In this episode of Truth About FX, Walter digs into cryptocurrencies — is this legit or a big scam? He tackles the issues that surround this why he doesn’t like to trade stocks. He gives some useful insights on how you can minimize risks and gaps should you decide to trade these. And is it true that the bitcoin is a bubble? And what should you do in case it all blows up in the market? Find out more in this episode…

Download (Duration: 07:54 / 9 MB)

In This Episode:

00:55 – owning it

01:40 – it’s atypical

02:53 – flash crash

04:35 – bumpy road

06:16 – scary

Tweetables:

Find a yourself a good broker [Click To Tweet].

Calculate your margin  [Click To Tweet].

It’s a bubble [Click To Tweet].

Announcer: Sometimes, forex trading is a wild and wooly place to be. That’s why Hugh is here, to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.

Hugh: Hi, Walter. What do you think about trading cryptocurrencies? Is it something that people should maybe check out or is it all a big scam?

Walter: There’s a couple of issues here. If you are actually physically buying it and not trading it like as a CFT — CFT is a contract for difference where you can trade gold and silver. You actually don’t own the gold and silver just like you don’t own bitcoin or whatever. You can trade those, the market movements, without actually owning it and so it’s a derivative.

It’s not really doing it now. The issue with that are the same issues that you come up with regular, like choosing a broker. Things like gaps can be an issue. I’ve heard, if you’ll look at the bitcoin chart, as we record this in end of 2017, it’s very choppy. There are a lot of gaps.

One of the reasons why I don’t like to trade stocks is because they are very gappy and you can easily imagine yourself getting gaps over your stop. I’m sure it must have happen all the time to people so you think you’ve managed your risk.

To be fair, that can happen when you’re trading forex as well but it’s just that the chart, it’s atypical. Sometimes you get that weekend gap but you don’t get three gaps a week. That is the thing to think about here.

Number one is can you find a broker who’s not totally dodgy. I’ve heard that there are several cryptocurrency brokers who are catering to the cryptocurrency traders who are really dodgy right now because it’s just a hot thing as we’re recording this.

Number two is how do you deal with these gaps? You’ve got to calculate your marginal requirements and all that, assuming that you have access to CFT broker. You have a CFT broker who allows you to trade CFT bitcoin or CFT ethereum or whatever so you’re trading it. What happens if you get gap over?

The other side of it is were you actually physically buying and selling? Do you actually truly own bitcoin in your wallet and all that? That’s another thing. Again, I’ve heard — and I don’t know if this is true because I’m not doing it — but I’ve heard, my understanding is that they’ve had something like the exchanges have gon...