Bitcoinica, Short-sales, and profit

[BitMagic]

I have some questions about the operations of Bitcoinica (and Forex brokerages in general, if they indeed are the same). I am specifically referring to a post in the General Discussion section, quoted below:

Most BTC Exchanges vs Bitcoinica

1) agency trading (majority of BTC trading) vs principal trading
2) commission charged vs no commission
3) no leverage allowed (majority of BTC trading) vs leverage allowed
4) client orders can change the inside market vs client orders can not change the inside market
5) your order can't be traded through vs your order can be traded through without a fill

Some clarification questions:

-For 1), Bitcoinica acts essentially as a 4th party in trades. On Mt. Gox, Mt. Gox is a 3rd party facilitator between two individual traders. With Bitcoinica, I trade with Bitcoinica, they trade with Mt. Gox. This is why 4) happens, as well as 5). Correct?

-Also, how do deposits work with these kinds of brokerages? I see something about Mt. Gox redeemable codes, which I don't understand.

-Bid/Ask spreads: What is the superscript number above these values?

-I'd like to short-sell! So I have questions about how these work. My understanding is the following: I deposit money with them, and they provide me with a balance I'm allowed to trade against. I can place a sell order for BTC without owning any. I can place a buy order at any time, the difference in sell/buy price being mine to keep, positive or negative. If prices exceed a certain amount, a margin call is automatically imitated and I am forced to buy at that price. Points to note include the prices I can buy and sell at (the spread offered by Bitcoinica), total maximum transaction value (looks like 50 BTC allowable? Is this what they mean by liquidity?), my tradeable balance (determined by total deposit and leverage ratio, correct?), and the margin call. Am I on the right track?

Besides corrections on any of the above, can someone describe how I rould calculate the exact margin call price and how it relates to a multi-trade position and total deposits I might hold, my tradeable balance, etc?

I'd ultimately like to put together a spreadsheet that will tell me what bid/ask spread values I need to see in order to make a profit for any given sell/buy amount, obviously coupled with what level of deposit protects you against margin calls given current volatility.

Without even a back of the envelope calculation, my gut tells me that with such a low leverage ratio, wide spreads, limited transaction sizes and the current volatility of USD/BTC prices, short-selling on Bitcoinica will provide very limited profit opportunities even if you avoid a margin call.

I also saw this (paraphrased) in a thread over in Speculation. Anyone want to comment?

Short-selling BTC with so few transactions and market capitalization is insanity

Edit: Hell, might as well add one more - explain sniping and hunting, and how we might catch it? Sweet.

[nmat]

I am also interested in some of your questions.

About deposits: You can transfer money from your MtGox account to your Bitcoinica account. Just go to Withdraw (on MtGox's website), choose Redeemable Code and then enter that code on Bitcoinica's website. It's instantaneous. Note that Bitcoinica does not hold any money. The money is kept at MtGox.

[BitMagic]

I am also interested in some of your questions.

About deposits: You can transfer money from your MtGox account to your Bitcoinica account. Just go to Withdraw (on MtGox's website), choose Redeemable Code and then enter that code on Bitcoinica's website. It's instantaneous. Note that Bitcoinica does not hold any money. The money is kept at MtGox.

Very strange. So when does Bitcoinica call in on the transaction from your Mt.Gox account? Also, Bitcoinica claims to accept wire transfers. How does this work if they don't hold any cash?

[nmat]

Very strange. So when does Bitcoinica call in on the transaction from your Mt.Gox account? Also, Bitcoinica claims to accept wire transfers. How does this work if they don't hold any cash?

Maybe I wasn't clear. The money goes from your account at MtGox to their account at MtGox. When you wire them, the money goes to their bank.

I was just saying that they are not the ones responsible by the safety of your money (at least entirely).

[BitMagic]

Ah, awesome. Thanks for the clarification.

[Troll Toll]

I don't rearry trust bitcoinica. can't tell ya why though.

[Alex Fenner]

I don't really trust them as well. 

[BitMagic]

Neither do I, but I think it would be fun to play with $10 bucks or so. But I really need to figure out the calculations necessary for profit. I'd like to learn more than wikipedia about bucket shops.

[bacchist]

Do we really need bucket shops adding instability to the currency?

[Portnoy]

Interesting. 

[BitMagic]

Do we really need bucket shops adding instability to the currency?

Nobody needs bucket shops in the sense that I was referring to, the fraudulent business practice. You can have Forex-style brokerages without the scam. Using Bitcoin? Sounds fishy.