Topic: Futures and Stock trading denominated in bitcoins (Read 4172 times)

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I am working on this since July 2011.
Here is one of the threads - https://bitcointalksearch.org/topic/icbit-derivatives-market-usdbtc-futures-trading-live-50817

However due to problems which would arise with liquidity and great demand in a good quality currency exchange, I decided to make the trading engine universal and start from trading currencies. After it's done and there is a currency market, then I wanted to add a futures market (short intro is on the website - http://icbit.se/node/2).

1QaZ - maybe instead of redoing all the work (imagine, I spent almost a year on all the preparation stuff, and I'm not alone), you could join us? I was looking for an experienced futures trader, however I couldn't find anyone back then.

I'd rather not hijack this thread to discuss trading strategies. Perhaps you could create a separate thread for it.

Have you see this? http://www.investopedia.com/articles/trading/08/turtle-trading.asp#axzz1moP6uutb

If your entry is precise, you should never need to hold for more than two to four five minutes bars to take your first target successfully. Two points on ES is $100/contract.

How successful are you in trading?

This is certainly an interesting idea!

All of them, of course! You can never have too many domains. But for the main site, you really still need a .com, and those others can forward to it.

We are considering the following domains. Anyone care to comment which one would be preferable?

btcfutur.es
bitfutur.es
btctra.de

Bitcoinica trades BTC like forex. You actually are buying BTC from and selling to them. The quotes are their quotes to you, not price discovery from bid/ask like a real exchange. This is how most forex works. You are not buying from another trader, you are buying from the forex broker. They will take a small slice off your trades. This is great for Bitcoinica and forex traders should be fine with it, but as a futures trader, I would never trade in such a manner.

We plan to be a real exchange where traders take each other's bid and ask. This facilitates price discovery and avoids conflict of interest issues.

What I mean is that most futures traders hold their contracts for a very short time. For example, when I trade the S&P futures, my average holding time is about 15 minutes. Most traders exit and re-enter futures trades many times in the day and most of them flatten all positions before the end of the day.


A trader closes a long contract by selling a contract and a short contract by buying a contract.


95 to 99% of futures contracts are closed by the trader before delivery date. Physical delivery is rare and occurs electronically. i.e. gold in a depository, etc.

Futures are mark to market, i.e. The difference in value is settled at the end of every day.

http://en.wikipedia.org/wiki/Futures_contract

Do you intend to become in the future a competition to Bitcoinica?

This sounds even more weird.

I could maybe understand you transferring the contract within a day, but closing it?

What does that even mean?

Say you contract with me to take delivery of 10,000 pork bellies on 1st december.

How do you "close" that? Is there some default you pay?

Or have you already paid me for the bellies when you "opened" the contract, and "closing" it merely means telling me I can keep the cash but please do not actually send you the bellies?

I could understand you selling the delivery to someone else, so come dec 1st you'll tell me hey by the way here is my new shipping address, so-and-so will be there waiting for the bellies instead of me".

But "closing"? I don't understand... if everyone is doing that, can I basically just eat my bellies and contract to deliver them too, knowing no one is ever actually going to take delivery so I might as well eat them myself, no one will even care?

I thought the "hedging" part of futures was (a) I know I got paid for my bellies so I can use the money to buy food for the pigs so as to create the bellies; and (b) you know how much the bellies you'll be taking delivery of in december cost long before december.

-MarkM-

Technically, yes. But in reality, futures are a speculative and hedging instruments. Most futures contracts are closed on the same day as they are opened. Also, there is the concept of a continuous contract that automatically rolls over to the next expiration. That way, you never actually deliver anything, your position is exited at a profit or loss when you wish. Of course, if your position goes against you so much that you violate margin requirements, it may be liquidated but responsible traders who trade with stops never encounter this situation.

I guess I do not understand what you mean by futures contracts.

I thought they are things like "10,000 pork bellies on 1st december".

If you never actually plan to buy any actual pork bellies, won't you be stuck when someone actually lets the contract run its course instead of selling it off to someone else who sells it to someone else etc?

Come the delivery date, who-ever is stuck with it is stuck with taking delivery of the actual thing contracted to be delivered, aren't they? And presumably thus someone is also stuck with having to actually deliver it?

-MarkM-

I appreciate your concerns and thank you for vetting the system. Its certainly beneficial to others.

We plan to start with the simulated trading and then add instruments as soon as we have a certain minimum number of participants who have tradeable accounts. That way risk of low liquidity can be mitigated.

Our trade API should also allow participants to write automated market makers and arbitrage applications that would add to the overall liquidity of the system. The simulated environment allows them to test their apps before sending orders in larger quantities to the real market.

Good luck getting participants.  I predict insurmountable liquidity issues, but don't let me stop you.

For such a situation to arise, there should be absolutely no bids below. This basically means that the market has shutdown and every order has been removed suddenly. Bitcoin being new, there are no guarantees it will never happen but it is extremely unlikely. Look at the order book on Mt. Gox for instance, the order book is always full at very fine granularity.

Even in the unlikely case that the market only has two participants and your buy moves against you, the person who sold short eventually would place a bid to buy back his short.

Even if he forgot about his short (or died), we would need to place a bid at the minimum price, ie. 0.0001 and your trade would be liquidated against it. These scenarios occur very very rarely. For example, such an event did occur during the May flash crash.

The problem you are considering is a very theoretical one and does not occur even in the thinnest markets except in extremely rare circumstances. There is always a bid or an ask somewhere.

In any case, we plan to offer automated trade management, i.e., when you enter a position, the system will automatically place stop loss and target orders for you per your configuration. Trading with stops is a very good practice and you should never need to encounter an adverse move so bad that your position needs to be liquidated.