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Author Topic: What is Bitcoinica's P/L?  (Read 1920 times)
alan2here
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December 22, 2011, 08:12:05 PM
 #1

I have a trade with leverage on Bitcoinica. Whats does the P/L value that each item in the list of active positions has represent?
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ultima
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December 22, 2011, 08:26:50 PM
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profit/loss
alan2here
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December 22, 2011, 09:51:32 PM
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ty. Presumably having used "buy" and put a value in Bitcoin when I "liquidate" I gain or loose all the bitcoin that value represents?

However the loss is increasing as the price increases, perhaps I have it set the wrong way round.
alan2here
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December 22, 2011, 10:44:07 PM
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Both a buy with leverage and sell with leverage result in making an increasingly larger loss over time despite the price of bitcoin rising, I'd apreceate a hand, perhaps I've missed something. The Bitcoinica help forum replied to my question about this sort of thing there with "the best way to learn is to try stuff" and immediately close the thread.

It sort of looks like there is some constant tax on thease transactions that drains the P/L all the time and the price must rise faster than it to make a profit?
dree12
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December 22, 2011, 11:41:24 PM
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It's possible you have a short position, as in you sold instead of bought bitcoins. There is no "constant tax".
alan2here
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December 23, 2011, 12:48:24 AM
 #6

ty for this info. Performing a sell (short) would have been really profitable during all that time the price was dropping, there must be a catch. It would be nice if there were more people around to help, gtg now and leave things as they are, sort it out tomorow.

The system won't let me liquidate atm, trying to just makes more orders and I keep getting "Your order cannot be canceled".

It could cirtainly be more user friendly reguarding why usually when an order is placed, at least for me it disapears a minute or so later and the log just shows it as "invalid".
sgbett
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December 23, 2011, 01:12:32 AM
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The spread is a bitch - makes trading difficult. As soon as you get any volatility or movement to trade on the spread widens which totally screws your ability to get any decent profits.

I am only using bitcoinica for extra leverage on a long term long position now. Leave plenty of free margin to avoid liquidation, you'll still get a bigger exposure than buying outright, with manageable downside risk, and unlimited upside.

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alan2here
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December 23, 2011, 01:27:51 AM
 #8

ty. What is spread and why is it an issue?
dree12
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December 23, 2011, 01:32:24 AM
 #9

Spread is the distance between the two prices displayed. The higher price is the one you buy bitcoins at. The lower one is the one you sell bitcoins at. Because of this spread, one will have a loss immediately upon assuming a position until the position turns a profit.
alan2here
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December 23, 2011, 03:56:26 PM
 #10

ah, so with high leverage thats a big chunk of loss as soon as you buy no-matter what happens if there is a high spread due to high volatility.

Is spread roughly the same over all excanges in the same way that price dosn't vary much between exchanges?
ultima
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December 23, 2011, 06:17:56 PM
 #11

Bitcoinca spread is different than other exchanges.

It is based on mtgox order book. They place buy and sell offers where there is enough bids and asks in mtgox order book, so they can always hedge their position when you click BUY or SELL.

If you place buy order at the lower end of the spread it wont get filled unless the price moves down significantly, and your offer hits the higher end of the spread. This is because bitcoinica is not exchange. When you buy, no one needs to sell on the other side. It is bitcoinica that guarantees liquidity and they are on the other side of the trade.

Traditional exchanges don't do that. If you place a buy order at the lower end of the spread and someone places a sell order at the same price you will get your bitcoins, but the spread will not move.

You are not actualy buying and selling bitcoins when using bitcoinica. Bitcoinica vs. exchanges is like gold futures contracts vs. buying physical gold.

If you are looking to buy bitcoins, use real exchanges instead. It will be cheaper and you will hold the real stuff. If you want to short sell or leverage your existing bitcoin position on the long side, then you have to use it (or you can borrow cash and buy bitcoins, it is the same thing).
mjcmurfy
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December 24, 2011, 03:10:23 AM
 #12

My advice to you would be to just forget about trading on margin - for the moment at least.

You don't know what P/L means, what the spread is, or the difference between a sell or ask order. These things are really _really_ basic. Knowing what they are is the absolute minimum requirement before you even log into bitcoinica, let alone place any live orders. And you will need to know a LOT more than this if you intend not to lose the entirety of your investment.

I think your best option is to trade directly on the exchanges until you have more experience and have an adequate understanding about the risks you are taking when you trade on margin. A good place to start learning is at investopedia.com. They have a lot of great articles on a broad range of topics.

It might seem easy to learn and get good at margin trading, but trust me.... it really isn't. Despite how it may appear, what with all the rationalization that goes on in these forums, those who have been successful at it have just been lucky that their trades went in the same direction as the trades made by the bitcoin elites. And even when you do make the right calls, you can still end up losing money due to the volatility of the market and thus the spreads on bitcoinica.

Also, another requirement to be successful at this is a huge wad of capital! In the real world markets, you might as well throw your money into the wind if you trade on margin with less than $10,000 starting capital. You need a very large buffer behind you if you hope to be able to withstand the short term fluctuations in the market and not get liquidated by sharks. Unless of course you intend to use a short term trading strategy, which will all but guarantee that you end up getting wiped out sooner or later no matter how good of a trader you are. You might aswell set your money alight, at least that way you will get some value from the heat it produces!

There are people who have been doing this for a long time with many thousands of coins/dollars, and people with degrees in economics, mathematics, statistics and other 'ics and 'ologys, who still end up losing huge chunks of money trading on margin. The vast majority of people who try it will lose more than they ever win.

It really is no better than 'investing' your money on the roulette table. But at least with roulette, you are playing a fair game of chance. You can't gain any advantage by playing with more money than everyone else. You can't move that wheel with your dollars, no matter how many you care to throw at it. And the people you play with do not spread misinformation to further their own underhanded motives.

http://www.bitcointorrentz.com/images/bct_button_117_30.png - BitCoinTorrentz.com: High-speed HTTP torrent downloads. 0.05 btc/gb. Up to 50% discount with free membership!
phorensic
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December 29, 2011, 09:40:08 PM
 #13

http://www.babypips.com/ is how I learned everything I needed to know before playing with Bitcoinica.  Took me a month of trading before I had a full grasp on it and now I'm kicking ass at forex+leverage style trading on Bitcoinica.
alan2here
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December 30, 2011, 10:36:07 PM
 #14

One always risks loosing the entirety of their investment. There's no way around that when betting on something as irratic as the Bitcoin vs USD price over time.

I know that to profit reiably without just as many losses you'd have to get lucky, know something others didn't or be trading at a time when the whole market was doing increasingly well over time.

Although Bitcoinica could be more beginner friendly, even just by rewording things a bit.

Thanks for the link.

I'm not going to put a large investment in, apart from the obvious roulette issue a downward spike can only clear you'r investment, putting you back at step 1 but without the small amount you invested, so more funds then need to be added. But an upwards spike as I understood it has no upper limit, it's a shame we are limited to 1:10.

As I've understood it in general real markets are an ass, huge taxes everywhere, if under another name and it's deliberately difficult for beginners.

I wonder if you could leavage 1:0.2 for example in a volatile non Bitcoin market, you wouldn't get as much profit but you wouldn't stand to loose so much either.
mjcmurfy
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December 30, 2011, 11:51:52 PM
 #15

it's a shame we are limited to 1:10.

Whatever you say, my friend. In my opinion, you are lucky that you do not have that gun with which to shoot yourself.

I'm not going to add any further to my post above, as I think I have already covered all the basic warnings. But I think you should be aware of the fact that some of the more experienced people have recently pulled their bitcoin out of bitcoinica due to certain worrying issues that they have been experiencing. Go to the speculation forum if you want to find out more -> https://bitcointalk.org/index.php?topic=55938.0

There is no such thing as easy money, except of course by parting it from those who are, shall we say, credulous? That is quite easy to do.

http://www.bitcointorrentz.com/images/bct_button_117_30.png - BitCoinTorrentz.com: High-speed HTTP torrent downloads. 0.05 btc/gb. Up to 50% discount with free membership!
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