Ok I have lots of btc a friend of mine turned $5k in btc into $240k in 5 years. Since this is the guy i sell my coins to at face value to cash out of btc poker sites he has no incentive to teach me how to leverage. Right now btc is going to stay under 4 figures i want to short it but don't know how the hell u make money predicting that btc will stay low.
In the meantime im supposed to buy when btc hits that low number.... So what?? How is that any different from waiting for it to drop and buying low to later sell high?? This coupled with episodes of billions where they shorted the Nira have made me realize my parents are probably cousins cuz i can't understand this. Where does the extra buying power come from the exchange it sounds like free $ how can they afford to do that?? Also in the case of billions say the Nigerian currency crashed HOW DOES HE MAKE $$. WHO PAYS HIM?? WHAT IF EVERYONE TAKES THE SAME POSITION?? PLEASE PLEASE HELP ME I AM TRULY ******ED AND MIGHT EVEN PAY FOR COACHING.

Bitcoin:
Some adults are not nice people. They want to do stuff that daddy has told them not to do or they'll get a spanking or a timeout. Daddy watches their bank accounts. So the people who want to do not nice stuff created their own way of paying for stuff. It uses a lot of complex computer stuff. But it stops daddy from watching them. There are a lot of not-nice adults and not all of them have found out about the special coin yet. So the value of the coin they made goes up and up, because it lets people do the stuff they're not supposed to and more people are trying to do that.

Stock leverage:
Stupid people give you money. Other smarter people use that money to gamble. If the gambling goes well, they make money. If it doesn't, they lose money. If it all goes really bad, the stupid people who gave the smart people the money can't get their money back. This is what grownups call a "freeroll" and it is the chocolate ice cream of gambling.

Back to adult speak: you will not make money in the market unless you are smarter and more knowledgable than the money weighted average of market participants, in whatever niche you choose.

Do you think this applies to you? If not, you are negative expectation and should stay out of the market.

So the idea of shorting is you essentially borrow btc from someone and sell it. Then when it drops low enough you buy it at the lower price to sell it back to them and make profit on the amount it dropped from the time you bought it. Conversely if it goes up you have to pay the higher price to give back the btc you borrowed.

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Leverage: You pay a fee to get higher upside/downside on a trade. If you leverage you risk going broke fast. For example lets say you have $1k. You long with a leverage of 10x. Bitcoin falls 10%, you are now broke. Bitcoin increases 10%, you now have $2k*.

*Not really but almost.

This is wholly unfair. There could be truth to it with half the story left out. Or the converse could be true with only that half of the story told.

The converse in this case is that BTC was created to function as a decentralized currency to counter the (potential) tyranny of governments.

Also to function more efficiently than the current international banking system.

I know that was not very ELI5. But TS police cannot allow the dissemination of missinformation...

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Also, IDK if OP was asking about BTC / Stock leveraging or Leveraging(BTC & Stocks).

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OP the best way to think about leverage is as a contractual promise to buy or sell at a certain price (options & futures).

You can also borrow the underlying to trade more of something than you would otherwise be able to afford.

I am bearish as well but I wouldn't go wild at these prices. Not because I don't think it is going down. But because you want to sell rallies not dips.


The main difference is time. If it is going down today you can make money by selling today. If all you can do is understand long exposure you have to wait until tomorrow.

I actually like this show and normally don't like shows / movies on this subject.

I don't think they ever (at least not yet) get into the details how the trade is structured.

Traditional currency markets are levered. So you trade on a margin. This basically means you have to cover the change in the price of the asset but not the entire notional value of the asset.

For a lot of reasons options are typically used in combination with a trade in the underlying. If the trade is exclusively options you don't need buying power (for the underlying). You need to be able to afford the price of the option if you are long or post margin to cover a loss if you are short.*



In trading there several key institutions / players:
(Central Banks in the case of currency)
Clearing Houses
Market Makers
Brokers
Traders
**

In some cases he gets paid when he makes the trade, like if he sells calls. In other cases he gets paid when he closes out the trade, like if he buys puts or short sells.

If he sells calls he takes in a credit when he opens the trade, the options have a certain value at the time of sale. He can then buy them back at a lower price (he pockets the difference) or he can hope they expire worthless (pockets the entire price of the sale).

In this case other traders / market makers would be indirectly paying him. This means someone takes the other side of the trade, they pay their broker who tells a clearing house. Some matching / cancelling happens and the position is assigned.

If he bought a put he paid some money upfront for the right to option. If at the time he closes out the trade the option has appreciated in price he can sell it and pocket the difference (or execute it and force someone else to buy the underlying from him at the contractual price listed in the option).


* You can be long or short a call or long or short a put. Long a call in someways is similar to being short a put for example (though there are important differences).

**The ordering in the middle is debatable. It is not a clearly linear hierarchical structure.

BTW, I would be happy to coach you, PM and we can talk further.

Also BTC is based upon SHA-256 hashing. Eventually that function will become obsolete. You have to wonder about the networks ability to adapt and the utility of a coin while it is doing so.

Of course, no system is perfect, theft etc. is always a risk.

In other words, I would not put my net worth into BTC (rarely to never a good idea anyway).

Thank you all for your answers ducksauce and Rand I think u cleared most of the fog for me. I personally haven't invested in btc except to make a deposit on betcoin poker and SWC since then instead of selling coins on local bitcoin i just sell them to one guy. I started doing this about 4 years ago he used pull up in an old honda now he pulls up in 16 Mercedes V-10 and thanks btc for his wealth. I feel i should learn to leverage because im just selling my coins to him every 2 weeks at face value.

Any suggestions on where i can learn to leverage without losing a ton. The reason I don't sports bet is your fate is in the hands of athletes with free will.

The way i see it the more variables the more variance but apparently this guy is showing it can be done. YouTube vids are all so different i don't know who to listen to. I should spend more time in this forum.

so, over the years you've been selling your btc to your friend whose buying and holding them and getting rich - and you're envious of his skillz. and your idea is to short bitcoin?

Rand, what do you suggest if, through price increase, btc becomes a significant portion of your network. should you always be selling to maintain the same relative % of N.W.? if so, what % do you suggest?

easy there nostradamus.

I would suggest reading, (then paper trading...eh), then trading your own money. While this is not true by definition, you pretty much can't learn effectively without risking real (your own) capital. And, you pretty much can't learn without losing. Everyone losses in the beginning (or they are just making noise). The question is, for how long does the losing continue?

In truth, I cannot think of one book specifically on leveraging. Most trading books are on strategy and mindset (psychology).

You are a poker pro? Here is how you should think about leveraging: You are a rolled and successful 5-10 NL pro. One day you get tired of the grind and take a shot at 25-50 (live).

Is this a good idea? Maybe, mostly depends on your mindset and risk management. How much can you afford to lose?

That is a fair analogy. But in truth, it will often feel more like this: you are a rolled and successful 5-10 NL pro. One day you get tired of the grind and take a shot playing 4 tables of 25-50 PLO online.

Is this a good idea? Same answer but in truth, probably not.

What you need to do is learn how to trade and how to apply risk management to your trading bankroll. The principles are basically the same as they are in poker.

Then risk what you can afford to lose and learn from your experiences.

Are we really wasting time on this? There is zero chance donkology has an edge. His expectation is negative. Anyone not self-sufficient enough to figure out what leverage is will never beat the sharks. It's not like there's someone to take you by the hand and walk you through making money in the markets, like there is with poker, where even a total idiot with a bit of self control and a coach can learn to make money. And has software to make the decisions for them.

Network = Net worth I assume.

I personally do not like valuing my assets in terms of USD (or other government fiat). But for simplicity's sake here is my personal answer:

I would not want more than 10% of my net worth in BTC. Or more than 10% of my net worth in precious metals. The main reason I say that is that they are not productive assets. But they are not supposed to be (same with cash).

If I were earning in BTC I would save some of what I earned, and diversify the rest. The unit your expenses are denominated in matters. You can't have all BTC if you owe the IRS USD.

Warren Buffet will sing the praises of diversification. Mark Cuban will say it is for losers. They are both right, it just depends on the risk you want to take.

The best idea I have come across is Taleb's "Barbell" strategy (I think that is what he calls it). He says something like 80-90% really conservative, I think his example is US paper, and then like 10-20% super risky. An example of this could be OTM equity puts.

For me I like conservative to be more a combination of real estate, equities, BTC, and PMs. With risky being poker and active trading.

In the long run you diversify. In the short run you don't. Diversifying in speculation is the dumbest thing ever, but you see everyone do it.

buck, I know that didn't answer your question very effectively.

You need to find a (n ultimate) unit of measure. We are conditioned to think in terms of our local currency. But if you take a longer term perspective it should be obvious that that is a bad choice.

In truth I don't have the perfect answer. You could get super complicated and value things against a basket of goods like the USDX (does, not against the USDX).

IDK, the point is, first correctly value your net worth. Then be aware of how you have to pay your expenses. Then what are your goals? If you have so much that you don't want to lose it, you should diversify. If you want the risk, take the big swing. But know that you often miss when trying to hit a home (ha, but of course, sometimes you dont...).

1. (Pretty much) Everyone's is when they start.

2. Ha, IDK, maybe. Not trying to argue with you, just wanted to help.

I find this paragraph amusing.

Rand, net worth, typo. so you'd cap it at ~10% - thanks for your opinion. we can measure in loaves of bread or bmw's. no worries, but i get your point - long-term

I don't know much about this field, but that's also what I got out of it lol.