Can anyone tell me some basics about trading on bitcoinica for a total beginner?
I don't want to hear, 'don't do it or you'll get zoutanged' I'm aware of the risks and curious to try it out.
At the moment I have deposited about 30btc in there but haven't seen any interest appear yet, thought I would have by now its been a few days..
if i wanted to go short on bitcoin and put a stop loss on that how would i do it?
If I wanted to go long on bitcoin and again put a stop loss how would i do that?
I'm a little unsure what the order types are and what the little target checkbox is for
Thanks for any help
Hi btcgoldsilver,
right at the moment bitcoinica is taken offline, due to a security break and proabably a theft.
This is the second time it's happening to them, and the last time they covered all losses and just continued business as usual.
Having said that -- trying out bitcoinica is an valuable experience, if you're able to control yourself and know the risk.
The most important thing to understand is that you're allways working agianst the spread (the difference between the buy and sell rates). This spread is the real market spread increased by some amount, which is the fee bitcoinica is taking its profit from.
The point is: you have only one position in your account, and the buys and sells do match and neutralise each other.
Thus, if you start with a buy order, you're automatically going long. Your buy is executed at the current
buy rate, as shown on the page. When you later place an sell order with the same amount, that sell order is also executed at the current
sell rate, and it will cancel out your position. If the sell rate is higher than your previously used buy rate, then you make profit. Otherwise bitcoinica makes profit and your loss is covered by the funds you put in at start.
if i wanted to go short on bitcoin and put a stop loss on that how would i do it?
If I wanted to go long on bitcoin and again put a stop loss how would i do that?
You go short by selling BTC. Later, you'd close that position by buying the same nominal amount of BTC back. Thus, basically you open that short postion with a sell order and close it with a buy order.
Now what you want is a stop loss. That is, you want to close that position automatically.
Thus you need a suitably sized buy order, which is executed automatically at a rate which you can set up up front. This kind of buy order is called a "stop" order. Thus, you'd edit the rate in the input field, and choose "stop" as a type and then enter that buy order as well. Obviously the rate you enter needs to be
above the current buy rate (otherwise that order would be executed immediately).
Placing a stop loss for a long position is basically the same logic, just all directions swapped.
You open the long position by buying, thus you close it by selling. Thus your stop order needs to be a sell order.
And it needs to be
below the current selling rate, otherwise it would be executed immediately.
So far for the mere mechanics. Does this make sense? Do you need additional explanations?
Maybe you've noticed allready the twist, which makes bitcoinica tricky and risky to use: The spread is your enemy. If you go long, you buy at the buy rate, and the corresponding sell rate is
allways lower. Thus, you immediately start out with a nominal loss on your position. Only if the marked moves up considerably, so the current sell rate goes above your opening buy rate, then you start making profit. Add to that the fact, that BTC rates are volatile and allways swinging up and down. So, unfortunately the result is that you can't set up a sensible stop order right at start, without that stop order causing a loss to you if it is actually executed. Only when the marked has moved to that extent that you start making considerable profit, then you can adjust your stop orders so that they prevent
any loss and really protect your positions.
Having said that, you really need to set up stop orders whenever you walk away, even if they mean you could make losses. See it the other way around: the stop order prevents you from making more losses. Of course, its a matter of experience to set that stop order so far away as to make it unlikely that they execute accidentally, but not so far away that they ruin you
I'm a little unsure what the order types are and what the little target checkbox is for
- market - the order is enqueued and executed as soon as possible, taking just the current rate
- limit - the order is executed only when it stays within the given limit
- for buy orders: if the actual price is below
- for sell orders: if the actual price is above
- stop - see the explanations above. Basically here it is the price which triggers the order becoming effective
- trailing stop - well... please forget about those, they are extremely dangerous and difficult to manage and rarely usable.
The little target checkbox is a convenience shortcut for placing a limit order with the current rate. Useful if the market is moving heavily, because then with a mere "market" order you might end up with quite a different rate during the (usually short) delay between placing an order and the actual order execution.
hope that helps
Cheers!
Ichthyo