Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.


Testing Times.

Recommended Posts

After an eventful summer it is time to knuckle down and start testing the plan that I have been working with for the last few months. I had started this process in another place but circumstances outside of my control had my thoughts elsewhere.


The purpose of the journal is to track how the plan I will be trading stacks up through back testing to forward testing and eventually on to sim trading, should the results be consistent throughout each phase I will be able to move into live trading with confidence that I have a thoroughly tested and consistently profitable plan.:)


The backbone of my plan is the SLA/AMT so charts that are posted should look familiar, I will try to briefly explain reasoning for decisions on chart as I have a tendency to waffle.


I will be testing 2 strategies side by side (might get a little confusing at times) one is a safer strategy but a little restricting when it comes to maximising gains (2 lot entry with one off early to lock in gains) the other is a little more testing (2 in 2 out AIAO) but allows one to hold on to a trend to its conclusion thus maximising gains.


I will go in to more detail in the next post, regarding entry, management and exit rules along with a brief explanation of stats that were collected whilst studying certain price action behaviours.


I'm still learning so any input or questions welcome.



Share this post

Link to post
Share on other sites

Two strategies both of which will share the same entries, the management will differ slightly between the two.


1 Runner.

This strategy is set up as a safer strategy that might appeal more to a fearful trader (I have no idea how I will behave should I go live) The strategy is geared up to locking in profit early on half the position which may give one the freedom to let the other half work out a little and endure those pull backs that are to be expected in any move one might expect to see.


The numbers below give an idea as to how far a move can go prior to making a more substantial pull back. The first lot in the runner strategy will come off at the relevant number. The second lot will be managed using the trend break continuation number.


Trend break continuations: 3 points.

I expect a rally or drop to break its stride as it progresses, 3 points is the average the line can be pushed with the trend remaining intact.


The breaking of the stride by more than 3 points does not signify a change of trend, it is only more likely that a change will happen. Watch how price interacts with the swing points that constitute the break.


Trend break reversal entry leg: 7 points.

Price has now broken stride and has retraced forming a lower high or higher low, one takes the trade per entry criteria, how far can a trader expect price to move before it comes back on the entry. I plan on entering trades with 2 lots and taking the first off on the entry leg and managing the other, However I will be tracking the alternative of this versus an all in all out approach.


A traders entry is irrelevant the measurement is from swing point to swing point, depending in how one enters the trade the first contract might be taken off after 3 or 4 points or less. Even though a 7 point move might be expected it does not mean that it will, watch how price interacts with the previous swing points, price may range.


Range poke: 1.5 points.

How far can a range or swing point be pushed but hold, 1.5 points, beyond that and one moves into the territory of breakouts and continuations, an order to trade breakouts could be left 7-8 ticks beyond the range extremes to catch a breakout.


Very important to pay attention to what happens next, price can move beyond 2 points then stall and hang around sometimes for hours, however, when there is intent behind the move it does not. If price gets to an extreme the move away is often decisive, if it is not, one would have to question their participation in the trade.


Breakout entry leg post retrace: 11.5 points.

Had a harder time defining the MFE to a breakout, a lot of the breakouts would often BO by 1,2 or 3 points before making a retrace of some kind (rarely noticeable on a 5 minute chart) but seeing as entries would boil down to a 1 minute chart I felt I had to include the rets as part of the breakout.


It seems a large number but I guess it is a reflection of traders intent to move on and find value.



This strategy is more about maximising gains from trending days, there will be times one has to clench their teeth and endure the pull backs that are inevitable which may pose a challenge in its own right, it is more reliant on the AMT aspect and depends more on swing points being broken or holding for exits.


My thoughts have evolved as I have gotten more into this, when I started I would exit on the first line break and wait for a reversal that would never come as price continued on without me, this could happen multiple times, and each time I would be waiting for a reversal.


Eventually price would get to a level that meant something to enough traders that price would be turned back, but in the meantime I would only have a caught a small chunk of the move, how far can stride be pushed but leave the trend intact?


Stride is less relevant, it can be broken multiple times throughout the trend what do I expect to see from a trend? If it is still doing that what I expect and has not reached a point of interest why exit.


I will trade ranges via reversals at the extreme but the ranges must be at least 10 points wide, if they are not one will have to sit tight and wait for a breakout trade.


Whilst I will trade reversals and breakouts, there are other tactical sets that will need to be considered as the day unfolds, these will include DT, DB, hinges, dogs etc.


When it comes to stops, I will be using danger points (DB PDF) but also looking at behaviour, is price doing what I expect it to do?


I am forgetting something but I am sure it will get covered at some point soon. I will try and simplify my plan a little better later on.



Share this post

Link to post
Share on other sites

To start off with the market is in two states, it is either trending or ranging and this knowledge is important as the plan depends on being able to identify which is which, what is happening and how to take advantage of it. And yes, there are ranges with in trends and trends within ranges, but, the focus prior to placing any trades is to identify what the most immediate state of the market is.



As part of the preparation, one needs to have a general idea of what is happening, the weekly and daily might give a bias to price direction, what I mean by that is, if for example price has reached the upper extreme of the weekly/daily channel its most likely move is away from that extreme to the mean and onwards to the opposing extreme.


If the higher time frames are pointing down it would come as no surprise if a breakout to the upside of a 1 minute range fails to get anywhere and results in a losing trade. Even with this knowledge one has decide their own risk tolerance and understanding of the PA.



The little 1 minute range that a trader is trading might be a part of a larger range, when price breaks out and trends, context can give one a heads up as to where that trend could be reversed, larger swing points can impede progress as they mark a point that price could not get beyond, a point where one behaviour ended and another took over, just because price gets back there does not mean the reason has gone away, but, again the focus is the behaviour at that level.


The basics.

The barebones of the plan is to start off with finding the most immediate range, locating the extremes of said range and waiting for price to get to those extremes. Once there, there are two possibilities, if price reverses at the extremes short the upper limit and buy the lower limit (ranges <10 points will be left for breakouts). If however price breaks out, it shall be traded as a breakout into a trend.



The theory with ranges goes that once it has tagged one extreme it will most likely head to the other, with that in mind I will keep an eye on respective swing points and the mean, an exit is not based solely on price reaching the opposing extreme it is more on the behaviour. If price breaks out one is already positioned for it so pay attention to what price does there.


With a breakout, do not panic over a retrace after the BO, its normal, once the continuation is confirmed track it with a DL/SL. This is where context/(AMT) can give a target and the SLA manages the trade, the line will get broken occasionally but some breaks mean more than others. I collected stats on most likely outcomes with a note of discretion that explains my thinking, last post.


It is okay to scratch a trade that is not doing what is expected, and if what is happening makes no sense sit out and take notes.


This is barebones and basic, after all it is just a test. I will look to cover 100-200 trades, once this task is completed the next step will be replay untested days then move to sim, I have been taking my time with this process as I all to often rush back in then get disappointed when the results fail to follow.


Now that I have waffled for 3 posts I think I can start the actual testing.

Share this post

Link to post
Share on other sites








After the third trade price started ranging, any breakout to the downside had a lot of hurdles to overcome before it could get anywhere so I decided to sit out.









Edited by Gamera

Share this post

Link to post
Share on other sites







After the second trade I felt a little lost, I considered a long on the double bottom but, with 2 failed trades I felt it best to watch.


Not the best start to the test, PA always seems to be a whole lot messier around the mean of any range.








Share this post

Link to post
Share on other sites





As I pointed out in the chart above I have started to make mistakes, I have revisited my journal and reread it to help get back on track and also gone through appendix F as I think I am over reacting in certain areas, i.e spandex tight DL or SL for instance.







Share this post

Link to post
Share on other sites








The chart above shows what happens when I get attached to an idea, after getting out of the short I was looking for a long, I had made myself unavailable to a short re-entry when price broke down again.


See also "A Final Note" at the end of Developing A Plan.


Went through it and realise I have gotten a little wrapped up on what I think and feel, the market will do what it does whether I am there or not, I need to remember that and focus on what price is doing and where it is doing it.


EDIT: I completed the above day prior to reading the final note.







Share this post

Link to post
Share on other sites

Went through it and realise I have gotten a little wrapped up on what I think and feel, the market will do what it does whether I am there or not, I need to remember that and focus on what price is doing and where it is doing it.


Not just that but also determining your criteria for failure rather than relying on your feelings. If, for example, price returns to the last swing low, is that a failure? This can easily be determined by testing. If price returns to the last swing low and drops below it, is that a failure? What are the odds that price will rally if it exceeds the LSL? If it reaches it but doesn't exceed it? If instead you entered at the LSL and are worried about your trade, then you are no longer focused on price but on yourself. If your criteria tell you to exit the trade because price has returned to the LSL, then exit. Otherwise, there's no reason to exit simply because you perceive that your trade is in "danger". If it's difficult to see the difference, just imagine that you're not in a trade at all.

Share this post

Link to post
Share on other sites

I have spent the last couple of weeks reading as I feel I have wandered into the weeds a little and find myself making mistakes that I thought I had moved beyond.


Some of the more apparent issues seem to revolve around losing sight of context, it can be tough not to get sucked into what is happening on a 1 minute timeframe and still bear in mind what traders are doing on the higher timeframes.


At times I am excessively rigid, I feel obligated to stick with the numbers and end up holding on far later than I should ignoring the change in behaviour, for example, waiting for a 3 point break of stride before exiting a trade, problem is that for a DL break of 2 points can lead to a DT or LH which could be cause for a short, but, waiting for the 3 point stride break will happen much later and increases the risk.


I will have to loosen up a little, keep my eye on the context and be a little more sensitive to what traders are doing.

Share this post

Link to post
Share on other sites





I was not so keen on taking shorts at the ONH as this was in an area the conflicted with the hourly break of the SL and subsequent retrace. However, given the daily LOLR being down towards the LL, and the hourly/LTF choking and chopping on the MP of the last HI/LO the secong long was perhaps questionable.







Share this post

Link to post
Share on other sites

Two quotes that I really need to bear in mind.


And if price keeps running over your stops like a rogue truck?


After you have traded for a while, if you find that your stops are being caught too frequently, it will mean that you are not careful enough in starting your trades. Thereafter decide to use more discrimination. Refuse all but the best opportunities. Wait for them. Take your positions as close as you can to the danger points, as shown on your charts or on the tape. Place your stops [at or just beyond the danger points]. Study your mistakes and profit by them. Know every minute why you are starting a trade, why you are holding it, and why you should close out. (Wyckoff)


One of the best rules anybody can learn about investing is to do nothing, absolutely nothing, unless there is something to do. Most people always have to be playing; they always have to be doing something. They can't just sit there and wait for something new to develop. I wait until there is money lying in the corner, and all I have to do is go over there and pick it up. I do nothing in the meantime. Even people who lose money in the market say, 'I just lost my money, now I have to do something to make it back.' No, you don't. You should sit there until you find something.


-- Jim Rogers

Share this post

Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

  • Topics

  • Posts

    • TPO chart shows important zones (levels) like POC, singles, value area). With Volume profiles we'll get information about volume distribution https://www.quantower.com/blog/tpo-profile-chart-and-trading-on-bitmex https://www.quantower.com/blog/trade-with-alpaca-markets-via-quantower#tpo-profile-chart-got-more-features-and-improvements also, we're discussing trading with TPO chart, VWAp, Volume profiles in Quantower Futures Trading group https://t.me/quantower_futures
    • Date : 23rd January 2020. How To Improve Your Trading Mindset 23rd January 2020.Our Head Market Analyst, Stuart, explains how to improve your Trading Mindset. Understand the importance of emotional control and discipline through an unmissable Q&A session.Always trade with strict risk management. Your capital is the single most important aspect of your trading business.Please note that times displayed based on local time zone and are from time of writing this report.Click HERE to access the full HotForex Economic calendar.Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding on how markets work. Click HERE to register for FREE!Click HERE to READ more Market news. Stuart Cowell Head Market Analyst HotForex Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
    • Bitcoin: Upcoming Halving And What To Expect Bitcoin’s upcoming halving will be one of the most followed crypto-related occasions in the year 2020. Thousands of cryptocurrency enthusiasts will be observing the markets eagerly to witness what effect this year’s halving will have on the cryptocurrency. Many believe that the occasion would have a positive effect on BTC’s price as has been observed in the past. On the other hand, some are expecting the price to drop dramatically after the occasion. Whatever the result may be, it is apparent that this occasion will be a defining juncture for Bitcoin. In this review, we breakdown what the Bitcoin halving is all about, some effects of this occasion, historic occurrences, and what to anticipate from this year’s halving occurrence. Bitcoin was built on a system that mandates regular halving (also known as Halvenings) to sustain its value. The halvings are programmed to happen every 4 years. Already, Bitcoin has witnessed two halving processes, the first in 2012, and the other in 2016. The next halving process is scheduled for the 20th of May 2020. Bitcoin’s Value Preserving Strategy Bitcoin runs on a deflationary economic model which ensures that over time, lesser and lesser Bitcoin tokens will be created until finally, the creation of new Bitcoin tokens will end. BTC’s total supply is capped at 21 million, meaning that it is impossible to have more than that exact number of Bitcoin token in circulation at any point in time. It has been estimated that the very last Bitcoin token will be mined in the year 2140. Bitcoin’s deflationary model predisposes it to scarcity which increases in demand, thereby causing its value to increase as well. This model is different from traditional fiat which is based on an inflationary model, this means that banks can instruct for the printing of more banknotes at will. This is not an ideal practice per se as a boost in the volume of banknotes in circulation could result in the devaluation of that currency. Bitcoin’s “Block Reward” System New Bitcoin tokens are pumped into the market through a popular process known as cryptocurrency “mining”. Bitcoin miners get rewarded with a Bitcoin “block” allotment every time they successfully solve transactions. The blocks are allotted by the Bitcoin algorithm. The block rewarding process happens every ten minutes. So in fact, ten minutes from this moment, new Bitcoin tokens will be created. Mining is not an easy process. It requires a certain level of expertise, specific hardware, and a serious quantity of electricity. After the inception of Bitcoin, the first mining reward was fifty Bitcoin. This meant that every ten minutes, a Bitcoin miner received fifty Bitcoin tokens for solving transactions. That number has since been halved, twice, and is now at 12.5 Bitcoin token per block reward. By May this year, the halving will bring that figure down to 6.25 Bitcoin token per block reward. This feature has been pre-programmed into Bitcoin’s system. What This Could Mean for Mining Lesser block rewards are not the only reason Bitcoin is scarce. It has gotten significantly harder to mine Bitcoin and receive rewards. This is because mining is now more difficult as more miners are entering the system thereby increasing competition. Consequently, an increase in competition means miners require more sophisticated tools to solve cryptographic Algos. Over the years, miners have created what is known as “mining pools” to better handle the rising competition of mining. Mining pools are a network of miners, collectively working towards achieving block rewards. Block rewards in mining pools are distributed according to the percentage of effort put into earning a block. Improved Stock-To-Flow Ratio Halvings have several profitable impacts on Bitcoin. One such effect is that it boosts the Stock-To-Flow ratio of Bitcoin. A commodity’s STF ratio is calculated by dividing the quantity of the asset held in reserves, by the quantity manufactured in a year. The greater the STF ratio, the lesser the annual inflation on that asset. Commodities like gold possess a very impressive STF ratio as its available quantity is limited. Presently, Bitcoin has a significantly lesser STF ratio, unlike gold. Regardless, more halving occasions will boost the Bitcoin’s STF ratio. It is even believed that someday, Bitcoin will surpass gold in the STF ratio rating and will be an even better store of value. This is probably why Bitcoin is dubbed “digital gold”. After-Effects of Previous Halvenings 2012’s Halving The first Bitcoin halving happened on the 28th of November. On that day, the cryptocurrency recorded a 6.5% trade range. Regardless, to the surprise of many, the price remained at a consolidated state months after the occasion. This was partly because Bitcoin was still in its infancy and so, not many people were engaged with it. Also, media coverage at the time was not what it is today, which means many people were not informed of what was going on. Based on the information on Bitcoin’s BNC Liquid Index, the price of BTC attained a high of about $32 on the 8th of June 2011. The price of BTC never broke above the $32 mark until the 28th of February 2013 (4 months later), where price witnessed a climb to $260 after which a drop was experienced and the price stayed below that level for several months. Fast forward to the 30th of November 2013 (close to a year after the 2012 halving), Bitcoin rallied dramatically and peaked at $1,167, which was a whopping 9,686% increase from the initial price of $11 on halving. 2016’s Halving On the 9th of July 2016, the second halving, the price peaked at $664 but did not maintain that uptrend instead fell to $626 on the same day. Subsequently, the price continued on that downward trajectory for about three months. However, things started looking up for Bitcoin from the 27th of October 2016 when price closed above the previous halving’s high of $664. Bitcoin later proceeded to smash its last all-time high of $1,167 on the 23rd of February 2017. This spike started the famous bull rally of 2017 through 2018, which witnessed a peak at $20,000 sometime in December 2017. 2016’s halving shot Bitcoin’s price from $664 to $20,000 which was a growth of 2,912%. Possible Outcomes of this Year’s Halving? In the crypto sector, the Bitcoin halving is undoubtedly among the most talked-about and anticipated occasions of the year. Presently, there are mixed expectations as to what the outcome of the 2020 halving may be. Many in the crypto sector are very optimistic and believe that, just as in the past, the price will soar dramatically either before or after the occasion. Creator of Kraken, Jesse Powell expects the price of Bitcoin to rise close to $100k or 1 million after the halving. The CTO of Morgan Creek Digital Assets also shares the belief of Jesse and expects Bitcoin to reach the $100,000 mark by 2021. He says that scarcity is a driving force for the demand of any commodity. He explains that the 2020 halving will cause Bitcoin to be more scarce. Other crypto players believe that this year’s occasion will not have a similar trajectory with past occasions and would, instead, mar the price of Bitcoin. Another possible scenario that has been observed over time is the “buy and dump” case. This scenario usually plays out when there is a highly anticipated occurrence. It works exceptionally well when the upcoming occasion is sure to have a quantifiable effect on supply and demand dynamics. The price of the asset in question experiences a huge spike just days or a few weeks to the main event. This transpires because investors stock up on the asset towards the event. After the event, however, the price of the said asset drops significantly. This kind of activity has transpired frequently in the cryptocurrency space. One such occasion was the Bitcoin futures trading releases for the CBOE and CME. Just a few days to the CME’s release, the price of Bitcoin rallied from $6,400 and peaked close to its all-time high of $20,000 in a day. Not surprisingly, the price dropped considerably in the period that followed those releases. Furthermore, some cryptocurrency experts believe that the aftermath of the halving has already been priced in. It has been observed that demand is “missing” in the Bitcoin market, this could be a clear indication that the halving has been priced in. Usually, months before a halving, a boost in demand and price of Bitcoin is always noticeable. This time, however, no increase can be observed in neither of the stated areas. In this case, it could lead to a lateral trading period which might be a good thing for traders. At the moment, Bitcoin is still struggling to break above the $7,200 mark and there are no signs of a reversal happening soon. Whatever the result may be one thing is for sure, the price of Bitcoin is set to experience drastic changes this year.   Source: https://learn2.trade 
    • Your All-Round Guide To Security Token Offerings Security token offerings (STOs) are one of the most revered investment options in the crypto space at the moment. It has even been termed the “future of fundraising”. But what exactly are STOs and what is the rave all about? This article aims to break down STOs, what it is all about, and how it can be beneficial to you. What Exactly is a Security Token Offering? STOs, simply put, provide a means of tokenizing fungible financial assets such as stocks, bonds, and REITs, and introduces the tokens to the public through regulated channels. STOs are a lot like ICOs as they generally involve the same processes. However, the differentiating factor between STOs and ICOs is in the tokens being sold. With ICOs, the tokens are usually non-descriptive and could range from anything digital currencies to utility tokens. With STOs however, the token is a “security”, meaning that it is exchangeable and possesses a set monetary value. Breakdown of Security Tokens Security tokens function as digital versions of the assets they represent. Here’s a list of some popular security token representations: 1- Capital markets: Firms can convert their shares into tokens, allowing investors to own parts of the firm. In some cases, owners of tokens receive dividends and can execute votes on the affairs of the firm. 2- Equity funds: Equity funds can also tokenize their shares for sale. 3- Commodities: Commodities like gold, natural gas, coffee can be tokenized. 4- Real estate: The equity of this asset class can be tokenized, much like how REITs function. STOs do not change the underlying securities, instead, it makes these assets more readily accessible on a digital platform. Unlike other digital assets, security tokens can only be traded on certain regulated exchanges. Some exchanges require interested investors to meet some set qualifications. Advantages of STOs STOs are formulated with regulatory-compliance in mind, unlike ordinary token sales. Security tokens provide its owners with several legally binding rights. Some security tokens even bestow its owners with rights to dividends or other defined streams of income. Security tokens are also beneficial to their issuers. From the onset, the entities issuing the tokens are aware that their tokens are being purchased by accredited and verified investors and so, they don’t have to worry about the credibility of their investors. Other advantages of STOs include: 1- It is adequately regulated: Entities issuing security tokens must operate under the guidance of designated regulatory agencies in the region like SECs and FTCs. 2- You can rest assured that STOs won’t falter in the future: Unlike ICOs that cannot be guaranteed, STOs are sure to always deliver because it is properly regulated. 3- STOs offer great convenience: Procuring security tokens is easy, straightforward, and stress-free. All you need to do is to adhere to the STO requirement in your jurisdiction and you’re good to go. 4- It can be programmed: Security tokens are programmable and can be facilitated by smart contracts. 5- Automated dividend disbursement and voting: Some security tokens are structured to send dividends automatically through smart contracts. Also, some security tokens provide the bearer with exclusive voting rights in the affairs of the entity offering the tokens. 6- It is a globally accessible investment vehicle: Investors across the globe can procure security tokens regardless of their location. 7- It is not susceptible to manipulation: Considering the mode of operation STOs are run by, big players cannot manipulate its movements. 8- STOs are very liquid: It is a very promising investment option as it has an impressive liquidity quality and can be traded easily. With benefits like these, STOs are for sure transforming the fundamentals of the financial sphere. Disadvantages of STOs As with every other form of investment, security tokens has its limitations and shortcomings. Some of these limits are: 1- It is considerably more costly than utility tokens: STOs, unlike ICOs, hosts many organizations in their fundraising campaigns. Also, regulatory fees are not cheap which makes it more capital-intensive to host STOs. 2- Investor Qualifications: Countries like the US have certain qualifications an investor has to scale before becoming eligible to engage STOs. According to the SEC to be an “Accredited investor”, you must have an annual income rate of $200k and above or a minimum of $1 million in the bank. 3- Specific trading conditions: STOs can only be traded on certain designated exchanges. Also, these tokens are time-bound meaning that you are allowed to trade these tokens between investors for a set period after the STO. The Howey Test Usually, tokens are said to be securities, by law, when they pass certain thresholds. One such way to identify a security instrument is by applying the “Howey Test”. But first, let’s look at a piece of quick background information on how the Howey test came to be. In 1944, a citrus plantation called the Howey company of Florida leased out a large portion of its land to several investors in a bid to raise funds for much-needed developments. The buyers of the land were not skilled or versed in citrus farming in any way and decided instead to just be “speculators” and let the experts do their jobs. The lease was made on the premise that profits would be generated for the investors by the lessor. Not long after the business transaction the Howey company was sanctioned and accused by the United States SEC of failing to register the sale with the authority. The SEC maintained that the company was dealing with unregistered security. Howey denied the claims however, assuring that what it offered wasn’t a security. After much debate, the case ended up in the Supreme Court, which later ruled in favor of the SEC that Howey’s land leasing were undoubtedly securities. It remarked that investors were purchasing land mainly because they saw an opportunity to make a profit off the deal. Howey was then ordered to register the sale. This was the story of the enactment of the Howey test. Today, per the Howey test, anything is deemed to be a security if it satisfies the following criteria: 1- The investment included money. 2- The investment was made on an enterprise. 3- Profit will be made from the efforts of the providers of the investment. The Howey test has become a stronghold name in the crypto space. In 2017 and 2018 (during the “Heydey boom”), many ICO providers were completely consumed with scaling the Howey test as it was a major determinant used in ascertaining the legality of an ICO by the SEC. Failure to pass the test meant the offering was illegal and was sanctioned by the authorities. Some ICOs even advertised their tokens as investment instruments that had no value, describing their tokens as “utilities” used only for interactions on the platform. The Inception of STOs The very first STO was released by Blockchain Capital on the 10th of April 2017. The release pooled about $10 million in one day. Several STOs have been released following the first event including tZero, Sharespost, Aspen Coin, Quadrant Biosciences, and many more. STOs have since gained widespread acceptance and relevance in today’s market. Understanding the Distinction Between Security Tokens and Tokenized Security Confusing security token for tokenized securities is a common trap that people fall into. The main distinction between the two is that the former is usually a recently issued token that functions on a distributed ledger system while the latter is just a digital manifestation of pre-existing financial instruments. Apart from similarities in appearance and nomenclature, security tokens have absolutely nothing in common with tokenized securities. What Entities are Involved in an STO Issuance? Assuming a business entity plans on issuing security tokens as an embodiment of equity in its establishment, the next necessary step for that business would be to involve certain players and follow certain directives. It has to formally contact an issuance platform to serve as a medium for issuing the tokens. Popular issuance platforms include Polymath and Harbor, which consist of service providers like custodians, broker-dealers, and legal entities to carry out secure processes. Who Can Invest in STOs? STOs are available to the general public for the taking, regardless of location. However, as mentioned previously, the US has certain rules guiding STO investments. In the US, it is mandatory to be an “accredited investor” before you can invest in this instrument. An accredited investor is an individual with an annual cash flow of $200k and above for at least 2 years or a net worth of $1 million and above. More nations are starting to adopt the United States’ classification method and have begun restricting certain classes from investing in STOs. It is advisable to always research on the STO rules and regulations of the jurisdiction you’re planning on investing with. Final Word STOs provide businesses with the prospect of raising funds in an easy and regulated setting. It gives both investors and issuers a good deal of benefits, while also ensuring insurances against fraudulent or malicious practices, unlike ICOs. Issuers are not limited to any industry, they can vary from several sectors including real estate, VC firms, and small and medium enterprises. Moving forward, we will likely witness prominent firms venture into the STOs.   Source: https://learn2.trade 
    • PocketOption Broker - 50$ Binary Options No Deposit Bonus - https://1binaryoptions.eu/review/pocket-option/ USA, EU, & WorldWide Customers Welcome Daily 250$ Binary Options FREE ENTRY Trading Tournament
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.