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Find a Bitcoin ATM near You

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Technology has brought about a big change in many different fields and business is no exception to that. It started when paper money was replaced by credit and debit cards. Now, we have more than a dozen varieties of digital currencies at our disposal. Although they may have to overcome many issues before they can replace traditional money, they have made already a huge impact.

Bitcoins

Among many different currencies, Bitcoins is the most popular and is already being used in some places. It is also traded. It is a form of electronic money that is supported by a software-based payment system. There is no central regulatory authority and the system works on peer to peer basis. It is the first crypto currency that is fully implemented. It uses strong cryptographic techniques to secure the transactions but still it had to face some security issues in the past.

Bitcoins are stored on a computer system and this process is known as mining. Users can trade bitcoins to purchase a product or service, and even exchange it for real money. Sending and receiving Bitcoins has not been an issue for some time but you will have to pay a fee for that. The rates of Bitcoins fluctuate regularly and are made known publicly. The transactions are recorded in a ledger known as block chain. It is also distributed pubicly to authenticate ownership.

Mining

Mining is a process to store Bitcoins and keep the records of the transaction. Another duty of miners is to keep the block chain consistent and complete. They have to record every new transaction made and combine similar ones to form a block. Information in the new block is used to connect the new block with older blocks. SHA-256 cryptography is used by Bitcoins of the previous blocks.

Miners who are able to find the next block successfully are rewarded with a transactional fee and newly created Bitcoins. A special transaction needs to be made to receive the reward, which is known as Coinbase. These Coinbase transactions play an important role in tracking all the Bitcoins in circulation at any given time.

Bitcoin ATM

Similar to paper currency, Bitcoins can also be withdrawn through ATMs but they are specialized ones and different from normal ATMs. Basically, it is an electronic device which helps you to conduct a transaction using Bitcoins without the need for any human involvement. Some Bitcoins ATMs also offer the facility to purchase Bitcoins by paying cash.

It is a recent phenomenon with the first Bitcoin ATM starting operation late last year in Vancouver, Canada. Since then, many Bitcoin ATMs have stated to crop up in different parts of the world. The Number of Bitcoin ATMs is still quite low and you will have to see a map to find one. The map which shows Bitcoin ATMs is known as Bitcoin maps.

Laws Governing Bitcoin ATM

These machines operate under different laws. There are different laws applicable in different countries regarding the operations of Bitcoin ATM. Laws are still in its development stage in many countries but they are fully implemented in a few countries, such as the US. Different bodies responsible for regulating and monitoring money are responsible to make the laws regarding Bitcoin ATM which can be implemented regularly.

Future

The popularity of Bitcoins cannot be denied but some issues, such as security issues and no regulatory authority to monitor and manage the digital currency are some of the biggest hurdles in its growth as the future of business. Bitcoin ATMs can take cross border e-commerce to the next level and it has the potential to do that

It could prove to be helpful for those who want to shop online but don’t have a bank account or credit card to make payments. They could use Bitcoins to make payments anywhere in the world because it is accepted everywhere. Travelers who visit different countries will not have to face any issues regarding converting currencies.

They will not need a bank account or credit card for that matter. If they have some cash to spare, they can also convert it into Bitcoins. There are many other uses of Bitcoin ATM but before it could control and find a solution to security and other issues that plagues Bitcoins, things mentioned above could not become a reality.

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How Artificial Intelligence affects financial market

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Financial Analytics

 

The dawn of the 21st century has brought many novelties with it, Robo Advisor among them. Today, financial markets are not just monitored by humans. They are also flooded with artificial intelligence. Artificial Intelligence, or AI, is the new theme for covering desired financial aspects of the market. A human mind has shortcomings as it cannot remember large portfolios and databases simultaneously. A Robo Advisor, however, is a different story.

The first version, known as the Robo-1, was more like a preliminary assistant, encompassing basic financial matters conducted by the client. However, Robo-2 is a different story. Robo-1 was more of a technical demonstration model of the basic user-friendly interface with basic financial assessment functions.

The Robo Advisor 2 is a quantum leap over the original model. The IBM Watson is the new name of the artificially intelligent financial assistant. Watson is programmed with the human cognition in mind. The model has the capacity of understanding financial databases and daily requirement-based model assessments to facilitate the client regarding what activity is deemed probable.

As a learning CPU, Watson can read, learn and talk and has the assisted memory to learn with experience. A true model of state of the art technologies, Watson can present an argument, reason and present a case based on the financial history of a client. In other words, if you are going off the mark, Watson can give you reasons not to do so.

Human Interaction Not Needed Anymore

As an intelligent cognitive design, Robo Advisor 2 can assist the client in making decisions, analyzing the market, what to purchase and what not to, Robo Advisor can help. In fact, the model encompasses the capability of becoming your online financial portfolio of choice in years to come. Watson is designed with these fundamental aspects on purpose, since the aim is to provide the easiest financial advice possible. The user can feed login details and Robo Advisor can log in as the user, analyze the market, see the financial portfolios and predictions and execute the orders for profitable trades.

Evolution Instead of Revolution

Despite advancements, the Robo Advisor is far from perfect. It may serve best as a financial assistant but not as a financial legal advisor. Not only does it lack the capability to look into legal documents, it also lacks a basic understanding of executing legal barricades as it is not an authorized entity to sign documents.

Even if it does, several websites have secure codes to fill, something the Advisor cannot do, which leaves the legal aspect out of its reach. It is a quantum leap over the basic model, so much so that it is 2 to 3 times more efficient in every aspect. However, the Robo-Advisor 2 is more of an evolutionary design which needs improvements and additional functionality.

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What Is Money Flow Index (MFI)?

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Dollar, USD and American Market

When you are performing a technical analysis, you need to focus on various indicators and what they say. Closely analyze the indicators and the bigger picture will be in front of you. Same is the case with the asset trading business. There are many indicators you must consider when trading securities and one of those indicators is the Money Flow Index (MFI).

Money Flow Index

The money flow index is an indicator which shows the strength of money flowing in and out of asset trading. It is interlinked with RSI (Relative Strength Index). The main difference between the two is that RSI only considers prices while money flow index (MFI) takes both price and volume into account. Its range is from 0 to 100.

All the bars whose average price is more than or less than the previous bar are considered while calculating the MFI. Index values are used to plot the money flow. The price and volume nature gives more in-depth information from different angles which could help in determining the progress towards your goal. The money flow index can show lot of fluctuation and highlights overbuying and overselling in an effective way.

Overbought and Oversold

On a scale from 0 to 100, a value of 20 or less is considered oversold and a value of 80 or above is considered overbought. This is also known as accumulation and distribution. It is used to indicate the momentum and direction of the market. You will have to add the distribution and accumulation values of all the trading days and divide it by the number of days you want to find MFI of.

Calculations

Firstly, determine the actual price by using the following formula:

Price = (High + Low + Close)/3

Next, calculate the money flow by following formula:

Raw money flow = Price × Volume

Specify the number of days you are trying to find the money flow for. For example, you want to find money flow for 20 days. Now, it is time to calculate the ratio of money flow by using the following formula:

Money flow ratio = (20 days’ accumulation)/(20 days’ distribution)

Accumulation and distribution can also be replaced with positive and negative money flow respectively in the above formula.

The final step is to find the money flow index. The formula to find the money flow index is:

Money Flow Index = 100 – [100 / (1+Money flow ratio)]

Many traders are looking to take advantage of opportunity when price and money flow index move in opposite directions. This brings about a significant change in the market. Divergence of these two factors, price and money flow index, can be beneficial or can also be disastrous depending on the situation you are in. It is a little risky but if you consider some other factors then you will end up on the safe side.

Other Factors

It would be much better for you if you consider factors other than price and volume because you will be able to see the bigger picture and can easily make the right decision. If there are large gaps in price action, then there is some problem because calculation of money flow is done by taking mid-points of price action into account. If there is a large gap, then it means some mid-points are missing and the complete calculation becomes suspicious and ambiguous.

If the mid-points are missing, the results will be disturbed. It is highly recommended to verify your results through other indicators and don’t depend only on price and money flow. You can also check out exponential moving averages and moving average convergence and divergence which are more accurate as compared to money flow index indicator.

It can give early warning signs for a changing currency trend so you can be prepared beforehand to tackle such issues and save yourself from losses. The STC indicator can also be used but it was primarily developed for the currency trading. The STC indicator reduces the risk of false signals significantly. With computers at your disposal, you can quickly judge the accuracy and reliability of prices thanks to trading software. Be aware of the latest indicators because they might be more efficient as compared to older methods.

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Price-Action Trading Strategy

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Stocks Chart

To succeed in today’s trading world, you need to be aware of what is going on the market so you can accurately predict what could happen in future. Your biggest chance of survival and making it big in the industry is to know and do things according to a plan or a strategy. This will make it easier for you to achieve your goals.

Price Action Trading

Price action refers to the fluctuation in prices, either high or low. It is analyzed by considering the price changes that have occurred in the recent past. This gives an overview of the market to the trader and what he could expect in days to come. The trader can also make short-term decisions based on this analysis. It depends on technical analysis tools instead of looking at other indicators.

Price bands, price swings (high or low), trend lines, charts, break outs, etc are the technical tools which can be used to analyze the price action. Each trader has his own method to interpret the information they receive. Behavior and psychological aspects also play a crucial role in the decisions made by the traders. For example, if a market is showing a positive trend for a week, traders believe it will continue to do so in the future, which is always not the case.

Uses

Price action trading is mostly used to speculate and predict future trend and price movements. It is mostly used by speculators, retail traders and trading firms. It is used in many types of trading, such as Forex trading, bond, equity, and commodity trading. Traders recognize trading patterns using price action trading and keep an eye on stop losses and entry and exit levels among other indicators.

Strategies

Using a single strategy on a stock will restrict your trading opportunities. Use a combination of strategies to be more effective when trading. The first thing you need to do is to identify the situation when things go high or low, break outs occur etc. Next, analyze the scenario and identify trading opportunities such as when it is more feasible to trade? When the market will go up or down? Trading opportunities vary from trader to trader. It is a highly volatile market so you need to be alert to be successful and keep an eye on trends and what experts say.

Make a strategy by considering different factors which influence the price shifts and your trading goals. Action trading analysis and price analysis is done through tools but the decision has to be taken by the trader after closely assessing and studying the results of the price action analysis. Price action trading strategies works well for short to medium-term investments. It is not that effective when it comes to long-term investments.

Advantages of Price Action Strategy

The trading markets follow a random pattern which may be hard to predict but if you keep an eye on various factors which influences price changes, you can speculate what will be the future of the market. A price action trading strategy offers traders the liberty to choose a strategy that suits their needs best. As mentioned before, action trading strategies can be applied on different kinds of trading, such as bonds, equity, commodities and Forex.

The biggest advantage of price action trading is that it gives control and power to the trader so he can decide according which set of rules would be better suited for them instead of following rigid rules. You can easily use a price action trading strategy through trading software. A software gives you charts, graphs and uses other tools to present data in an organized way so you can make a plan or a strategy to achieve your goal. Using the right combination of strategies can lead you to success. You can also test your price action strategy before you apply it, which is an added advantage.

You can apply the same strategy you have chosen on past data and see the results before applying it in future trading. Decide on a strategy after analyzing your requirements carefully. You can also set limits within which you can sustain the price fluctuations of stocks. Many traders support price action trading strategies for their advantages.

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Pros and Cons of High Frequency Trading

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Norway’s $860 billion sovereign wealth fund — the world’s largest — has decided to abandon algorithm-based High Frequency Trading (HFT). The electronic “trail” left by such trading allows traders elsewhere to profit on the HFT orders placed by the fund. But the decision comes at a very tumultuous time for HFT trading: Although the majority of stock market trade volume is by way of HFT, regulators continue to cry “foul” when HFT abuse crosses the line into market fraud.

The Emergence of HFT Stocks

HFTs have become controversial in large part due to the fact that they now account for at least 50 percent of all trades transacted by traders in United States equity markets — although in 2011, that figure was widely quoted as being as high as 70 percent. But it is not just the percentage of volume that has sparked debate over its implementation but also whether it places conventional, institutional investors at a distinct disadvantage. In addition, the technology has given rise to a category of stocks known as “HFT stocks” that are favored by HFT traders. These easily traded, highly liquid stocks in large companies put long-term investors at a disadvantage if they do not employ the fastest trading media utilizing the latest, most aggressive algorithms.

The Liquidity Debate

Defenders of HFT point out that it lends greater liquidity to the market. However, opponents cite instances of large orders being placed only to be immediately canceled, creating nothing more than “phantom liquidity.” The SEC recently investigated a New York HFT firm for the manipulative practice of placing rapid-fire, aggressive  trades in the last two seconds of almost every trading day during a six-month period from June through December 2009 that resulted in the manipulation of closing prices of thousands of NASDAQ-listed stocks. The tactic overwhelmed the market’s available liquidity and artificially pushed the closing price in the firm’s favor.

Crossing the Line

Although the defendant firm was relatively small in size, it dominated the market in the last few seconds of a trading day for stocks that it otherwise traded only minimally. During the period investigated by the SEC, the firm’s trades constituted more than 70 percent of the total trading volume of the stocks it manipulated. A statement released by SEC Chair Mary Jo White cautioned: “When high frequency traders cross the line and engage in fraud we will pursue them as we do with anyone who manipulates the markets.”

The condemnation of HFT abuse was echoed by Andrew J. Ceresney, director of the SEC’s Division of Enforcement:

“Traders today can certainly use complex algorithms and take advantage of cutting-edge technology, but what happened here was fraud.”

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Why Self-Directed IRAs May Be Your Key to a Comfortable Retirement

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New York, business center at night

With the average person working well over 40 to 50 years in their life, they set aside a small amount of funds for their retirement. To ensure a better retirement, many individuals place their savings into retirement funds, allowing them to gain profit on the savings they make and thus enjoy a better retirement.

A self-directed Individual Retirement Arrangement (IRA) is one of the many arrangements people make for their retirement. It allows them to have greater control over their retirement fund, allowing them to shape their retirement as they will. Here is a closer look at self-directed IRAs and why they may be your key to a better, safer and comfortable retirement:

Benefits

Gain Greater Control over Your Future

As the name suggests, possibly the biggest benefit of self-directed IRAs is the account owner can direct their funds into any securities they want. As a result, they gain greater control over their risk, returns and, evidently, their future. This helps them choose securities and investments they know about, thus providing a host of benefits, such as greater return and control.

They Offer Greater Returns on Savings

Unlike regular retirement funds, where the account manager has control over the investments, self-directed IRAs give the owner greater control of them. As a result, they can expand or shrink their account’s investment portfolio. By doing so – directing greater investment in certain securities – account owners can acquire greater returns on their savings.

They Diversify Your Investments

With the ability to direct your retirement fund into a specific or broad range of securities, self-directed IRA owners can diversify their investments and thus hedge their risks against poor performing securities or market problems. As a result, their retirement fund continues to grow, even if a security underperforms.

Limitations

It’s as Risky as It Is Beneficial

While they may provide greater profitability, self-directed IRAs still follow a major underlying financial principle: the greater the risk, the greater the return. As such, while it does give the account owner the ability to earn greater returns on their savings, it also opens him up to greater risk and thus greater loss.

Your Investments Doesn’t Allow Ownership

While they may be highly beneficial, they do not allow you to own a company, home or certain other securities. For example, if an owner directs a significant portion of their funds into a small company, they cannot own it through the IRA.

It’s Not for Everyone

In truth, a self-directed IRA is not for everyone. If you do not have the expertise to choose securities, it is better you stay away. Moreover, certain prohibited transactions are prohibited by the IRS – make sure you do not plan to invest in them before acquiring a self-directed IRA.

They allow you to hedge your risk, improve your returns and/or allow you to better shape your retirement. As such, self-directed IRAs can be one of the best choices you make for your retirement, provided you know what you are directing your investments into.

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Coindesk – A Platform for Bitcoins and Crypto Currencies

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Bitcoin and criptocurrency

Introduction to Crypto-currency

From shopping to entertainment, the internet has brought about a revolution in many industries. Now, it is setting its sight on taking the payment system digital. This has given rise to Bitcoins and other crypto currencies.

Crypto currency, as the name suggests, uses cryptographic techniques and methods to secure transactions. A mutually trustworthy party manages the integrity of a crypto currency. The rates are set and known to everyone. Crypto-currency puts a cap on production of the currency to maintain a balance in the market. Some of the best examples of crypto currencies are Namecoin, Litecoin, Peercoin, Ripple and Masterxcoin.

Bitcoins is one of the most popular crypto-currency so far.

Bitcoins is a form of a digital currency that is stored on a computer system and traded online. Bitcoins was developed by Satoshi Nakamoto in 2009. It does not have a central regulatory body to monitor and is based on a peer to peer model. It is the first crypto currency and many other crypto currencies have followed its model. One major issue with Bitcoins is highly fluctuating price and distrust on its authenticity and security.

Processing and storing bitcoins in computer system is called mining which is a reward for individual or a business because they charge a fee for that. You can buy bitcoins from exchange by paying real world money. Sending and receiving bitcoins is also not an issue anymore but you will have to pay a transaction fee for that. The fees are lower as compared to credit card fee which has attracted the interest of merchants towards Bitcoins.

CoinDesk

The need for a unified system still remains to be fulfilled to manage Bitcoins and other forms of digital currencies. CoinDesk tried to take care of this need and offered a platform for newcomers and experts in the field to know about the latest news related to crypto currencies and digital money. The site started operating in May 2013 and took it to the next level when Jon Matonis joined the team of CoinDesk as an editor in September 2013. Jon Matonis was a former executive director of the Bitcoin Foundation and has the right skills and experience in the industry.

CoinDesk is one of the best websites if you are new to the field of digital currency or want to know about the latest happenings in the Bitcoin industry. With the increase in popularity of mobile devices, CoinDesk also took an initiative and released its iOS app in April 2014. The app gives you access to all the top stories and news related to digital currencies. It also has a Bitcoin Price Index so that you can access all the important information about crypto currencies on the go.

CoinDesk Price Index

There are many exchanges for Bitcoins and the rates may differ slightly. To standardize things, a Bitcoin price index has been developed by CoinDesk. The CoinDesk Bitcoin price index is the average of Bitcoin prices of Bitcoin exchanges. Set up in September 2013, many new exchanges have been added while some removed since then due to a number of factors. For instance, Mt.Gox was added to the price index later due to decreasing risk premium and to add new deposit and withdrawal methods. Unfortunately, it was removed because it failed to meet the standards of inclusion in the index in February 2014.

A new exchange called Bitfinex was added to the index to take the number of exchanges to three due to its good performance in Bitcoins trading. Some of the popular publications, such as New York Times, BBC, and Reuters, also publish Bitcoins Price Index in their publications. There are a few conditions exchanges have to fulfill before they can be considered for inclusion in the CoinDesk Price Index.

For example, the minimum trade size should be worth at least $1500, the daily trading level must touch the level set by CoinDesk, the exchange should be operating internationally, and must be large enough to be counted as at least 2% of the total market. Otherwise, the exchange will not be considered for listing on the Coindesk index. This applies to any and all exchanges for Bitcoins and other crypto currencies.

 

Related Posts:

The Rise of Bitcoin

The Bitcoin Price History So Far

Explaining Bitcoin Charts

What is Bitcoin Exchange?

Best Bitcoin Trading Platforms

How Bitcoin Prices Affect Exchange Volumes

How to Trade Bitcoin

What a Trader should know about Bitcoin

How to hedge against Risk when Investing in Bitcoin

Top Bitcoin Start-Ups

Top Bitcoin Exchanges

 

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Anyone can trade and profit from binary

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The Full Binary Options Trading Guide</a> <p>Anyone can trade and profit from binary options trading, regardless of experience or prior knowledge. However, as a trader you will be even more successful if you arm yourself with the right knowledge and tools – that’s why anyoption created the “Zero to Hero” binary options trading guide. The “Zero to Hero” guide is designed to take you step by step from a complete beginner to an expert, pro trader. In our anyoption Zero to Hero guide you will learn not only the fundamentals of options trading, but also advanced trading techniques and pro tips

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Could FINRA Finally Help Finance Companies Market On Social Media?

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What Makes an Elite Trader

Businesses that offer financial services to its customers have long been trying to dominate the social media channel. With a gargantuan-sized audience, finance companies are trying to connect with their customers more than ever and on a more personal level. However, without the help and/or approval of the Financial Industry Regulatory Authority (FINRA), they will not get far.

But with all the efforts FINRA has publicized, could they be the answer to simplifying social media marketing for finance companies, or complicate them? This article takes a look at FINRA’s efforts in the field for well over a decade and a half, and how it is translating for finance companies.

FINRA Can’t Regulate Loose Rules

While FINRA has provided a substantial amount of regulations and rules to companies offering financial services, the problem is many of these rules can be bypassed relatively easily. For example, when a social media ad is posted, aimed at promoting a service, finance companies are required to state a warning for it. However, this warning can be written or integrated in a picture, often small. As such, regulating loose rules can be rather difficult.

As such, while FINRA can help finance companies market their services better, they will need to overcome regulatory problems in order to do so, and that may not happen within the next 5 years.

Creativity and Personalization May Not Be Possible

For social media to thrive, a company needs to personalize its posts in order to both cater to its customers’ needs and preferences, and stand out from its competition. However, finance companies are rather limited on the posts they or their agents can make, often relying on pre-approved messages. This not only inhibits creativity but limits the messages they can send. By putting proper guidelines into place, FINRA will be able to enable more personalized messages to be created, allowing finance companies to be creative with their messages.

Measuring Your ROI – Still As Complex As Ever

For numerous departments, such as marketing and especially human resources, measuring ROI is not as simple as it may seem. When it comes to social media, measuring your ROI becomes a rather difficult task. Identifying the base factor, likes, comments, shares, and direct messages leading to purchases, can be simple but using them to identify ROI is difficult. With many finance companies worrying about current regulatory and compliance issues, real challenges may be overshadowed by a mediocre one. However, if FINRA does well in putting transparent rules in place quickly, it may shed light on ROI methods.

FINRA has been working tirelessly to help finance companies market their services better on social media channels. Unfortunately, their momentum is rather low and it seems they may not make much headway soon. However, once they do, FINRA could help improve the future of social media marketing for finance companies. Until then, it seems FINRA will not be able to do much for these companies.

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Top Innovative Investment and Trade Platforms: Pros and Cons

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Forex Traders Chart

When you talk about investment and trade platforms, it is important to do a comparison in terms of each vendor’s advantages and disadvantages. A good trading platform serves as a pinnacle for maintaining and balancing your trading portfolio, not to mention it also aids you in keeping your funds reinvested, offering services at reduced prices. This is especially important to consider if you have your holdings divided in various brokerages and accounts. The famous John Bogle once said,

“When there are multiple solutions to a problem, choose the simplest one.”

Managing your investment and trading portfolio using a computer is just not simple, but it’s smart as well and it can potentially increase your investment returns. Mentioned below are four of the best trading platforms with their respective pros and cons to help you decide which one(s) you should choose. So, here goes a summary of the best platforms with the details presented further below:

 

Vanguard

Pros

  • Amazingly reduced fee index ETFs along with mutual funds that don’t include a commission fee
  • Provides the benefit of automatically reinvesting your dividends
  • Useful online trading tools that can help you analyze and evaluate your entire trade portfolio which also includes external accounts as opposed to the broad market

Cons

  • User interface is not so user-friendly and might end up feeling bulky
  • Takes too long to transfer funds and switch between trading accounts in comparison to other platforms
  • Moving money and rebalancing your portfolio takes a bit of a manual input which does take considerable time especially if you’re managing multiple accounts
  • You will receive a lot of duplicative email pertaining to your accounts with Vanguard which can be really annoying

2. SigFig
Pros

  • SigFig is indeed a promising platform that has an interesting user interface with attractive visualizations
  • You can select from two different options, namely free evaluation and advice and automatic rebalancing at a fee of $10 per month

Cons

  • Although there is no doubt about the beauty of its interface, where it lacks is functionality. The interface feels too traditional when used and appears to emphasize on short period returns
  • Constant emailing can be irritating
  • A lot of screen space dedicated to short-term returns and real estate

3. Future Advisor
Pros

  • A pleasant user interface
  • FutureAdvisor also provides a view of all your investment which you are holding in different accounts
  • Offers two different accounts, like SigFig
  • Automatic tax-loss harvesting
  • FutureAdvisor enhances your current holdings (in contrast to liquidation and reinvestment)

Cons

  • Because of the fact that FutureAdvisor altered its models a couple of times over the years, it also charges an account management fee which is 0.5% more than other providers
  • A lacklustre customer support system, you may or may not get a reply from them pertaining to a query, complain and or an enquiry
  • Irritating emails about short-term profits
  • A non-transparent methodology in terms of your portfolio

4. Wealthfront
Pros

  • A visually pleasing interface, not to mention easy to use
  • Offers different portfolios for both IRA and other taxable accounts
  • Provides free management of your first $10k
  • Automatic tax-loss harvesting which can be useful for investors
  • Wealthfront has control of more assets than any other provider mentioned here
  • Reduced fee (0.25%)
  • A transparent system

Cons

  • For $100k accounts, the fee charged is higher compared to other packages
  • Minimum of $5k to register an account with Wealthfront
  • You have to create your account first in order to look at their internal interface

5. Betterment
Pros

  • A good website design and smart user interface
  • Depending on the type and size of your account, you can enjoy reduced fee up to (0.35% to 0.15%)
  • You can also choose to invest in fractional shares
  • Betterment ranks 2nd of the platforms in terms of number of customers
  • A transparent portfolio style
  • No initial deposits
  • Impressive foundational philosophy with a focus primarily on long-term returns and automation of trade
  • Offers automatic tax-loss harvesting
  • As of 20th of July this year, Betterment also offers an enhanced bond mix for accounts which are taxable for example IRA accounts

Cons

  • Betterment offers no REIT ETFs

All in all, these are five of the best platforms with their pros and cons to help you select the one that suits your needs the best.

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The Rise of Bitcoin

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Bitcoin and criptocurrency

It was all thanks to the advent of Bitcoin people realized that there could be such a thing as computerized or digital currency. Now, the same digital currency which did indeed cause quite a frenzy when it first debuted in the world of trade just a couple of years ago is trying to evolve into something that could be of use to everybody. This newness and innovation made way for all the hard effort that is put into establishing and financially raising new business organizations and companies. For instance, brokerages that deals in Bitcoin and a plethora of Bitcoin trading platforms that can both be financially lucrative and boring.

You would have seen some pretty erratic price movements in Bitcoin shares over the past couple of years to come to the conclusion that maybe Bitcoin isn’t the way to make millions, yet. The price of Bitcoin dropped 20% last month, but the thing is in order to have faith in the digital currency’s power to make money, it is imperative you think about the ingenuity and the intricacy invested behind it. That is when you will see the reality will surely but gradually come in par with the rhetoric.

The Scenario

Even as financial analysts and entrepreneurs seek newer business models, it is true the Bitcoin convergence has been battling through numerous legacy problems, like the prosecution of the operator behind the ‘Silk Route’ scandal last year, the Silk Route was an online market where people used to peddle drugs in exchange for getting Bitcoins. Another example can be of Mt. Gox, a famous exchange platform in Tokyo that declared bankruptcy after the pilfering of over 850,000 Bitcoins by various hackers. At this point, regulation is proving to be a highly sensitive issue for Bitcoin. The problem is more complex than the initially anticipated by entrepreneurs.

The Background

For starters, digital currency isn’t something profoundly new, why? That’s because they have been consistently used in fantasy games played online. The interesting part is the fact that people are working on designing and developing a secure cryptocurrency that does not have a central issuer. Now that’s a potential head-turner.

The mystery creator or creators of Bitcoin Satoshi Nakamoto cracked a big puzzle which is central to just about every currency in the world and that is the management of its issuance which is controlling its forgery. Satoshi Nakamoto also provided another brilliant solution for cryptocurrency trade, i.e. to stop digital currency traders from spending the exact unit of the currency two times. Nakamoto’s solutions come in the form of an online ledger where each and every single transaction in regards to the Bitcoin is recorded and supervised by a group known as Bitcoin ‘miners’.

They use their computer to do computations and calculations which authenticate each Bitcoin transaction. This, in turn, stops users from double spending. The miners get to enjoy rewards for each Bitcoin mined although the speed of the entire mining process is rather limited and there will no Bitcoins mined over 21 million.

Bitcoin traders can use their Bitcoins to purchase a variety of things, which also includes a Tesla sports car. Traders of the currency can also store their Bitcoins on popular Bitcoin platforms, such as BitPat, Bitgo and Coinbase, which are all secure platforms.

The boom in Bitcoin share prices earlier last month failed to impress many as they said the spike in the price would not have any intrinsic value. Entrepreneurs from around the world disagree and most state the public has missed the point. They say that the reality of this cryptocurrency lies within its potential to be useful, especially when you talk about it being a foundation for a brand-new payment process. Albeit, it is all but a matter of time and money before you could start to see Bitcoin work.

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The Future of Trading: Part 2

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What Makes an Elite Trader

The transformation which has been brought on by a surge of technological innovation has not affected trading trends and the capital markets need to be approached with holistic strategies which would have a long-term effect on the future productivity and flexibility in the financial industry. There have only been two dominating elements which have significantly added to the successful transformation of the trading world and those are digitization and access to vital data and statistics.

Mike Persico, the chief executive of Anova Technologies, said that,

“There is more money being poured into this wireless space than any time in its history. A lot of things are science fiction, but I like to say we operate in the world of science fact-ion.”

The evidence which has pointed out towards this fast transformation of the capital markets and trading firms and organizations requires a new approach to the technological aspects of the banking infrastructure must be implemented. The trading of assets, stocks, commodities and foreign currencies are all experiencing these massive but important changes. For example, many financial trading firms have now employed the use of electronic channels associated with each asset class instead of voice execution. Hugh Cumberland, the manager of financial services at Colt, stated,

“High frequency trading is driven by being either the fastest to market, or equal fastest to market, and coming second is like losing.”

OTC derivatives trading along with fixed income trading are now steadily moving towards being traded from organization financial exchanges. These alterations to the whole trading and trading execution environment works to substantially increase the requirements of different trading platforms and trading venues which means more data and more messaging which also makes routing decisions more complex, giving rise to multi-sourced risks and because of this there is now the need for more scrutinized monitoring, just as different investors, traders and regulators are increasing the reporting requirements.

Modern Trading

Under the modern framework, trading today depends on three things: speed, efficiency and scalability. In order to be able to react to the obstacle posed by the transformation it faces today. Many financial and economic analysts agree that strategic and tactical progression in the short-term will never present a solution for such problems and because of these reasons, traders are now seeing more strategic solutions being implemented in the same context.

Within this transformation, there are two important phrases that are often cited and these are the digitization of the trading environment and system and fast access to trading data. So, what does the digitization of the trading environment mean? Basically, what this means is that there is no longer ‘unified accessibility’ of trading systems and information which can be viewed by each and every trader, both individual and company traders. You can now enjoy access to real-time data which you can use to monitor your trades, orders and enhance your portfolio.

In the future, the trading infrastructure will have many information and connectivity protocols so that the whole trade and investment process (i.e. the starting of the trade to post trader analysis), will be managed centrally, via one point. And the main reason for this is the fact it will no doubt make the whole digitalization process much simpler and faster. And this is why you can now see a shift from legacy silos to an adoption of incorporated trading solutions which now play an important role in facilitating the completion of the digital trading infrastructure.

Mobility

A significant characteristic of this technological change is mobility, especially when you talk about particular capital markets and services. The simplicity in controlling trade flows, order book build-up, pricing and risk analysis and evaluation from smartphone and tablets maximizes the agility and execution of trading options. What it also does is increase the credibility of different financial organizations and brokers who now don’t have to operate from their desks or PCs and can now provide their services from virtually anywhere they want. Since the whole purpose of increasing mobility is to simplify everything, transcending into an easier trading environment with fewer applications will accelerate the entire trading infrastructure into a simple and mobile atmosphere.

The Data Aspect

When you talk about the flow of data and its accessibility, you need to consider three instances: timelessness, volume and security. This is a rather new aspect the experts have touched on. Electronic trading requires the use of real-time data and access to conducting trades, real-time access to market data, counterparty data and venue data.

What this does is produce bigger trade volumes and leads to quicker processing which allows the trader to make quick decisions in real-time and execute them right away. The utilization of cloud technology as a place for data management and access is being considered a more long-term solution which falls in line with the fundamentals of digitization of trading principles. The mentioned alterations in trading technology is going to cost both in regards to investments and trading resources. Since the results would only prove to affect the productivity of trading in the years to come, planning, design, phasing and costing will serve as being fundamental for the success of the entire transformation.

Where to Start?

The first thing which needs to be considered is the fact that there should be detailed mapping of the today’s trading infrastructure and the use of essential components which should be integrated into a trading platform that will provide the traders with one point of access for the workflow which can eliminate any reliance on traditional methods or on a fragmented infrastructure.

This strategy will certainly be in favour of the vendors of different trading platforms on which they will be able to provide traders standard workflow connectivity. The effect of this transition would be seen across the whole of Fintech that will surely reap the advantages provided by the effectiveness and efficiency of the transformation. All in all, the transformation of the capital markets will serve as a vital component for the resurgence of the entire financial industry.

 

Relevant Posts: 

The Future of Trading – Part 1

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How Wealthfront became the Fastest-Growing $1 Billion Investment Service

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Wealthfront is an automated investment company founded by Andy Rachleff and Dan Caroll in 2011. And in two and a half years, the firm has managed to accumulate over $1 billion in assets under their direct supervision. Wealthfront is working with some big players in the industry, like Benchmark Capital, DAG Ventures, Index Ventures and The Social + Capital Partnership.

The Millennial Investor

The company capitalizes on a new generation of traders and investors. In the US, there are over 90 million millennial investors, which if you combine, have a net worth of over $2 trillion. This number is estimated to grow by $7 billion after four years. This new generation of traders has a new outlook on trading with a completely different style, attitude and method of trading.

Continuous Innovation

Wealthfront achieved their success solely due to investing in research and technology and that is why the company went on to become the fastest growing. With incredible features like Daily Tax Loss Harvesting which was introduced in 2012, Wealthfront.ort in September 2013, the Wealthfront 500 in December 2013 and their Single Stock Diversification Service which they launched in April this year. The fact of the matter is using powerful software for managing investments and trading can give you one critical advantage, and that’s the benefit of evolving into something bigger and better.

Wealthfront has managed to achieve their success by catering to a niche market which comprises of wealthy traders and investors. They cater their high value online trading services to improve their trading and to pretty much automate everything. Here are some of interesting benefits Wealthfront offers its clients:

Benefits

Great Index Funds

Wealthfront’s service depends on consistent and accurate research which in turn helps index funds to considerably optimize their performance. Wealthfront uses ETFs to monitor 11 biggest asset classes which make up their portfolio. Every ETF is picked and selected by their team of expert financial analysts on the basis of cost, performance, tracking difficulties, market liquidity, lending policies, etc.

Tax Efficiency

Wealthfront is perhaps the only investment service which provides its customers all five tax reducing opportunities in the industry, which include:

1. Index Funds

Different from actively supervised mutual funds, index funds, on the other hand, have a lower annual turnover, which also means you get to pay less in capital gains taxes.

2. Smart Dividend Investing

Using dividends through your investment portfolio adds a bit of balance which also leads to reduced sales in a given year. This means you have to pay less in realized capital gains taxes.

3. Tax Location

All customers get to choose different asset classes and provisions for both retirement and taxable accounts which enhances their performance after taxation.

4. Daily Tax Harvesting

You can choose to get more benefits by subscribing to Wealthfront’s Daily Tax Harvesting if you have $100,000 or more invested in the market.

Tax Optimized US Index Portfolio

Client who have $500,000 invested in a taxable account, or if they have more than this amount invested can seek the advantages of the Tax Optimized US Index by identifying losses and gaining from them in the S&P 500.

Both the abovementioned products can increase your investment portfolio’s after tax return significantly, which can be up to 1.6%.

Expert Software Engineers

Another thing which might interest you is the fact that Wealthfront’s software team comprises some gifted individuals recruited from a range of top companies like LinkedIn, Facebook, Google, Apple and Twitter.

All in all, Wealthfront has made it big as an automated investment service and employs the use of cutting edge technology to serve the needs of its clients.

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Trends in FX Trading 2014: Part 1

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GreySpark Partners have recently posted a report pertaining to the various explorative elements of the ripe but new A2A market, which stands for (all-to-all) in direct correspondence to Forex trading in 2014. The report stresses on how, with the massive increase in trading frequency, many buyside companies have now placed themselves on the side of spot Forex trades in the market areas which were before considered to be only used by Forex brokers and dealers.

After 2008, the occurrence of circuitous buyside-to-buyside spot Forex trading has increased when you talk about inter-dealer venues. The investment banks have also adapted to currencies dealings and business models to remain less competitive in the venues. Prime brokerages investment platforms which were run by inter-dealer spot Forex locations are a great example of the ground breaking technological progress and solution building which significantly aided in the expansion of buyside-to-buyside trading quotations and volume.

This slow and steady movement in spot Forex liquidity enables buyside market traders to demand the fact that a variety of electronic investment and trading platforms and solutions be sold to them from over the sell side.

According to the report published last month by GreySpark Partners which is a capital market consultancy firm based in London, it was revealed that buyside companies have now been trying to excessively access spot Forex trading via numerous spot Forex companies which were considered to be bank-only trading platforms. This report also gives a detailed analysis of how this has affected the Forex market, especially when talking about Forex trends in 2014. You will see that this recent development is leading to the rise of A2A markets which has the potential to spread over a variety of other instrument classes for example, Forex options and non-deliverable forwards in the future.

Senior consultant and co-author of the GreySpark Partners report on Forex trends, Russell Dinnage said,

“A GreySpark assessment of bank FX e-trading service offerings and a likewise survey of buyside opinions of those service offerings showed that, while all the banks reviewed offer strong principal trading business and dealing models that their clients find useful, the competitive battleground of the future is in the agency trading space. The leading FX banks must continue to develop e-trading technology offered to their clients via single-dealer platforms to build new agency dealing models that simplify and bring efficiency to the provision of liquidity or access to liquidity venues to their customers, which will ultimately reduce costs across the board.”

Direct Market Access

Another thing that was disclosed in the report is the fact that there are currently 3 top level banks that now provide (DMA), which stands for direct market access to their buyside customers to indulge in e-trade spot Forex within the market’s best inter-dealer platforms for spot Forex. There are various other banks that too, provide their clients high-speed connectivity to inter-dealers for spot Forex systems requiring the utilization of bank ID access codes to conduct spot Forex trading.

What this means is that while dealer and broker banks for Forex still maintain a bigger control of the extent of the liquidity that the market has in a spot Forex platform of an inter-dealer in a given day. The banks too are encouraging buyside customers to determine the extent of the volatility or the churn in the market. The banks are also encouraging their clients to identify the extent of market volatility in the spot market of Forex by making the entire process simpler for them. This effectively enables their client to touch base with various other market players, such as hedge funds.

The extent of buyside-to-buyside Forex spot trading has expanded significantly since 2008. GreySpark Partners agree to the fact that these alterations in Forex spot trading will place a benchmark for even higher trading volume in other Forex trading options. The fact that the overall level of Forex trading is increasing considerably, electronic Forex trading could result in lucrative equities, for instance, A2A market infrastructure for Forex spot trades to occur.

Forex options will essentially be traded via banks using multi-dealer trading venues and platforms with most of the venue becoming worthy of selection for the liquidity of calls and puts. On the other hand, it has been seen that sellside NDF trading could evaporate in the near the future, with ETF (Exchange Trade Funds) contracts being predominantly used to imitate market liquidity in currency markets that the instruments at present provide.

GreySpark Partners’ managing partner, Fredrick Ponzo was reported as saying,

“In 2014, already high levels of e-trading in the FX market are causing all-to-all market structures to evolve, especially in spot FX, where evidence of an equities-like trading environment is common knowledge to the majority of market participants. The next steps in this evolutionary journey will be for electronification of trading to increase in other instrument classes – standardised FX options could become nearly fully electronic in the next few years. These changes mean that the balance of power in the FX market is now shifting toward the buyside, away from the sellside, and banks must continue to find new ways to compete with each other for client flow.”

Concluding Thoughts

Overall the GreySpark report on FX trends for this year carefully evaluates electronic commerce and e-trading shifts and movements in trends which currently affect the Forex market along with the Forex options and the NDFs. However, it is important to note that the GreySpark report is in no way a prediction in regards to the rise of A2A markets in Forex.

The GreySpark report is a combination of a string of different reports which include ‘Trends in Equities Trading’, and ‘Trends in Fixed Income Trading 2014. The main aim of the GreySpark report on Forex trends is to streamline the variety of options offered by Forex trading and other products that are provided by the sellside this year along with promoting a bunch of other trading solutions and tools on a multitude of dealer trader platforms. So, this will enable you understand the trends in FX trading to a certain extent.

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The Risks of High-Frequency Trading (HFT)

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At the beginning of last year, the Members of Congress in the US, Edward J. Markey, stated algorithm trading or high frequency trading clearly corresponds to a high level of risk to the safety and permanence of the capital market in the US and the fact it should be truncated as soon as possible. And he isn’t alone in saying HFT does indeed pose considerable risks to the trading infrastructure.

Many financial analysts claim to back this same assertion with the proof taken from recent market events, such as the Flash Crash along with the loss Knight Capital as a result of a software malfunction. Mentioned below is the summary of the overall risk associated with high frequency trading:

  • The sheer speed of the trade puts most trading styles at a considerable disadvantage
  • High frequency trading intensifies market volatility
  • Most of the ‘other’ types of investors usually run away from it
  • HFT volume has a risky high proportion of the total traded volume

But it is also important to understand the fact not everyone agrees with the analysis made in regards to the potential dangers of high frequency trading. It is true the machines have taken over when you talk about modern trading. They have taken the place of human specialists or the smart market makers and a majority of the trading quotes, offers and bids which come flowing in today flow in through high frequency trading computers and systems.

And it is also true the Flash Crash that occurred back in 2010 is a great example of the dangers posed by high frequency trading when Waddell & Reed incorrectly keyed a trading order which resulted in a terrible market dive. HFTs went scurrying out of the scene as the market fell for a short period of time and there were no bid being placed and there were significantly big price dislocations demonstrated by the 10% market freefall.

A Drop in High Frequency Trading

Despite the fact that several trading companies get to enjoy the high speed benefits of HFT, it has been seen that there has been a considerable drop in profitability using HFT. If you look at the reports from 2011 and 2012, you will see that those years saw considerable drops (7.8 billion shares each day to 6.5 billion shares). The drop was of 17%. Another thing to consider is the fact HFT is all about speed and co-location.

HFT providers such as Citadel, Virtu Financial and GETCO have to all constantly bring in new technology and upgrade processing units to match each other’s speed. According to a report, it was revealed GETCO spent a total of $37 million on upgrades.

Lower volumes are bad for HFT solely because of the fact the lower the amount of the orders that enter the market, the fewer the opportunities to make a bid/offer. Another problem that isn’t highlighted much is the fact the amount of traders who want to willingly use HFT is dropping. One of the major concerns with HFT today is the fact that it might blow out of proportion in the capital markets, just like what happened at Knight Capital. Companies employing HFT and the HFT vendors have both failed to display a successful effort to manage and control high frequency trading.

The only things you need to have are state of the art evaluation and tracking control systems to prevent events like the Flash Crash from happening again. Because if HFT isn’t controlled, the losses could easily keep piling up and then you would need to place a more drastic countermeasure: a ban on HFT, which most traders suggest should happen now. But if you talk about the future and improvements, then taking a drastic step like banning it now could overcomplicate the situation.

The science of HFT systems and processors enable the computers to analyze and predict your moves in the market which mean there could be landmines everywhere you look. It is no surprise the framework of modern trading has been forever altered. A human hand that just takes a couple of seconds to conduct a trade now is replaced by a machine which can do the same trade in a millisecond or a microsecond.

The fact is HFT can neither be called bad nor can it be called good and that’s the way it’s going to be in the future as well.

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The Future of Trading – Part 1

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Forex Traders Chart

With so many technological advancements, predicting the future of trading can’t really be that difficult. Computers can break down currency transactions to search for good stock prices just as any normal trader would. However, the only major difference between human traders and machines is that machines don’t employ the use of chat rooms, which, if you can remember, have attracted a high degree of scrutiny from trading regulators who attempted to disclose all evidence leading to manipulative practices in the market.

And because of this high frequency trading is seen as a solution to the Forex market and has now become a benchmark in case of trading complications and a crisis in the markets. So, what are human traders to do then just babysit the algorithm trading systems? ICAP’s Justyn Trenner stated,

“To the extent the future is machines, its humans babysitting machines, it’s like the U.S. Air flight that landed on the Hudson River. The pilot had to control the angle of descent manually and used the autopilot to keep the plane level; Captain Sullenberger could only do this because he knew how to use the machine”.

And it is true when you think about it, because can you ever go to sleep behind the wheel after putting your car on cruise control? However, if you look at the algorithm and high frequency trading from a broader perspective, you will realize the machines can significantly aid traders in choosing the most perfect trade condition and help execute decisions fairly rapidly.

The chief execute of C-View, Paul Chappell said,

“[Algorithms] seem the most appropriate way to execute a trade. We have implemented a tool to take profit and stop losses on each currency. This program automatically puts a risk wrap around our trades, saving us the manual effort of introducing the same controls manually.”

Over the last couple of years, you may have witnessed a great deal of change in the financial community, more specifically in trading and the investment markets. There have been some cutting edge advancements made pertaining to how trading data and information is transferred and how traders use this information to conduct fast trades. Not to mention the significant progress which has been made in regards to how traders communicate with each other.

>The technology has made a great impact on the financial industry and has helped democratize entire equity markets. In simple words, traders are now seeing an end to trading floors where trades in stocks, commodities and foreign exchange. This is how technology impacted trading:

Simultaneous Access and Information Gathering

For a majority of traders and investors, the technological trends shifts in trading have provided a beneficial window of opportunity. And traders and investors these days and for the days to come will not have to lead a central position at an important hedge fund and neither would they have to work hard to make important connections with the brokerage community over at Wall Street.

This is mainly because of the fact that all vital information and updates pertaining to the stock and Forex markets are now made available instantly to all traders via news sources like CNBC and Bloomberg as well as on websites like Forbes.com and Seeking Alpha and social media networks like Facebook and Twitter. This automation and the free flow of financial notifications give a strong chance to every trader to make his trading decisions and implement his strategies. Information is now accessible to anyone and not just the top dogs in trading.

Individual traders can now eliminate the time limit and delays that over the years have accompanied trading reports pertaining to government inflation and corporate earnings and data. Traders of today and tomorrow will use different stock and Forex trading and investment platforms designed to help you trade via your smartphone, tablet, PC, and laptop from virtually anywhere in the world which means you will never be detached from the financial world. Plus, traders will also get financial notifications on the go using various trading applications.

Moreover, all this innovation has also allowed traders to come up with various types of strategic trading methods they implement in order to establish their positions in the financial markets for assets. Algorithm trading or high frequency trading have been established as the most popular form of trading traders from different financial firms have started to use. In fact, there are many recognized and well-known traders in the market who firmly believe that algorithms, along with complex charting and analysis of trades, can make traditional approaches to analysis and evaluation redundant.

Although this is disconcerting to some traders but you cannot undermine the fast developing trends technology is bringing, especially at this stage. It has therefore become increasingly apparent that electronic trading has taken over a considerable portion of both stock and Forex markets.

Increased Trader Competition

Ryan Jordan who is a market analyst at Prime Trade said that,

“It is now relatively easy for individual traders to gain access to a wide variety of asset classes, and to trade them high efficiency execution. This is why there is such a high level of competition from broker to broker to carve out larger sections of the market.”

 

If you look at it from a broader perspective, competition can be a good element here. And this competition has resulted in various brokerage firms drastically altering their approach in order for the financial communities to take notice. For example, most brokerages firms have guaranteed, that’s right, they have guaranteed stock and Forex traders a ‘trading execution’, which means they ensure traders their stock orders will be executed at exactly the price levels they want. But, as you may know, guaranteeing this is impossible when market volatility sets in, making price execution impossible.

Secondly, a majority of modern-day brokerage companies have explained price slippage can be devastating, especially when you’re talking about a highly volatile market. And this is where trading platforms come in and many platforms have undergone several improvements to guarantee efficiency in trading.

The future of trading is bright although it is too soon to be predicting any trends changes. When you talk about trading, marketing specialists have predicted that three or four year down the line even non-professional traders will also be able to establish themselves in the market for assets and the Forex market, which is a good thing.

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The Genesis of Algorithm Trading

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“Algorithmic trading frees you from the drudgery, but do you have good ideas? There aren’t that many masterpieces out there.”  EquaMetrics’ Christopher Ivey

Several traders and investors in the global money markets have been for quite some time transforming their entry, exit and financial management and investment strategies into automated computerized trading which in turn allows the computers to trade for them. And you have to understand that one of the biggest advantages of using technology is the fact that it complete eliminates any emotion. It takes the emotion and any bias right out of the trade.

However, it is also important to note that when you let the machine do all your work, especially when you talk about trading, there are bound to be a few mistakes and these mistakes can be pretty much devastating for both traders and the markets. For example, let’s go back to the ‘flash crash’ which happened back in May 2010. And it happened in August 2012 as well when the trading software used by the traders and investors at Knight Capital Group Inc. broke down. What this crash did was cause a series of unintended stock trades which resulted in a $440 million loss for the company.

And the irony of all it was the fact that Knight Capital Inc. was known in the financial world as a market trendsetter and trailblazer which employed the services of experts and seasoned traders and investment specialists who had the ability to monitor trades on both sides of a particular security to make sure that the market functions smoothly. However, despite the probability of setbacks, almost all of Wall Street now heavily depends on algorithmic programs to conduct trades quickly and decisively.

There is no doubt about the fact that many traders have mixed feelings about using computerized programs to run the show and say too much algorithm trading might just destabilize the markets. And another thing, algorithm trading isn’t something that was invented a few years ago. The concept was implemented several decades ago.

Algorithm Trading – A Look Back in Time

Back in 1951, a student from the University of Chicago, Harry Markowitz, acted on the advice of his Ph.D. supervisor, Jacob Marschak, and proceeded to complete his dissertation on how to successfully apply complex mathematical algorithms and concepts and fuse them with the financial world, more specifically, the stock markets. The result, however, turned out to be quite fascinating and transformed into a modern portfolio explaining the difference and conflict between a security and how it may affect the profits risk-averse traders demand when dealing in potentially riskier securities.

Back then, the normal method to calculate and determine a variance in securities included a thorough evaluation approach which was designed by John Burr Williams in the 1930s. Investors used Burr’s price-to-earnings ratios and other factors pertaining to the overall statistical health of a company or organization. These methods helped traders at the time to determine whether or not the real price for a security became a standard tool for analysts.

An Enhanced Trading Portfolio 

Once Markowitz came up with his brilliant new method, he aided in the development of various algorithms that do all the important and necessary calculations to make an enhanced trading portfolio. With his intellectual contributions and the advent of the IBM System/360 central processing unit in 1960, strategy traders and investors as well as various financial economists had the power to methodically evaluate millions of information and data centres that have been produced since.

Around the same time, there was another trading methodology that became popular, named the Signal theory, a strategy that implemented to extract various patterns and information from a given set of data. Stock charting experts and analysts were never too worried about the price of a security. What they were concerned with is how much would the price fluctuate. The data extracted or collected from a fluctuating stock price drops in value far too quickly. So, when investment companies were emphasizing on a core and fundamental analysis that would aid in the execution of trades stretched over a period of several days or weeks, the signals experts detect have to be executed right then and there.

Investment companies since then have been trying not to rely too much on human trade executions and decisions and that is why most of them switched to using computerized programs as algorithms are designed to conduct instantaneous trades on the fleeting information given. Long-Term Capital Management, which was established in 1994 by John Meriwether, employed algorithms and computer programs to identify tiny fleeting variances in stocks and securities so they could make hefty profits.

On the other hand, the company was also experiencing a shortfall in yearly profits solely because of the fact there were other firms which began to use algorithm trading technologies. This led to LTCM devising other strategies that didn’t quite seem to pan out and resulted in the fund losing everything in 1998.

With the downfall of LTCM, there was little consideration to the potentially destabilizing effects of algorithm trading in the money markets. And within a decade or so, algorithm trading transformed into nano-trading. Nano-trading is all about catching the signal faster than others. Even a second seems like forever in the financial world. For example, an algorithm trading centre near the New York Stock Exchange would use its servers to detect and catch signals a millisecond faster than a nano-trading company which is further away from the stock exchange.

It is also important to understand that traders and investors, even small ones, would never attempt to rely on the basic fundamental evaluation methods. And according to reports by chartists, algorithm trading will rule the trading world and looking back at history, it is makes sense to expect more problems associated with algorithm trading in the future.

Although algorithm trading has its merits and can prove to be a money-making tool, if executed correctly, at the same time it is also imperative you never substitute the use of technology for cleverly thought-out and well-executed trading.

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Technical Analysis: Why Bitcoin price is falling?

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According to Bitcoin technical analysis, it has been identified that the uptrend is likely going to be reversed from current market levels. An enthusiastic market breakout has drizzled which has ended up losing the vital momentum. If the resulting downwards trends is just a correction, there may be a powerful turnaround in the market in the near future. However, if the big players in the Bitcoin market fail to be on top of their game, things could take a turn for the worse.

Takeaway

It is important that traders and investors both be careful and prepare for a powerful price reversal. The advance has been losing critical momentum because there have been several indications market conditions are worsening and it is experiencing a lack of volume in terms of transaction and reduced trader participation. It has also been identified the prices will reverse from current levels and will bounce back to $600 and will retrace almost 50% of the advance, which is $520. It is important you understand that the idea of complete price retracement and resumption remains active.

A Comparison with an Earlier Advance

According to the Bitstamp Daily chart, which has been indicating a price action since March 2012, the strong advance which took form in October last year is being supported by the analogous behaviour of the momentum signals, with MACD being at the lower half of the chart. On each consecutive higher level shown by the MACD, the market price has formed an equal high. This coordinated action between the price and the indicator paves the way for the advance and as you can probably see, the results become quite evident in November high.

If you look at the right side of the chart given below, you can see the current advance making a local high, but compared with the peaks formed during the downfall, the local high can still be considered a lower high. However, if you take the momentum indicator into account, you will see the price has increased to the correspondence of a MACD rise in January, but the actual price cannot be seen anywhere near this peak. This occurrence is what is known as “reverse divergence” or “hidden divergence” and is displayed on the chart by red lines which are connecting with the higher highs.

Bitstamp Daily Divergence

As you can probably see, the volume of trade has substantially but gradually declined during its downwards spiral from the November high. If you are thinking something here isn’t what it seems, you are right because a supposed breakout has now advanced on a seriously low volume in the market.  Notice how the rise in price in October 2012 could also be associated with higher volume than the current advance. And that too in a period when Bitcoin adoption and participation was recorded at considerably lower levels compared to the penetration which has been achieved presently.

So, a reduction in trade volume in the market during breakout directly proves the movements in the market are not wide enough. This could be due to the fact that some of the big players with larger holdings have decided to exit that market or smaller traders have decided to release their holding in the exchanges while the big boys sat idle. You really don’t need to be a rocket scientist to figure out what happened here.

Bitstamp Targets

Viewing the Bitcoin prices charts from various other exchanges, Bitstamp and BTC-e for example, strangely indicates vague statistics.

In accordance with the four-hourly chart given above, Bitcoin prices are now nearing another falling trend-line (illustrated in red), and this one could possibly a nemesis to the advance. The two pink lines on the chart indicate a ‘Regular Divergence’ which is directly associated with the MACD indicator as shown at the bottom.

On the other hand, it is true that regular divergence can compound a couple of times. This occurrence works in tandem with the reverse divergence indicator on the four-hourly chart and should ring a bell. Although regular divergence can compound multiple times, the occurrence of this divergence in tandem with a reverse divergence signal on the daily chart is alarming. You should realize by now the Elliot Wave count indicates the current advance as rising to correction.

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