolutionary technology supported by a vast community (√) Popular coin among traders (√) Available for trading in numerous crypto markets (√) Most cryptocurrency projects are developing on top of Ethereum, and that fact creates a constant demand for Ethers Strong Cons: (x) Significant lack of scalability (dApps)
  27. 27. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 28 / 87 (x) Can only handle 15-20 transactions every second (x) $0.76 cost per transaction (considerably higher than newer coins) (x) No set block limit today (we cannot estimate the coin’s future capitalization) ■ Key Exchanges: BITFINEX | OKEX | HUOBI ■ Total Supply (today): 99.015.180 ETH
  28. 28. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 29 / 87 Stellar (XLM) ■ Official Website: https://www.Stellar.org/ ■ General Info/Technology: Stellar is an innovative decentralized (non-profit) platform that aims to connect banks, payments systems, and people using smart contracts (like Ethereum). Transactions on the decentralized Stellar network resolve in 3-5 seconds with minimal fees. Notes: - The initial funding of the project was made by the payments startup Stripe - Corporate donors include BlackRock, Google.org, and FastForward Strong Pros: (√) Stellar is a non-profit and decentralized version of Ripple (√) Partnership with IBM and other key players (√) Developer-friendly software and tools (√) The Stellar network is free to use (√) Great technology (the network can handle 1,000-3,000 transactions per second) (√) Cost per transaction is only 0.00001 USD (√) Transaction confirmation time is 3-5 seconds Strong Cons: (x) The founders hold 90% of all XLMs ■ Key Exchanges: BINANCE | UPBIT | GOPAX ■ Total Supply: 103.887.050.716 XLM
  29. 29. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 30 / 87 NEM (XEM) ■ Official Website: https://nem.io/ ■ General Info/Technology: Built from scratch in 2015, NEM aims to create a new decentralized and fully scalable economy. NEM’s architecture includes several interesting innovations towards achieving flexibility, customization, and scalability. Using ‘Smart Assets’, NEM promises to offer exactly what the developer needs, whether that’s a Fintech system, an ICO, a Logistics Application, Decentralized Authentication, or more. The NEM blockchain's features are available through simple calls to an API Gateway Server and this simplifies the creation of any application. Strong Pros: (√) Customize how you use the NEM blockchain via ‘Smart Assets’ (√) Enables businesses to build a vast variety of real world application uses (√) Designed for speed and full scalability (√) Offers innovations such as ‘Proof-of-Imроrtаnсе (POI)’ algorithm, Multi-Signature capabilities, and the application of ‘Eigentrust++’ as a reputation system (√) Introducing “Namespace”, a system that can be used to create unique names and subdomains like a domain name system (√) The network can handle 3,000 transactions per second Strong Cons: (x) Currently, most developers are skeptical switching to NEM (needs more users) (x) Complicated project (needs to offer more educational resources) ■ Key Exchanges: BITRIX | ZAIF | BINANCE ■ Total Supply (today): 8.999.999.999 XEM
  30. 30. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 31 / 87 Cardano (ADA) ■ Official Website: https://www.Cardano.org/en ■ General Info/Technology: Cardano is a 3rd-generation open-sourced blockchain project that evolved out of a research-driven approach. The Cardano team is developing a smart contract decentralized platform, strongly backed by the scientific community. The development team consists of a large global collective of expert engineers and researchers. Notes: -Programmed from scratch within Haskell coding language -Cardano is the first platform that uses academically peer-reviewed code Strong Pros: (√) Open-sourced, designed to be scalable and reliable (√) Smart contracts for developing dApps (√) Backed by scientists and international researchers (√) 200-250 transactions per second Strong Cons: (x) New project, currently undeveloped ■ Key Exchanges: UPBIT | BINANCE ■ Total Supply: 31.112.483.745 ADA
  31. 31. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 32 / 87 NEO (NEO) ■ Official Website: https://Neo.org/ ■ General Info/Technology: NEO is a decentralized alternative platform to Ethereum offering programmability with improved execution speed and extended flexibility. NEO is a non-profit project using dBFT (dеlеgаtеd Bуzаntіnе Fаult Tоlеrаnсе) for security instead оf Prооf оf Wоrk. There are 40 dApps listed in the Neo website today. Strong Pros: (√) Can host dApps, ICOs, and Smart Contracts (√) Smart Contracts can run 340 times/seconds (√) NEO is backed by Alibaba and other online giants (√) Great acceptance in China Strong Cons: (x) In the future, Neo may be forced to follow the strict Chinese legislation for the crypto industry (that may be an obstacle for its future growth) ■ Key Exchanges: BINANCE | BITFINEX | UPBIT ■ Total Supply: 100.000.000 NEO
  32. 32. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 33 / 87 TRON (TRX) ■ Official Website: https://Tron.network ■ General Info/Technology: Tron is a non-profit development platform supporting a great variety of decentralized apps based on entertainment and content ѕhаrіng. The Tron protocol allows each user to freely publish, store, and own data but also the issuance, circulation, and trading of digital assets through a decentralized self-governance model. Strong Pros: (√) 10,000 transactions per second (√) Focused on creating a free global соntеnt еntеrtаіnmеnt and sharing system (√) Solid team of developers Strong Cons: (x) 100 billion TRX total supply ■ Key Exchanges: UPBIT | BINANCE | BITHUMB ■ Total Supply: 100.000.000.000 TRX
  33. 33. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 34 / 87 Bitcoin (BTC) ■ Official Website: https://Bitcoin.org ■ General Info/Technology: Everybody knows Bitcoin and its popularity is comparable to Nike, Microsoft, and IBM. Furthermore, there are more than 2,600 Bitcoin ATMs and more than 100,000 merchants worldwide accepting bitcoin. On the other hand, Bitcoin is built on obsolete technology and that makes it slow and very expensive. According to crypto experts, in the future, Bitcoin will play a role similar to ‘Gold’ in the traditional financial markets. Meaning it will become an asset providing stability in the cryptocurrency market. - Note that the total number of Bitcoins today is 16.996.250 BTC - In total, 21 million Bitcoins can be mined (limit reached in 2140) Strong Pros: (√) Massive global popularity and brand name awareness (√) 2,600 Bitcoin ATMs and acceptance by more than 100,000 merchants (√) Very liquid asset, and that means you can trade Bitcoin in minimal spreads (difference between Ask/Bid) (√) Hundreds of crypto markets worldwide offering Bitcoin and exchange it for any crypto or FIAT currency Strong Cons: (x) High fees on all transactions ($42) (x) Obsolete Technology and low transaction speed (can only handle 4-7 transactions every second when VISA can handle 40,000-50,000 transactions every second) (x) Lack of programmability, as it operates exclusively as a digital currency ■ Key Exchanges: BITMEX | BITFINEX | BINANCE ■ Total Supply: 21.000.000 BTC {20,999,999.9769 BTC}
  34. 34. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 35 / 87 Litecoin (LTC) ■ Official Website: https://Litecoin.com/ ■ General Info/Technology: Released in 2011 by a former Google employee (Charlie Lee), Litecoin is a fork of Bitcoin and consequently does not offer any great technological advantages. On the other hand, Litecoin is considerably faster than Bitcoin and it can handle much more transactions per second. If Bitcoin will play the role of ‘Gold’ in the future, then Litecoin might play the role of ‘Silver’. - In May 2013, the first Lightning Network transaction was completed through Litecoin, transferring 0.00000001 LTC from Zürich to San Francisco in under one second Strong Pros: (√) Compared to Bitcoin, Litecoin is considerably faster and more flexible (√) Popular among traders as one of the first digital currencies in the world (√) Available for trading in a great variety of crypto exchanges (√) New Proof of Work algorithm Strong Cons: (x) It is not programmable as it is designed as a simple digital currency (x) Litecoin can handle only 56 transactions per second (much more than Bitcoin but still poor performance) ■ Key Exchanges: OKEX | GDAX | BITFINEX ■ Total Supply: 56.227.838 LTC
  35. 35. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 36 / 87 Chapter-4: Technical Analysis Theories Key Technical Analysis Theories Technical Analysis is a method of forecasting future price movement based on the evaluation of past price movement and on statistics generated by past market data. Technical analysis is not able to predict future price movements with accuracy but it can provide a framework for measuring the likelihood that certain price movements may occur in the future. A technical analyst uses charts and indicators to identify patterns that can suggest future price movement. Main Focus Technical analysis focuses on two major issues: 1. What is the current price of a financial asset? 2. What is the history of price movements for this financial asset? Major Assumptions of Technical Analysis The process of forecasting future price movement is based on the following major assumptions: 1. The current price levels incorporate all fundamental data 2. The current price levels incorporate all news 3. Price movements are not ‘totally random’
  36. 36. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 37 / 87 4. Prices are moving in trends 5. Historic trends are usually repeating in the same patterns 6. Future price movement is more likely to follow the same direction of an already established price trend 7. There is no particular timeframe when you trade the market (technical analysis uses multiple timeframes) Basic Technical Analysis Theories These are some basic technical analysis theories that may help cryptocurrency traders to understand and explain the behavior of the cryptocurrency market: 1. Elliott Wave Theory 2. Dow Theory 3. Harmonic Patterns
  37. 37. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 38 / 87 1. The Elliott Wave Theory «Exploring the Natural Order» Ralph Nelson Elliott was a famous American investor (1871-1948) who studied and wrote about the waving behavior of financial markets. Short-Explanation of the Elliott Wave Principle As Elliott said, what appears random and unrelated will actually trace out a recognizable pattern once you learn what to look for. The Elliott Principle tries to explain how people invest in the financial markets. Investor’s psychology is constantly moving from extreme pessimism to extreme optimism in a natural order that create a specific pattern. This is especially true as concerns cryptocurrencies. This general pattern involves two (2) phases: ■ Phase-1: Impulsive Phase (or Motive Phase) -Financial markets are advancing in three up waves, 1, 3 and 5, which are separated by two down waves, 2 and 4. ■ Phase-2: Corrective Phase -The correction of any advance is happening in three waves (A,B,C). Graph-2: The Elliott Wave Pattern and its extension in 34 waves.
  38. 38. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 39 / 87 Elliott Wave Theory and Principles Elliott focused on the behavior of Dow Jones Industrial and discovered that equity prices change in a structural way, reflecting nature’s basic harmony. These are some basic principles of the Elliott Waving model:  Wave-2 must not fall below the starting of wave-1. If it falls below then the pattern is still in prior trend  Wave-3 must not be the shortest wave compared to Wave-1 and wave-5  Wave-4 must not overlap the range of wave-2 Confirming the Completion of Waves with Volume Activity The end of each wave is usually characterized by increased volume activity. That is especially true when the whole impulsive phase is near completion at the end of wave-5. The Best Times to Trade ■ Best time to trade long during the impulsive phase is when wave-4 is near completion. Risk-averse traders prefer to wait until wave-5 has moved above the highest point of wave-3. ■ Best time to trade short during the corrective phase is after wave-C has fallen below the lowest point of wave-A. Elliott Waves and Degrees Elliott discerned nine degrees of waves. These are all the degrees from smallest to largest: i. Subminuette ii. Minuette iii. Minute iv. Minor
  39. 39. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 40 / 87 v. Intermediate vi. Primary vii. Cycle viii. Supercycle ix. Grand Supercycle Graph-3: Elliott Wave Degrees and Symbols as described by Robert R. Prechter, Jr
  40. 40. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 41 / 87 2. The Six Phases of Market Trends (Dow Theory) «What Starts with Greed Ends with Panic» One of the leading theories in financial trading is Dow Theory. According to the Dow Theory, the market trends are evolving in six phases. Three bullish market phases and three bear market phases. That is the key difference between the Dow Theory and the Elliott Wave theory which counts only five waves. Graph-4: The Phases of Bull and Bear Market Trends This is my short analysis of these six phases: (A) BULLISH TRENDS (↑) (i) Accumulation (Phase-1) During the accumulation phase, the ‘smart money’ buys or sells an asset against the general market sentiment. Therefore, demand from ‘smart money’ equals supply from retail investors and prices tend to accumulate, remaining unchanged. During this phase, the market usually ranges between a Master Support and Resistance level. The volume activity is usually considerably limited.
  41. 41. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 42 / 87 (ii) Public Participation (Phase-2) As retail investors eventually start to follow the ‘smart money’, a strong trend is forming. The previous range is abandoned, and a Trending Market emerges. This phase continues until speculators decide to capitalize some of their profits. During this phase, the volume activity and volatility is booming. (iii) The Excess Phase (Phase-3) Excessive optimism and greed are moving prices to very high levels. As the market is expensive in terms of fundamentals, the ‘smart money’ capitalizes most of its profits by scaling back positions. Volume activity is very high, but volatility can be limited. During this phase, we can witness the creation of extreme bubbles. For example, during the Dot-Com bubble in the start of the millennium, Yahoo! P/E ratio exceeded 400. (B) BEARISH TRENDS (i) The Distribution Phase (Phase-1) This is the first phase of the new bear market. This phase is the exact opposite of the accumulation phase-1 of a bull market. The smart money now aggressively sells the market. Prices are falling but they don’t tank as many retail investors remain optimistic regarding the master trend. During the first few days of phase-1, the volume activity is booming. During this phase, usually the media advise investors to hold their positions. (ii) Public Participation (Phase-2) As retail investors realize that the business conditions are getting worse they want to sell the market. The smart-money continues to sell, and remains long only on assets with an exceptional long-term fundamental outlook. Prices are falling fast but panic is not yet seen, as retail investors anticipate they will have better chances to sell the
  42. 42. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 43 / 87 market. Volume activity is shrinking as there are many sellers and only a few buyers (speculators). (iii) The Panic Phase (Phase-3) This phase of the bear-market is characterized by pure panic. Everyone wants to exit the market at any available price (sell-off). As cash becomes king, prices tank. The media make things even worse as ‘blood in the street news’ sells a lot now. The smart-money does not sell, during this phase. On the contrary, it opens selectively long positions. -In the 18th century, Baron Rothschild said: “Buy When There's Blood in The Streets”.
  43. 43. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 44 / 87 3. Harmonic Patterns «Seeking the Harmony in Price Movement» Harmonic patterns are recognizable price patterns that use the alignment of exact Fibonacci ratios to identify highly probable reversal points. Harmonic Patterns offer a very high success rate» Structure Each harmonic pattern has two basic structures: the internal and the external structure. Beginners and semi-advanced traders should better focus on the internal structure. (a) The internal structure refers to the ABCD formation and it’s obviously crucial in signifying the existence of the pattern. (b) The external structure describes the price action before and after the formation of each pattern (pips, bars, candlesticks) and it can provide very useful information. Six (6) basic harmonic patterns: i. ABCD Pattern ii. Three-Drive Pattern iii. Gartley 222 iv. Harmonic Bat v. Harmonic Crab vi. Harmonic Butterfly Chart-1: Applying Harmonic Patterns Recognition Software on BTCUSD (MT4 Daily chart)
  44. 44. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 45 / 87 Six (6) Types of Harmonic Patterns The following patterns are presented mainly for educational purposes. If you want to learn how to trade the harmonic patterns with accuracy, you should better refer to the book “Harmonic Trading, volume 1” by Scott M. Carney. (i) The Basic AB=CD Pattern The AB=CD pattern is a very important 4-point harmonic formation and it is considered as the basic structure of all other harmonic patterns. The AB=CD can be either bullish or bearish.  AB and CD form the legs  BC is the retracement If AB line equals the CD line, then the point C is indicating the existence of a potential AB=CD pattern, and point D is very crucial as concerns the completion or not of this pattern. Graph-5: Basic ABCD Formation How to identify the Perfect ABCD Formation (1) Find the Fibonacci retracement tool which is available in almost all modern trading platforms
  45. 45. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 46 / 87 (2) By applying the Fibonacci retracement tool on AB, the BC retracement must reach the 0.618 level (2) By applying again the Fibonacci retracement tool on BC, the CD should ideally reach the 1.618 level The AB=CD Pattern Key Characteristics 1. AB leg must be equivalent to the CD leg near completion 2. The Point C retracement can vary between 0.382 to 0.886 and that creates alternative AB=CD formations 3. The ideal Point C retracement is 0.618 (as seen in the above chart) 4. The BC projection can vary from 1.13 to 2.618 (according to point C retracement) 5. The ideal BC projection is 1.618 (as seen in the above chart) Alternative AB=CD Reciprocal Ratios The following reciprocal ratios may help to identify alternative AB=CD formations: Table-2: ABCD Reciprocal Ratios CD Retracement BC Projection 0.382 2.618 0.500 2.000 0.618 1.618 0.707 1.410 0.786 1.270 0.886 1.130 Tip: The projection of BC line should converge closely with the completion of the AB=CD.
  46. 46. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 47 / 87 (ii) Three-Drive Pattern The 3-Drive pattern is similar to the AB=CD pattern, except the fact that it has 3 legs and 2 retracements. AB=CD has 2 legs and 1 retracement. The 3-Drive Pattern is also similar to the Elliott Wave formation, which is one of the basic formations of technical analysis. Graph-6: The Three-Drive Pattern Basic Steps to identify the 3-Drive Pattern (1) Point A must be the 0.618 of Drive 1 (2) Point B must be the 0.618 retracement of Drive 2 (3) Drive 2 must be the 1.272 extension of correction A (4) Drive 3 must be the 1.272 extension of correction B (5) Ideally, the time required for the price to form Drive-2 equals the time for the formation of Drive-3
  47. 47. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 48 / 87 (iii) The Gartley 222 Pattern The Gartley 222 pattern was discovered by H.M. Gartley on page 222 of his book “Profits in the Stock Market, 1935). The Gartley 222 incorporates the classic ABCD formation with some extra features. The Gartley pattern is formed by 5 pivot or swing points which can be visualized as:  ‘M’ for bullish patterns  ‘W’ for bearish patterns Graph-7: The Gartley 222 The Gartley 222 Pattern Key Characteristics • The Point B must be the exact 61.8% retracement of XA • The projection of BC must not exceed 1.618 • Point C point must be within the range of 0.382–0.886 retracement • The point D must be precise 0.786 of the XA leg • Ideally, AB must be equivalent to CD in length • Ideally, the time required for the formation of AB equals the time required for the formation of CD
  48. 48. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 49 / 87 (iv) The Bat Pattern The Bat pattern is considered a very reliable formation. A strong advantage when trading the Bat pattern is that you can place a tight stop-loss. A tight stop-loss means a great Reward/Risk ratio. Graph-8: The Bat Pattern Bat Pattern Key Characteristics • The point B must be less than the 0.618 retracement of XA line, preferably the 50% or the 38.2% retracement of XA line • The BC projection must be at least 1.618 • The point C ranges between 0.382 and 0.886
  49. 49. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 50 / 87 (v) The Crab Pattern The Crab is a harmonic 5-point formation. The completion of the pattern is confirmed by the XA projection at 1.618. Graph-9: The Crab Pattern Crab Pattern Key Characteristics • Point B is the 0.618 or less retracement of XA line • BC projection is 2.618 or 3.618 • XA projection at 1.618 • Point C ranges between 0.382 and 0.886
  50. 50. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 51 / 87 (vi) The Butterfly Pattern The butterfly pattern, discovered by Bryce Gilmore, is another 5-point formation. Graph-10: The Butterfly Pattern Ideal Butterfly Pattern Key Characteristics • Point B retraces 78.6% B of XA line • The projection of BC must be 1.618, or more • AB=CD must be met. There are alternatives but AB=CD is the most common • Point C point must range between the 0.382–0.886 retracement
  51. 51. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 52 / 87 Chapter-5: Trading Platforms Explaining Trading Platforms & CFDs Trading This is some basic information regarding the use of electronic platforms and CFDs when trading cryptocurrencies. What is a Trading Platform? A trading platform is a computer software allowing traders to open, manage, and close positions through a financial intermediary. Trading platforms operate as a bridge connecting traders with brokers and liquidity providers. Common Types of Electronic Platforms: These are the three common types of Electronic platforms available for trading cryptocurrencies: → Web-based platforms (no need to install) → PC-based platforms (install needed) → Smartphone/Tablet Platforms (apps) Most cryptocurrency exchanges support exclusively web-based platforms, but there are some offering mobile apps too.
  52. 52. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 53 / 87 Using Multiple Trading Platforms Cryptocurrency traders can use a wide variety of trading platforms. They can use web-based platforms offered by cryptocurrency exchanges, but also the more advanced MT4 platform offered by CFD brokers. The Web-Based Platforms of Cryptocurrency Exchanges The web-platforms offered by cryptocurrency exchanges are easy to use but offer limited capabilities. Here are some basic features of these platforms:  Free software  Web-based (no need to install)  Easy to use and to start trading  Offering internal wallets (note that online wallets are vulnerable to hacking)  Transfer easily coins to external wallets (software/hardware wallets)  Limited set of trading orders  Limited charting capabilities  Limited number of indicators Image: This is an example of an Online Platform (Cexio exchange)
  53. 53. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 54 / 87 MT4/MT5 Platforms The series of MT4/MT5 electronic platforms from MetaQuotes are also free to use and offer some advanced capabilities. In order to use a MT4 platform you need a brokerage account with a CFD broker (also free). This is a little bit complicated and it will be covered later. First, here are some basic features of MT4:  Free software (requires a Forex/CFD account)  Extended set of trading orders (APPENDIX)  Multiple timeframes  Extended charting capabilities  Built-in indicators  Automated trading capabilities  Includes a built-in programming language (MQL-4) and a compiler  Built-in historic tester (back-testing capabilities)  Demo/Practice mode  Includes separate mobile/tablet traders for iOs and Android  Trading cryptocurrency CFDs  Limited number of cryptocurrency assets  Complicated to use/trade The following image presents an Ethereum candlestick chart on MT4. You can add any commercial/custom indicator inside or below the chart. Image: Trading Ethereum on MT4
  54. 54. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 55 / 87 CFD Trading Platforms MetaTrader is a free electronic platform. The only prerequisite to use MT4 is opening a CFD account. What is a CFD? CFD means Contract for Difference and it is an OTC (over the counter) derivative product that can be used for trading on any financial market, including cryptocurrencies. When you open a CFD position, you mirror the market and gain or lose money based on the price of the underlying asset. Explaining CFDs CFDs enable traders to easily trade a great variety of assets in tight spreads. While other derivative instruments use complicated formulas to determine their current values, CFD prices are identical to the underlying asset prices. That means if you buy Ethereum using a CFD contract you will buy and sell it almost at the same price as the current Ethereum price on a dominant exchange. That makes it extremely easy to monitor your cryptocurrency positions. Simply put, if the price of the underlying asset has risen between the time you have opened your position and the time you have closed it, you have made a profit. If the price of the underlying asset has fallen below, then you suffer a loss. Financing charges (Trading Spreads) Usually, CFD brokers charge only spread and no trading commissions. Spread is the difference between buyers and sellers (Bid/Ask prices). Here are some typical spreads on popular crypto:  $15.0 on Bitcoin  $2.0 on Ethereum  $0.015 on Ripple
  55. 55. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 56 / 87 Maintaining Cryptocurrency Positions Overnight If you keep a CFD position after midnight, your position becomes the subject of overnight charges (SWAP Rates). In general, when you go long on a cryptocurrency, you are paying an overnight rate, and if you go short on a cryptocurrency, you receive an overnight rate. In any case, before opening any position on a cryptocurrency CFD, you should check the swap charges on the website of your CFD broker or via the LiveChat service. Advantages when Trading Cryptocurrency CFDs  You can trade both directions of the crypto market (buy/sell)  Mirroring the price of a cryptocurrency without owning it (no need for a wallet and no risk to be hacked)  Crypto CFD prices are identical to their underlying asset prices  Tight spreads on Bitcoin and Etehreum trading  Leverage your trades (usually up to 3:1)  Advanced charting capabilities and use of unlimited indicators  You may create a robot (automated system) to trade cryptocurrencies 24/7 without human intervention  Demo/Practice account is always available  Accessibility from everywhere (web platforms, mobile platforms, etc.)  CFD brokers are better regulated than cryptocurrency exchanges (choose only among regulated CFD brokers maintaining headquarters in trustworthy countries such as EU countries, UK, Japan, etc.) Disadvantages when Trading Cryptocurrency CFDs  Currently, only a very limited number of cryptocurrencies is available (2-10)  You can’t withdraw your coins to an external wallet (as you don’t actually own the cryptocurrency you buy)  When you go long (buy) on a cryptocurrency using CFDs, your position becomes the subject of overnight charges (explained before)
  56. 56. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 57 / 87  Unattractive to long-term cryptocurrency investors wishing to go long  The use of leverage makes trading riskier  The trading spreads on instruments other than Bitcoin and Ethereum may be considerably expensive  There are a lot of CFD scams (in order to avoid them focus on regulation and headquarters country and NOT on bonuses) Demo and Real Accounts Nowadays, most CFD brokers offer a basic cryptocurrency asset index. You can open a demo account with a CFD broker, but a demo account is usually only active for a limited time-period and provides limited functionality. The best option is to open a real account and to deposit only $5. That way, you suffer no risk and your account will remain active indefinitely. In order to open a real CFD account you need: -Mobile phone verification -ID verification -Address verification -Usually a $5 deposit (don’t deposit more unless you have fully understood CFDs) Combining Trading Platforms The smartest thing for cryptocurrency traders is to combine the use of multiple platforms. → Use the extended capabilities of MT4/MT5 for market analysis (advanced charting capabilities and an unlimited number of indicators) → Use the online platform of your crypto exchange to trade the market CFD broker offering MT4/MT5 These are some regulated CFD brokers offering MT4 and a basic cryptocurrency asset index (none of the following brokers accepts US trades). Table-3: CFD brokers offering Cryptocurrency Trading
  57. 57. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 58 / 87 CFD BROKER FEATURES FUNDING ACCOUNTS » DUKASCOPY ACCOUNTS REGULATION: □ FINMA (Dukascopy Bank) □ FCMC (Dukascopy Europe) CORPORATE INFO:  Dukascopy Bank founded in 1998 and it is domiciled in Switzerland  Dukascopy Europe founded in 2011 and it is domiciled in Latvia ■ Tight Spreads, low Commissions ■ JForex platform ■ Auto-Trading ■ FIX/API Trading ■ PAMM Accounts ■ Includes Social Networking ■ Client funds are protected in the amount of CHF 100'000 for Dukascopy Bank clients and in the amount of EUR 20'000 for Dukascopy Europe clients □ $100 minimum account (Dukascopy Europe) □ $5,000 minimum account (Dukascopy Bank) FUND METHODS:  Credit/Debit Cards -Maestro -VISA -Electron  Bank Wire Open an Account with Dukascopy and get 30% Rebate for the 1st month of trading: ► Open an Account with this Dukascopy Link and get 30% Rebate for the 1st month of Trading Review Broker: ► Dukascopy Europe Review » HOTFOREX ACCOUNTS REGULATION: □ CySEC, MiFID  World Finance Top 100 Company CORPORATE INFO:  HotForex founded in 2007 and it is domiciled in Cyprus ■ CurreneX Account ■ Wide Asset Index ■ Popular v2 PAMM accounts ■ MT4/MT5 ■ FIX/API Trading ■ Auto-Trading ■ Free VPS for all traders holding more than $5,000 ■ Multilingual Support ■ Client funds are protected in the amount of EUR 20'000 □ $5 minimum account FUND METHODS:  Credit Cards  Bank Wire  Skrill  Neteller  iDeal  Union Pay  Sofort  TrustPay  And More Methods HotForex offer free VPS Hosting and many other promotions: ► Visit HotForex Review Broker: ► Review HotForex » FBS ACCOUNTS REGULATION: □ CRFIN (No 009069697) CORPORATE INFO:  FBS founded in 2009 and it is domiciled in Russia  Offices in many Asian Counties ■ MT4/MT5 ■ Wide Asset Index ■ Trading Contests and other Promotions ■ $50 (Free) No- Deposit Bonus ■ Multilingual Eastern- European and Asian Customer Support □ $5 minimum account FUND METHODS:  Credit Cards  Bank Wire  Skrill  WebMoney  PerfectMoney  MoneyGram  EgoPay  OKPay  More Methods Specialized in Eastern Europeans and Asian Traders by offering many promotions including a $50 (Free) No- Deposit Bonus: ► Visit FBS Review Broker: ► Review FBS » XM GROUP REGULATION: □ CySEC, ASIC, FCA UK CORPORATE INFO:  XM founded in 2008 and it is domiciled in Cyprus ■ Wide Asset Index ■ FIX/API Trading ■ MT4/MT5 ■ Auto-trading ■ CFDs on Futures ■ $30 (Free) No- Deposit Bonus ■ Multilingual Support ■ Client funds are protected in the amount of EUR 20'000 □ $5 minimum deposit FUND METHODS:  Credit Cards  Skrill  Liberty Reserve  Neteller  Wire Bank Transfer  And More Methods XM offer a $30 (Free) No- Deposit Bonus: ► Visit XM Review Broker: ► XM Review
  58. 58. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 59 / 87 Chapter-6: Technical Indicators Technical Analysis Indicators Bitcoin trading is a risky business, as BTC price can move from +10% to -10% in 24 hours. Therefore, effective Bitcoin trading requires advanced trading skills and a balanced money management system. This chapter aims to sharpen trader’s skills and the next chapter to explain the basic principles of money management. Starting with Indicators. Indicators for Creating Bitcoin Trading Signals An indicator is a small code that plugs in a trading platform and helps traders to determine the direction of the market or to identify overbought/oversold market levels. An indicator is NOT an independent predictive trading system. Indicators are useful only as part of a complete trading system which also includes confirmation and money management. Many Bitcoin traders have started using technical analysis indicators such as the 100-day SMA and MACD. Creating Custom Indicators on MT4 to Trade Cryptocurrencies Once you have downloaded the MT4 platform, you can create your own indicators to analyze the cryptocurrency market at a glance. Moreover, you can set your indicators to send you alarms on screen, via email or SMS. The EA Builder Application (Free for Creating Indicators, Paid for Creating Robots) EA Builder is an excellent free application that can help traders to create custom indicators without requiring any programming skills. The application is free but you have to create an account and confirm your email. There are no time limits for creating free indicators.
  59. 59. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 60 / 87 -Note that in order to create a fully automated trading robot you need to pay a one- time fee ($97). These are some basic features of EA Builder:  Free for creating indicators for MT4, MT5, and TradeStation  Online app (no need to install)  No need for programming skills  Analyze any cryptocurrency listed on MT4  High-customizable with tens of functions  Alert service via eMail, SMS, Audio, and On-Screen  Full money-management control  Create a fully automated trading robot (for EAs an one-time fee is required) Start a free account here: » The Free EA-Builder App Download Free Indicators for MetaTrader 4 and TradeStation You can use the same app (EA Builder) to download already-built indicators for MetaTrader-4 (MT4) and Tradestation platforms. These indicators are open to modification and you can download them here: » Download Free Indicators for MT4 or Tradestation
  60. 60. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 61 / 87 Trading Cryptocurrencies Using MACD and MAs MACD and Moving Averages (MAs) are two common technical analysis tools for trading cryptocurrencies. (i) MACD Bitcoin Signals MACD means Moving Average Convergence/Divergence and it is one of the most widely used and reliable indicators in financial trading. MACD aims to identify the direction, strength, momentum, and the duration of the price trend. Bloomberg MACD Strategy Bloomberg has applied an investment strategy based on MACD which has returned 1,152 percent in 12 months. This is the biggest gain among 22 technical analysis Bitcoin indicators tracked by Bloomberg. The Bitcoin MACD daily prices turned bearish in December 2017. Check the chart below: Chart-2: Bitcoin MACD daily prices (source is Bloomberg)
  61. 61. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 62 / 87 MACD Divergences More advanced traders trade also the MACD divergences. A MACD divergence is a slope divergence, which occurs between the price slope and the MACD Histogram’s slope. This divergence is an indication of a very probable price turnaround. (ii) Moving Averages A moving average (MA) is a very common lagging technical analysis tool that can help investors define the master trend of a financial asset. An MA can filter the “market noise” derived from random price fluctuations. Bitcoin traders usually focus on these SMAs:  25-day Simple Moving Average  50-day Simple Moving Average  100-day Simple Moving Average  200-day Simple Moving Average Identifying the Master Trend using MAs We can use three (3) different MAs to identify the master trend. In the following example, we will use three SMAs and two timeframes (D1 and H4).  3 SMAs (20, 50, and 100 periods)  D1 and H4 timeframes Conditions for Identifying the Trend (i) The Price and the SMAs must move all in the same direction (all up or all down) (ii) The Price and the three SMAs must move in perfect order (iii) The above conditions must be met in both D1 and H4 charts (↑) Bullish Trend -If the Current Price is above the short SMA (20), and SMA (20) is above SMA (50), and SMA (50) is above SMA (100), then the trend is Bullish (↑)
  62. 62. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 63 / 87 (↓) Bearish Trend -If SMA (100) is above the SMA (50), and SMA (50) is above SMA (20), and SMA (20) is above the Current Price, then the trend is Bearish (↓) (-) No-Trend -If all three moving averages are in random order then there is no clear trend Chart-3: Bitcoin Daily (1D)
  63. 63. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 64 / 87 Chapter-7: Money Management The importance of an Effective Money Management System Information and tips on how to formulate a simple and effective Money Management System to trade cryptocurrencies. The Two Basic Questions of Successful Trading Profitable trading requires the existence of a complete trading system that is able to answer two basic questions at any given time: 1. When to Trade (Time) 2. How Much to Trade (Money) Money Management is all about time and money. ‘The right time to trade’ is part of technical analysis, “How much to trade” is the job of Money Management. Effective Money Management Money management accounts for at least 50% of the long-term success of any trader in any financial market. The absence of an effective money management system can lead even experienced and very talented traders to suffer great losses.
  64. 64. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 65 / 87 Portfolio Diversification Anyone familiar with financial economics knows that portfolio diversification is the golden rule of investing. “Don’t Put all your Eggs in the same Basket” can be translated as “Don’t put all your Money is the Same Trading Opportunity”. Portfolio Differentiation has proven to be the ideal method of investing in studies for periods of 100 years and more. Therefore, we need to distribute our cryptocurrency funds in many positions, as opposed to just a few. Investing -In how many positions should we distribute our funds? The answer comes from a simple model: ■ Calculate your Total Annual Income (i.e. $20,000) ■ Divide it by 10 (i.e. $2,000) ■ The Outcome is the highest amount of money you should invest in a single cryptocurrency position Trading -The 1% and 2% Rules When it comes to short-term trading, the maximum position allowed should be considerably smaller. Many professional traders follow the 2% rule and that means
  65. 65. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 66 / 87 no trading position should be worth more than 2% of a portfolio. Other asset managers follow the 1% rule and that means no trading position should be worth more than 1% of a portfolio. Trading Leverage –More of a Liability than an Asset Some crypto exchanges have started to offer capital leverage. Capital leverage means opening a trade position by paying only a portion of its value, which is called the ‘margin’. In other words, trading with more funds than you own. It sounds like a great opportunity, but actually, high leverage is a great threat to any portfolio. Because the more trading leverage you use the more risk you must accept, and the more trading cost you must pay. Higher leverage means accepting higher risk and paying higher transactional cost, and therefore, trading leverage is more of a liability than an asset. The Leverage Formula In a past analysis on my website TradingCenter.org (2013), I have introduced a simple formula to explain the optimal level of leverage for a Forex trade. Here is the formula: ■ Leverage Formula= [ ( P/L Ratio ) x ( 1/Spread ) x ( R/2 ) ] % Where: □ (P/L) = Profit to Loss Ratio, or else Potential Profit Pips / Potential Loss Pips □ Spread is difference between Bid and Ask (in pips) □ (R) = Risk Tolerance range between 1-100 and reflects the level of risk a trader is able/willing to accept This simple formula combines: 1. Technical Analysis (To calculate Profit/Loss pips) 2. Market conditions (To measure Spread & Commissions)
  66. 66. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 67 / 87 3. Money Management (To calculate Risk Tolerance) Calculating all Components: (i) Calculating Profit/Loss Ratio The first component is the P/L ratio. Technical analysis can provide information about what is the potential profit and loss each time we trade. For those who are trading using ‘Support & Resistance’, the potential profit is the difference between the Current Price and the First Major Resistance Level, and the Potential Loss is the difference between the Current Price and the First Major Support Level. Calculation: ■ Potential Profit = First Major Resistance – Current Price ■ Potential Loss = Current Price - First Major Support For more advanced P/L calculations, we can use multiple support/resistance levels, as follows: -Averaging the three (3) Closest Major Support and Resistance Levels: ■ Potential Profit = (Average Price of the 3 Closest Major Resistance Levels) – Current Price ■ Potential Loss = Current Price – (Average Price of the 3 Closest Major Support Levels) (ii) Spread and Commissions Charged in pips The second component of the formula is trading cost. Trading cost includes: -Average Spread -Commissions Charged Calculation: ■ Calculation is simple as long as all cost sources are expressed in pips
  67. 67. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 68 / 87 (iii) Personal Ability to Accept Risk Risk is a very important investing factor, and unfortunately, it is not taken seriously enough. In order to calculate your Risk Tolerance, you must take into consideration several factors, for example:  The value of your portfolio  Your annual income  Your age and especially your trading experience  Your character  The likelihood that you will need to withdraw some money in the future In general:  if you are a newbie trader use a Risk Tolerance Ratio = 0.1  if you are semi-advanced trader use a Risk Tolerance Ratio = 0.33  if you are an advanced trader use a Risk Tolerance Ratio = 0.67  if you are a professional trader use a Risk Tolerance Ratio = 1.0 Summary Here are some key points/conclusions:  The two basic questions are (i) when to trade, and (ii) how much to trade  Money management helps traders to answer ‘How Much to Trade’  Portfolio Diversification is always crucial no matter if you are a Professional Investor or a Beginner Trader  Diversify your portfolio in multiple levels
  68. 68. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 69 / 87  “Don’t Put all your Eggs in the same Basket” can be translated as “Don’t put all your Money is the Same Trading Opportunity”  We should never invest more than 10% of our annual income on a single investment  We should never trade (short-term) more than 1-2% of the value of our portfolio  Trading leverage is very risky and expensive (as it widens both trading risk and trading cost)  High trading leverage is more of a liability than an asset  The rate of leverage must be always in balance with (i) Profit/Loss Ratio, (ii) Trading Cost, and (iii) Individual Risk Tolerance
  69. 69. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 70 / 87 Chapter-8: Cryptocurrency Exchanges Choosing Cryptocurrency Exchanges & List About 50% of your overall success as a financial trader comes from your ability to choose the right partners. Evaluating Cryptocurrency Exchanges These are some key issues when choosing an exchange (every factor listed below is important):  BASIC CONCEPTS ● Acceptance -Does an exchange accept your country? ● Verification -What are the requirements for verifying? -What are the trading limits before/after verification? ● Deposit/Withdrawal Methods -What are the available fund methods (Cards, Online Wallets, etc.)? ● Asset Index -Which coins/tokens are available in the exchange?  SAFETY/RELIABILITY ● Safety of money -Where is the headquarters base? -How many years in the market? ● Online security -Are the cryptocurrencies of clients stored into cold storage, as they should? -In case of P2P transactions, is there an Escrow Service? ● Online reviews for this exchange -What other people say about this exchange (Caution, 50% of all the reviews you read are fake)?
  70. 70. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 71 / 87  COMPETITIVENESS ● Transaction cost -What are the transaction fees? ● Exchange rate -What is the exchange rate for the crypto you need to buy? -What is the ask/bid spread? ● Responsiveness of the Customer Service -Is there a phone line and/or a live chat service available? CRYPTOCURRENCY EXCHANGES Cryptocurrency exchanges are common places to buy/sell Bitcoins and other digital coins. -Warning: Please be careful with your money When sending funds to an exchange or other counterparty you are trusting that the operator will not abscond with your bitcoins and that the operator maintains secure systems that protect against internal or external theft. It is recommended that you obtain the real-world identity of the operator and ensure that sufficient recourse is available. Exchanging or storing significant funds with exchanges is not recommended. These are some popular crypto exchanges:
  71. 71. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 72 / 87 CEXIO ■ TYPE: BITCOIN/ALTCOINS EXCHANGE ■ WALLET: YES ■ HEADQUARTERS: UNITED KINGDOM ■ ONLINE SINCE: 2013 ■ CUSTOMER SERVICE: EMAIL SUPPORT ■ LANGUAGES: ENGLISH INFORMATION ABOUT THE MARKET Founded in 2013, Cexio is a multi-functional crypto exchange based in the United Kingdom. Cexio started initially as a cloud-mining provider, but in 2015 begun to operate exclusively as a Bitcoin exchange. Cexio offer a web-based platform and two (2) mobile apps for trading Bitcoin, Ethereum, Ripple, Dash, ZCash, and Stellar. LEGAL: -MSB status in FinCEN (USA) -Registered with the ICO (UK) ■ SUPPORTED COUNTRIES: Most Countries (except many states in the US) ■ FIAT CURRENCIES: USD | EURO | GBP | RUBLE ► The Cexio Bitcoin Exchange
  72. 72. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 73 / 87 LOCALBITCOINS ■ TYPE: P2P BITCOIN EXCHANGE ■ WALLET: YES ■ HEADQUARTERS: FINLAND ■ ONLINE SINCE: 2012 (LocalBitcoins Oy) ■ CUSTOMER SERVICE: EMAIL | FORUM ■ LANGUAGES: ENGLISH | SPANISH | FRENCH | PORTUGUESE | RUSSIAN | ITALIAN INFORMATION ABOUT LOCALBITCOINS P2P MARKET LocalBitcoins is the largest Peer-2-Peer decentralized BTC marketplace allowing users to exchange FIAT currency for Bitcoins. The marketplace consists: (i) Traders, and (ii) Users, 'Traders' create advertisements with the price and the payment method they want to offer. 'Users' respond to these advertisements, and if they both agree, a transaction completes. There are more than 60 different payment methods available and that makes LocalBitcoins an easy solution for everyone wishing to buy Bitcoins. You can store your Bitcoins at LocalBitcoins or use an external wallet. The LocalBitcoins team recommends the Electrum Wallet, which is free. -Buy/Sell Bitcoin for fiat currency -LocalBitcoins requires no verification ■ SUPPORTED COUNTRIES: 248 COUNTRIES ■ FIAT CURRENCIES: NO RESTRICTIONS (ALL CURRENCIES) ► The LocalBitcoins Exchange
  73. 73. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 74 / 87 LIVECOIN ■ TYPE: WIDE CRYPTO EXCHANGE ■ WALLET: YES ■ HEADQUARTERS: UNITED KINGDOM (UK) ■ ONLINE SINCE: 2013 (DELTA E-COMMERCE LTD) ■ CUSTOMER SERVICE: EMAIL | CHAT SERVICE ■ LANGUAGES: ENGLISH | SPANISH | RUSSIAN | CHINESE | PORTUGUESE | FRENCH | ITALIAN | INDONESIAN INFORMATION ABOUT THE LIVECOIN EXCHANGE Based in the United Kingdom, LiveCoin is a multi-functional Bitcoin/Altcoin exchange offering a very wide crypto asset index. LiveCoin support the exchange of 125 altcoins for FIAT currency. ■ SUPPORTED COUNTRIES: ALL COUNTRIES (EXCEPT US) ■ FIAT CURRENCIES: USD | EUR | RUBLE ► Visit the LiveCoin Exchange
  74. 74. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 75 / 87 BITBAY ■ TYPE: BITCOIN/ALTCOINS EXCHANGE ■ WALLET: YES ■ HEADQUARTERS: POLAND (EU) ■ ONLINE SINCE: 2014 ■ CUSTOMER SERVICE: EMAIL | CHAT SERVICE ■ LANGUAGES: ENGLISH | RUSSIAN | POLISH INFORMATION ABOUT BITBAY Operating since 2014, BitBay is a large Polish cryptocurrency exchange. Bitbay offer the exchange of BTC, LTC, ETH, DASH, and a few more crypto assets by accepting USD, EUR, and PNL. BiBay support credit credits and offer additional funding solutions such as the Bitomats ATMs and the BitBay Mastercard. The BitBay platform is user-friendly and provides a full set of trade orders, including stop-orders, and 'Fill-or-Kill' orders. ■ SUPPORTED COUNTRIES: 240 COUNTRIES ■ FIAT CURRENCIES: EUR | USD | PNL ► The BitBay Bitcoin Exchange
  75. 75. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 76 / 87 PAXFUL ■ TYPE: PEER-TO-PEER MARKETPLACE ■ WALLET: YES ■ HEADQUARTERS: USA, DELAWARE ■ ONLINE SINCE: 2015 (Paxful, Inc.) ■ CUSTOMER SERVICE: EMAIL | PHONE {+1 (865) 272-9385} ■ LANGUAGES: ENGLISH INFORMATION ABOUT PAXFUL PaxFul is a Peer-2-Peer Bitcoin exchange similar to LocalBitcoins. Paxful operates as a decentralized marketplace trading only Bitcoin via a network of more than 1,200 vendors. The marketplace operates as a mediator between Bitcoin traders and vendors and provides the framework for its users to interact and to exchange Bitcoins for FIAT currencies. Paxful offer the wider selection of payment methods in the market (300+ methods) plus an escrow service for the maximum security of Bitcoin transactions. ■ SUPPORTED COUNTRIES: Almost all countries ■ FIAT CURRENCIES: All Major currencies ► Visit the PaxFul Bitcoin Exchange
  76. 76. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 77 / 87 COINMAMA ■ TYPE: BITCOIN MARKETPLACE ■ WALLET: NO ■ HEADQUARTERS: SLOVAKIA, ISRAEL ■ ONLINE SINCE: 2013 ■ CUSTOMER SERVICE: EMAIL | TELEPHONE (+1-800-261-6932) ■ LANGUAGES: ENGLISH INFORMATION ABOUT COINMAMA Founded in 2013, Coinmama is not a traditional Bitcoin exchange, as it sells Bitcoin and Ethereum out of a personal inventory. Transactions are always between the trader and Coinmama. Currently, traders can only buy (not sell) crypto. -The marketplace does not offer a wallet. Account Verification To place an order at Coinmama, you need to have your account verified. Once you get verified, you can buy in total up to 10,000 USD worth of bitcoin by using credit/debit cards. ■ SUPPORTED COUNTRIES: Most Countries, including 24 US States ■ FIAT CURRENCIES: Many currencies but pricing is always displayed in USD or EUR ■ REGISTERED: Coinmama is registered with FinCEN (US) ► The Coinmama Bitcoin Exchange
  77. 77. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 78 / 87 BITMEX ■ TYPE: PEER-2-PEER CRYPTO EXCHANGE (LEVERAGED PRODUCTS) ■ WALLET: COLD WALLET ■ HEADQUARTERS: SEYCHELLES ■ ONLINE SINCE: 2014 (HDR Global Trading Limited) ■ CUSTOMER SERVICE: EMAIL | TICKETING SYSTEM ■ LANGUAGES: ENGLISH | CHINESE | RUSSIAN | KOREAN | JAPANESE INFORMATION ABOUT BITMEX BitMEX (Bitcoin Mercantile Exchange) is an innovative trading platform that offers access to the global cryptocurrency markets using margin-trading (trade leverage) on all of its products. Note, that you can only deposit Bitcoin to Bitmex as no FIAT currency is supported. Perpetual Contracts The marketplace operates with Perpetual Contracts. A Perpetual Contract is a product similar to a traditional Futures Contracts in how it trades but does not have an expiry, so you can hold a position for as long as you like. Perpetual Contracts trade like spot, tracking the underlying Index Price closely. Bitcoin trades are offered in Spot and Futures trading options. Be extremely careful if you decide to trade Perpetual Contracts and use trading leverage (especially if you are a beginner). ■ SUPPORTED COUNTRIES: Many Countries (but not the USA) ■ FIAT CURRENCIES: NONE ► The BitMex Bitcoin Exchange
  78. 78. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 79 / 87 APPENDIX: Trading Orders & Website Resources (i) Trading Orders Cryptocurrency traders can place classic market orders but also pending orders and try to buy/sell crypto at best possible rates. These are the main orders for trading crypto:  Market order: Buying/selling a cryptocurrency at the current market level. The great advantage of a market order is the speed of execution, as you execute your trade almost immediately. The great disadvantage is slippage, and that means get a worst price that you expected. Executing market orders in non-liquid assets may prove a bad idea. Especially as concerns volatile sessions, slippage on order execution can grow significantly. In overall, market orders are effective only for trading liquid assets and only if the market conditions are not choppy.  Limit order: Placing an order for buying/selling a cryptocurrency in a specified price. There are two outcomes: (i) it will be filled by someone else’s order at this specified price, and (ii) it will stay unfilled. The advantage of a limit order is the protection that it offers against slippage and choppy market conditions. In overall, limit orders are ideal for volatile and non-liquid markets.  Stop-loss order: Placing an additional order to limit the potential loss. A stop- loss order activates only if a specified price level has been reached. Once this stop level has been reached, the position is automatically closed. Stop orders can be used as a shield to limit the losses of a portfolio in case the market moves in the unfavorable direction.  Take-profit order: Placing an additional order to guarantee profits. As in the case of a stop-loss, a take-profit order activates only if a specified price level has been reached. Once this take-profit level has been reached, the position is automatically closed. This type of order aims to protect your profit when the market is very volatile.
  79. 79. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 80 / 87 (ii) Important Websites for Crypto Traders These are some essential websites for cryptocurrency traders: □ Market Data:  https://coinmarketcap.com/  https://www.coingecko.com/en □ Cryptocurrency News:  http://www.coindesk.com/  https://cointelegraph.com/  https://www.ccn.com/ □ Experts on Twitter:  https://twitter.com/VitalikButerin  https://twitter.com/brian_armstrong  https://twitter.com/rogerkver  https://twitter.com/dan_pantera  https://twitter.com/jgarzik  https://twitter.com/bobbyclee  https://twitter.com/ErikVoorhees
  80. 80. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 81 / 87 □ Forums:  https://bitcointalk.org □ Reddit Threads:  https://www.reddit.com/r/icocrypto/  https://www.reddit.com/r/CryptoCurrency/  https://www.reddit.com/r/crypto/  https://www.reddit.com/r/CryptoMarkets/  https://www.reddit.com/r/Bitcoin/  https://www.reddit.com/r/altcoin/
  81. 81. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 82 / 87  REFERENCES ■ Wikipedia, the Free Encyclopedia: The History of Cryptocurrencies https://en.wikipedia.org/wiki/Cryptocurrency ■ Bitcoin.org: Bitcoin: A Peer-to-Peer Electronic Cash System https://bitcoin.org/bitcoin.pdf ■ Coinmarketcap: Compare the Market Capitalization of Cryptocurrencies https://coinmarketcap.com/coins/views/market-cap-by-total-supply/ ■ ExpertSignal.com: Comparing Crypto Exchanges http://expertsignal.com/index.php/cryptocurrencies/bitcoin-exchanges- comparison Cryptocurrencies -Frequently Asked Questions http://expertsignal.com/index.php/cryptocurrencies/cryptocurrency-faq ■ HackerNoon.com: Delegated Proof of Stake https://hackernoon.com/explain-delegated-proof-of-stake-like-im-5- 888b2a74897d ■ Medium.com: Cryptocurrency https://medium.com/topic/cryptocurrency ■ TradingCenter.org: Trading Leverage Formula http://tradingcenter.org/index.php/menu-training/training-online/the- leverage-formula
  82. 82. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 83 / 87 ■ Digital Coins (Official Websites):  Bitcoin.org  Ethereum.org  Ripple.com  Stellar.org  Neo.org  EOS.io  Tron.Network  Cardano.org  IOTA.org  Litecoin.com ■ SEC: Initial Coin Offerings (ICOs) https://www.sec.gov/ICO ■ Bloomberg: Bitcoin Trading Signal https://www.bloomberg.com/news/articles/2018-02-06/bitcoin-trading- signal-that-returned-1-152-is-flashing-sell ■ “Trading World Markets Using Phi and the Fibonacci Numbers” ebook by George Protonotarios (2016)
  83. 83. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 84 / 87  BIBLIOGRAPHY (5) Market Wizards: Interviews with Top Traders {Jack D. Schwager}………………………………… (4) Elliott Wave Principle {A.J. Frost and Robert Prechter}………………………………………………… (3) The Elliott Wave Principle: Key to Market Behavior {Robert Prechter}…………………………… (2) The Wave Principle {Ralph Nelson Elliott}…………………………………………………………………… (1) Harmonic Trading, Volume One {Scott M. Carney}………………………………………………………
  84. 84. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 85 / 87 © George M. Protonotarios 2018
  85. 85. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 86 / 87 CRYPTOCURRENCY TRADING GUIDE ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» ©© GGeeoorrggee MM.. PPrroottoonnoottaarriiooss 22001188 COPYRIGHT INFORMATION ALL RIGHTS RESERVED. No part of this eBook (including text, information, tables, analysis, resources and images) may be copied, reproduced, mirrored or sold. DISCLAIMER AND LEGAL NOTICE The information presented in this eBook represents the view of the author. Every attempt has been made by the author to verify all information included in this eBook, but there is no guarantee about the accuracy and the reliability of any information presented in this eBook. This eBook is not intended for use as a source of financial or investment advice. In addition, this eBook includes affiliate links.
  86. 86. ««TTrraaddiinngg tthhee DDeecceennttrraalliizzaattiioonn ooff tthhee FFiinnaanncciiaall SSyysstteemm»» 87 / 87 RISK WARNING There is considerable exposure to risk when trading Cryptocurrencies, Forex, Futures and Options. Trading Cryptocurrency, Forex, and other leveraged products involves a significant level of risk and is not suitable for all investors. Before undertaking any such transactions you should ensure that you fully understand the risks involved and seek independent advice if necessary. The possibility always exists that you could sustain a substantial loss. Never trade with funds that you may need in the future. Past performance is not necessarily indicative of future results. Any opinions, suggestions, brokers, systems, services, software, reviews, promotions, bonus, rebates, links, and web-sites mentioned on this eBook are provided as general market commentary, and do not constitute investment advice in any way. -Warning: Please be careful with your money When sending funds to an exchange or other counterparty you are trusting that the operator will not abscond with your bitcoins and that the operator maintains secure systems that protect against internal or external theft. It is recommended that you obtain the real-world identity of the operator and ensure that sufficient recourse is available. Exchanging or storing significant funds with exchanges is not recommended. Trading in cryptocurrency CFDs involves significant risks. Cryptocurrency CFDs are an extremely high-risk, speculative investment. You should be aware of the risks involved and fully consider whether investing in cryptocurrency CFDs is appropriate for you.  Major Cryptocurrency Risks  Price volatility  Leverage  Charges and funding costs  Price transparency Cryptocurrency Trading Guide -Copyright © April 2018 George M. Protonotarios ©-All rights reserved Distribution by Qexpert.com EExxppeerrttSSiiggnnaall..ccoomm RISK WARNING ON CRYPTOCURRENCIES RISK WARNING ON CFDs

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