2018 Guide to Trade Bitcoin Futures

I’d like to wish all of you a very happy and prosperous new year and one of the goals I have for 2018 is to explore things I did not do in 2017. What better way to start than by getting my feet wet in BTC trading? I had put away trading bitcoins for some time as I did not want to open separate trading accounts just for these crypto-currencies. I just logged into my TD Ameritrade account to find out that they are offering both the CBOE and CME Bitcoin Futures for retail investors to trade. And now that its finally trading on the US Stock Markets, I decided to give this a try on the first trading day of 2018.

My First Trade on BITCOIN

xbt long 02-jan-2018
Screenshot of /XBT Chart  from TD Ameritrade

I traded on a single contract of /XBT and went long at 13,360 as there was minor support at that level. This was a slightly aggressive trade with a tight stop loss, and the trade started working in my direction. Usually I would have scaled up this position on the way up, but with the high margin and trying out a new product for the first time, I decided to stick to just the 1 contract and exited at 14,090 when the underlying hit the 200SMA on the 15min chart.

Profit per contract: $14,090-$13,360 = $730
Time in Trade: A little over 7 hours

CONTRACT Specifications

For those of you wondering about the differences in the two Futures Contracts, here are the summaries of both of them.

btc
Click here for CME Contract Specifcations!

xbt
Click here for CBOE Contract Specifcations!

Things to Note:

1. Spread Size: Because these futures contracts are still very new and not even a month old, the volume in these is quite low. So when you are trading these, its important to note that your STOP LOSSes can’t be too tight because you will be taken out very early. Also right when you enter the trade, you will see an open loss on the position as the spread is about $50-100. So you would need to make at least a profit of the spread size to break even and if you want to close your position immediately after opening it, you will be definitely looking at a loss.

2. Margin Calculations: Margin is calculated based on what BTC is currently trading at right now. So if you want to take a position in these for a long term, make sure you factor this into your calculation before getting into it. So this means that its a dynamic value and you need to make sure you have enough cash in your portfolio to be trading these futures. Because if it goes onto a strong rally, and we have seen this to happen within a day, you might be required now to put up a lot more margin than what you had originally used to get into the position. On the flip side, your margin could also drastically reduce, if the BTC falls as margin is always calculated as a percentage of what BTC is trading at right now. Also exact margin amounts will be different for different brokers. The ones mentioned above are what my broker is offering which is TD Ameritrade.

3: Volatility: Finally, if you can’t be making money trading S&P 500 Futures (/ES), Gold (/GC) or crude oil (/CL) you should not even be thinking about this. BTC is a lot more volatile than any of these underlyings, and so unless you are consistently able to make profits trading these underlyings, it would be foolish to try the BITCOIN futures. The daily range of BTC from what I saw in the chart of the last few weeks is easily a few thousand dollars – and you are never ever going to get that kind of volatility in trading S&P or Gold Futures.

BITCOIN ETFs

If you do not want to trade the futures, “ARKW” is an ETF that is attractive which has some exposure to Bitcoin. In fact the top weighted holdings in this fund is for “GBTC” and holds other tech giants like Amazon, Twitter and Netflix. Here are the top 10 holdings,

ARKW
Source: https://ark-funds.com/arkw

And if you need more information on what GBTC is, you can use the link here to read up more on their website here,
What is GBTC?

What CRYPTOS should I consider?

If you want to be trading or investing in any other crypto-currencies, make sure you look at the market cap and invest in the ones with the largest market caps. Here are the top 10,

top 10 cryptos by market cap
Source: https://coinmarketcap.com/

BITCOIN Scams

Finally there are a lot of scams out there, now that everyone is talking about it. So make sure the next BITCOIN related thing you hear that can make you an overnight millionaire and that it can give you passive income and guarantee you 1% per day and at least 140% in 6 months is all a big load of BS. So learn how to invest in the coins directly or trade them through the futures. Here is a list,

bitcoin scams
Source: http://badbitcoin.org/thebadlist/index.htm

 That is all I had to share at this point about my experiences with BITCOIN trading so far. If you found value in it – please do like, comment and share it with all your friends. Happy 2018!

How do I get started?

Before you climb the mountain, you need to know that you can do it. If you are not sure, find someone who has done it and follow him. So here is my story,

My story on Straits Times

There are many many books out there and one is often confused on which books to read first to get you started. After having read over 500 books myself in the last 4 years, the books mentioned below are those that had a great impact on me. If you are completely new and want to trade for a living, I’d suggest to follow the books in the order mentioned. The ones with a (*) is my favorite book in the category mentioned. Happy reading!

“The best time to take action toward a dream is yesterday; the worst is tomorrow; the best compromise is today.”

Motivational:

*Rich Dad Poor Dad – Robert Kiyosaki
Think and Grow Rich – Napolean Hill
Awaken the Giant Within You – Tony Robbins
The Art of Thinking Clearly – Rolf Dobeli

Trading Psychology:

Reminiscences of a Stock Operator – Edwin Lefèvre
*One Good Trade – Mike Bellafiore
Disciplined Trader – Mark Douglas
Trading for a Living – Alexander Elder

Options Trading:

Options Futures and Other Derivatives – John C Hull
*Options as a Strategic Investment – Lawrence McMillan
Options Volatility and Pricing – Sheldon Natenberg
Options Greeks for Profit – J L Lord

“For the things we have to learn before we can do them, we learn by doing them.” ― Aristotle

By now you should have been motivated by the books mentioned above. If that was not motivating enough, then you can read my story which is a lot shorter and get inspired.

Now that you are motivated and ready to learn options trading, you should read up on the basics of what are calls and puts, basic options trading strategies, option pricing models and the impact of volatility on your trades. These topics are easily available online but I would recommend to use this free resource right here as its organised well,

Free Resource to Learn Options Basics.

Once you have a full understanding of this, then I highly recommend you take my introductory course in order to cement your understanding of these basics. This also serves as the pre-requisite to my premier programs, and if you are considering about accepting me as your mentor, this is a must.

TradeShifu’s Introduction to Options Course

Once you have reached here, you should have a good understanding of the basics of options. However to be able to do some trades using this new instrument that you have just learnt, you should be able to analyse charts and be able to do some basic technical analysis to make an informed decision of which way you want to be trading. Even if you think you are an expert in charts, please do brush up your skills here,

http://stockcharts.com/school/doku….

Finally, now you are at the last step in your conquest to make money from the stock market. To be able to do execute your trades, you need a broker who can do it for you. My personal top 2 US stock brokers are TD Ameritrade and Interactive Brokers.

– If you are a Singapore/Malaysian resident, I would recommend you opening an account with TD at the below link,

(I might be able to get you a huge discount on your trading commissions, pm me to check if you are eligible)

You do not have to fund your account just yet nor do you have to risk your hard earned money straight away. Most of these brokers provide access to a virtual/demo account when you create an account with them. I would suggest everyone trade on this virtual account and master the use of the platform so you can get the most of it. I personally traded on a virtual account for 7 months before going live. The objective when you are demo trading should be that,

1) Trade as if it was real money and react to positive/negative trades accordingly.

2) Make all the mistakes here on the demo account and learn from them as they will be invaluable lessons for the future and a tonne of $$ saved.

3) You can convince and prove to yourself that you have developed an edge in the market and been able to generate consistent profits month after month.

Now you are ready to face the beast in the real world. Get your battle gear on and begin your trading journey.

“You don’t learn to walk by following rules. You learn by doing, and by falling over.” ― Richard Branson