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joshdance

Phantom of the Pits Rule 1 - Time Stop ?

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Short summary: Betting Rules by Phantom of the Pits

 

http://www.wisetrader1.com/?page_id=19

 

Basically, PoP says in rule 1 that we are not to let the market prove us wrong, but rather it must prove us right, or we get out ourselves. I have not read the whole book yet so perhaps I will get to it later, but the problem here is it's very vague as to what is "right" and "wrong."

 

There are three primary metrics (and probably other derivatives) I can see to be proven right or wrong in a trade: price, time, and possibly volume.

 

1) If price moves beyond price X, I am "right" and will stay in the trade, and consider to add. However, if it moves to price Y, I am wrong, and will exit the trade (stop loss).

 

2) If I am in the trade for more than T minutes, yet price is not beyond price X, then I will close the trade, even if price Y was not reached.

 

3) If the volume is below some certain volume V in a given time or range since entering the trade, close early, but again, only if price X has not been reached.

 

In all three cases, IMO, price must validate the trade. That's what a trade is anyway, right? Buying and selling based on the traded price. So I am ONLY proven right by price, but I may consider that I'm wrong by price, time, or possibly some other metric like volume. If you disagree with this please let me know why; the logical seems pretty sound to me but perhaps I'm missing something.

 

As an example: I briefly considered closing the trade that I took around 1:10, the 76.75 long, after it stayed there for a half hour. But the market still had not traded below 76.25 during the later part of that range, so why should I exit? There are times when I will fade a down move, for example, and on the retrace up in my favor I notice the volume lowering, and after about 3 minutes I realize that I better exit now, because this is only a pullback good for a point or so. So, the market has not traded to my stop, but I would expect that if it goes back to my entry that it will drop further. This is a time when using a time-based stop makes sense IMO.

 

There are different ways to view the market and I find value in different paradigms. Volume, that is, transactions, actually cause the market to exist and for price change to be possible. Time does not. However, time is inextricably linked to the markets as well, inasmuch that we as humans are ruled by and live in the context of time. When the market price changes by 4 points in 1 minute, we perceive this as different as when it changes by 4 points in 1 hour, and volume is not a factor in how much the market moves; perhaps it was more over the hour cumulatively, but we notice the changes in time. This causes emotions to get involved (or bots programmed to act based on typical human emotion), and can create momentum and panic buying or selling that otherwise would not happen except that it happened so quickly. So, time is important.

 

Elsewhere on this forum one trader wrote: "Stay in the trade until your target is reached, you have an exit signal, or the reason for your entry is no longer valid." This last part, "reason for your entry is no longer valid," is the primary reason for this thread. Does passage of time alone constitute a reason that an entry would no longer be valid?

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Time for me is a very important factor.I only look at vol on a daily bar for confirmation of a reversal.If I am correct at my entry price,then the trade should move very quickly in my favour.This is what i call a S.W.O.O.P -small window of opportunity.These setups occur often in the 1st hour of trading and are ideally,for me, the H/L of the day.If i suspect that to be the case,i try to capture as much of the move of the day as possible.Either by just sitting tight or going in and out 2 or 3 times,It depends on what type of day it appears to be.The aim for me is as less trades as possible.

I have said before,that using simple observation,the very best trades are only available for a moment and appear at a time when the least amount of traders are willing to trade-usually near the open or just before the close.But can of course appear anywhere.Less willing near open because of the volatility/uncertainty and near close for fear of holding overnight.

In cases where i enter and price remains trapped-sideways,it's tougher since i use no internal market tools or very low time frame charts.Again time here is a factor.I tend to get out if price breaks out against me- i wont assume it's a false breakout,but the downside is getting shaken out of a good trade.

So actually time is what i look at for decision making because i already know in advance the price level i want to trade at.

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This last part, "reason for your entry is no longer valid," is the primary reason for this thread. Does passage of time alone constitute a reason that an entry would no longer be valid?
It’s system dependent.

 

Without knowing either we can be pretty sure that the whole of PoP’s system is quite different from the “Stay in the trade until your target is reached” trader’s system. Very loosely, (and without really knowing ),it’s likely the first (PoP’s) guidance on exits is for ‘surprise side’ trades while the second guidance is about ‘surprise side trades NOT!’, etc etc.

 

Be careful of authors who, via ‘ass umptions’,etc., don’t bother to specify what the whole system is that justifies the exit criteria they are expousing. It does a huge disservice to many, if not all, readers.

 

Moving on ... re: “Does passage of time alone constitute a reason that an entry would no longer be valid?”

Again, it’s system specific! I have ‘breakout’ oriented systems where the passage of time alone literally strengthens a reason that an entry would be valid… and I have ‘reversion' based systems where the passage of time alone does constitute a reason that an entry would no longer be valid…

 

we always have to ask 'does this exit advice align with the essence of my whole system?'

hth

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Short summary: Betting Rules by Phantom of the Pits

 

Betting Rules by Phantom of the Pits | Welcome to Wisetrader1.com

 

Basically, PoP says in rule 1 that we are not to let the market prove us wrong, but rather it must prove us right, or we get out ourselves. I have not read the whole book yet so perhaps I will get to it later, but the problem here is it's very vague as to what is "right" and "wrong."

 

There are three primary metrics (and probably other derivatives) I can see to be proven right or wrong in a trade: price, time, and possibly volume.

 

1) If price moves beyond price X, I am "right" and will stay in the trade, and consider to add. However, if it moves to price Y, I am wrong, and will exit the trade (stop loss).

 

2) If I am in the trade for more than T minutes, yet price is not beyond price X, then I will close the trade, even if price Y was not reached.

 

3) If the volume is below some certain volume V in a given time or range since entering the trade, close early, but again, only if price X has not been reached.

 

In all three cases, IMO, price must validate the trade. That's what a trade is anyway, right? Buying and selling based on the traded price. So I am ONLY proven right by price, but I may consider that I'm wrong by price, time, or possibly some other metric like volume. If you disagree with this please let me know why; the logical seems pretty sound to me but perhaps I'm missing something.

 

As an example: I briefly considered closing the trade that I took around 1:10, the 76.75 long, after it stayed there for a half hour. But the market still had not traded below 76.25 during the later part of that range, so why should I exit? There are times when I will fade a down move, for example, and on the retrace up in my favor I notice the volume lowering, and after about 3 minutes I realize that I better exit now, because this is only a pullback good for a point or so. So, the market has not traded to my stop, but I would expect that if it goes back to my entry that it will drop further. This is a time when using a time-based stop makes sense IMO.

 

There are different ways to view the market and I find value in different paradigms. Volume, that is, transactions, actually cause the market to exist and for price change to be possible. Time does not. However, time is inextricably linked to the markets as well, inasmuch that we as humans are ruled by and live in the context of time. When the market price changes by 4 points in 1 minute, we perceive this as different as when it changes by 4 points in 1 hour, and volume is not a factor in how much the market moves; perhaps it was more over the hour cumulatively, but we notice the changes in time. This causes emotions to get involved (or bots programmed to act based on typical human emotion), and can create momentum and panic buying or selling that otherwise would not happen except that it happened so quickly. So, time is important.

 

Elsewhere on this forum one trader wrote: "Stay in the trade until your target is reached, you have an exit signal, or the reason for your entry is no longer valid." This last part, "reason for your entry is no longer valid," is the primary reason for this thread. Does passage of time alone constitute a reason that an entry would no longer be valid?

 

Josh,

 

First, His description of rule 1 is vague.

Second, his rules are not for day trading. He is not a day trader.

 

My translation of his first rule is that your trade is wrong until it is proven right. if you are not right, volatility will eventually take price to your stop and since we measure volatility over a period of time, when that time is up, if price has not moved far enough away from your stop, then you should get out.

 

So if price was plus a few ticks and say the 15 minute true range was 10 ticks, and my stop was 10 ticks, i would get out if price had not moved far enough away from my stop to warrant staying in another 15 minutes. Price would have to be the 30 minute true range distance from price for me to stay in.

 

I have no idea if this was the right interpretation or not or not but it is how I traded my interpretation of it. Needless to say I moved on but implemented aspects of his ideas; such as, scaling contracts off my initial position before getting stopped out to get stopped with a smaller size than my entry when it was negative and adding to winners when my trade seems to be working. I suppose I go give POP credit for that.

 

I read it a few times and began to doubt whether this guy was a real trader or not. I suspected that the author and the POP were the same person and the rules were what this individual thought would be good rules. It was weird the way he then decided to have a third rule because the forum sort of demanded it.

 

 

MM

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Time absolutely matters. The reason for this is that if you put on a trade, believing that the price and timing of your trade within certain error limits are going to ellicit a profitable response from the market and yet it doesn't happen this way, all bets are effectively off. Anything can potentially then happen, but what does happen is going to be outside the remit of your specific trade plan. Of course, there's also the scenario that the day is much slower than you felt it might be originally. In this case, time then needs to be adjusted as a volatility variable just as ATR is. Here, the trade is likely valid for a much longer period of time. The key factor might also end up being how close it is to close as then if it hasn't gone in your favour, there may well be other similarly positioned participants who want to exit their trades. So like most things in trading, viewed with context, time is important imho as a gauge of potential success in an individual trade.

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I read it a few times and began to doubt whether this guy was a real trader or not. I suspected that the author and the POP were the same person and the rules were what this individual thought would be good rules. It was weird the way he then decided to have a third rule because the forum sort of demanded it.

 

 

MM

 

If PoP ever existed he was a pit trader - they don't usually use charts and indicators but only price levels and how the price reacts around them influenced by supply/demand and/or news/rumors. You need diff set of tools and skills for pit trading. The book is more useful for giving you an idea of the herd psychology of the pit traders. And how to follow your "gut" feeling against the rumors and the pear pressure.

 

Another problem with this apocrypha is that whoever wrote it doesn't appear to be a professional trader. A lot of the interpretations are hard to understand and somewhat naive.

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Of course, there's also the scenario that the day is much slower than you felt it might be originally. In this case, time then needs to be adjusted as a volatility variable just as ATR is. Here, the trade is likely valid for a much longer period of time.

 

One way of assessing a slow day besides the volatility variable is volume. When no range and light volume = the big guys are out golfing = take off or use modest targets. Different case is when narrow range but heavy volume - market is pressure cooking the next big move = volatility expansion. In this case either stay on the sidelines until clear direction or keep probing the market "until proven right".

 

For me "right" and "wrong" is about direction. Time, volatility and price proves you right or wrong. And it is not important to be right but to follow the market _which is always right.

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One way of assessing a slow day besides the volatility variable is volume. When no range and light volume = the big guys are out golfing = take off or use modest targets. Different case is when narrow range but heavy volume - market is pressure cooking the next big move = volatility expansion. In this case either stay on the sidelines until clear direction or keep probing the market "until proven right".

 

For me "right" and "wrong" is about direction. Time, volatility and price proves you right or wrong. And it is not important to be right but to follow the market _which is always right.

 

Right = green = you are aligned with market direction/orderflow.

 

Wrong = red = hopefully out quickly.

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It was implied from the series of of Phantom of the Pits articles that he scratched a LOT of trades.

 

RULE 1 : Remove positions before the market tells you to.

 

Only hold those that prove correct. Yesterday's data (midpoint) is critical to knowing PROOF.

 

Must be at least reduced if not produciing within 3 hours.

 

There must be a profit at the END of the entry day's close.

They must CONTINUE to prove.

 

RULE 2 Have a larger positon when you are correct.

 

Don't take profits when proven correct. You wait too long and too hard to abandon them.

 

Markets go to extremes. Press your advantage.

 

Add once trending in a 3-2-1 unit ratio.

 

RULE 3 Remove entire position with an early indication of topping.

 

BIG money is on the surprise side and big losers are on the popular/expected side.

 

Removing postions: YOUR exit is a better exit than the market proving you wrong.

 

If traders aren't aware of what the market can do to them, they will head in that direction.

 

Huge volume is a prelude to correction possibilities. Extreme volume is both high and low.

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efficiency, thank you for your reply.

 

RULE 1 : Remove positions before the market tells you to.

 

Only hold those that prove correct. Yesterday's data (midpoint) is critical to knowing PROOF.

 

Sounds like you are talking about a swing trade, yes?

 

Don't take profits when proven correct. You wait too long and too hard to abandon them. ...Markets go to extremes. Press your advantage.

Add once trending in a 3-2-1 unit ratio.

 

RULE 3 Remove entire position with an early indication of topping.

Removing postions: YOUR exit is a better exit than the market proving you wrong.

 

Your prior two quotes seem contradictory, and this is part of my question regarding PoP.

 

Taking the entire position off with because of "early indications of topping" would seem to contradict rule 2. Tops can't be predicted, and while I agree that volume and other indications may give us indications, the market is going in our favor, and you're suggesting on the one hand to press the advantage, and "once trending" to add. But you don't know when the trend is over until it's over. That's the nature of trend following--namely, that you will ALWAYS miss a top and a bottom.

 

Huge volume is a prelude to correction possibilities. Extreme volume is both high and low.

 

As we have seen since late December, a market can move up 12% on about as low volume as a market can have. Anyone who was long and took profits too early, may have seen early signs of topping, but they would have not let the market dictate their actions, thus they took themselves out early.

 

That's part of my question/problem with PoP. "Take yourself out before the market proves you wrong" -- well, in the right context, for an established, successful, intuitive trader in the pit, that's possible. But otherwise, it can be dangerous I think. Yet, I see the practical wisdom of this at the same time--I was long today and added on the way up, only to find myself with a loser after adding too high; intuitively I saw that the push was not strong enough to continue, but I have been burned too many times trying to guess, so I held on and should have dumped it sooner.

 

I suppose my point is this: what PoP says is absolutely the way to go: add to winners, and get out while you're ahead. However, the way he's able to do that is sheer experience. He talks about his uncanny ability to get out on the 3rd wave, just at the right time. That's because he's a good trader. I just don't think that that can be codified into a rule; as he intuitively knows WHEN to add, and WHEN to take his money and run. Reading about this will not help those trying to learn. It's like reading about a quarterback talking about being calm in a big game, and expecting to be able to do that from just reading it. Experience and innate ability are the keys. Don't you think so?

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I relayed the Phantom of the Pits "words" via my own interpretation..

 

Swing trade is a label. Call it a multi-day position. Riding profits and modest pyramiding until one deems the risk/reward becomes unattractive and responding by either getting smaller or booking the entire profit.

 

It appears his threshold was 3 hours hence a lot of scratching.

 

I neglected to mention he used point & figure charts.

 

I personally give little credence to volume. However, when it's extraorinarily high, there are a lot of decisions being made and what I term the "all in" concept.

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I use time stops extensively. They work very well but can't be set TOO restrictive. I've found price to be dominant over time, primarily. However, time stops are very effective. Time-based stops are really just a variation of a hypothesis based stop.

 

A hypothesis based stop has a rule and an implicit time-based function.

 

In general time-based stops or any method of making the market a series of discreet events will be helpful psychologically. This is the real benefit and helps to provide balance.

 

-Curtis

The Market Predictor

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For those of you that have not read the entire document, I strongly suggest you do that. Follow that with a manual editing of the document as this reveals more into the thinking. This manual editing forces you to think of what point he was trying to make in context of the overall knowledge he shared.

 

Without this editing it is difficult to understand his thoughts and statements. The markets that he was referring to do not exist anymore, but his rules still could hold some relevance.

 

TIME EXIT: this simple point we all have a specific amount of time a trade should require to reach its objective. POP makes the point that time is as important as price, and he used it to cut his losses short. Or if a trade was going in the correct direction, but was taking too long, then it was probably going to reverse and take your profits AND cause a loss.

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Where did I see a phantom around here? Or was that a phantom of the keyboards? Lol...

I fail to understand the role of time in proving a trade wrong. You never know what will happen after you enter a trade, be it 10 seconds or 10 hours later. My experience is that it is a 50-50 proposition each way.

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Where did I see a phantom around here? Or was that a phantom of the keyboards? Lol...

I fail to understand the role of time in proving a trade wrong. You never know what will happen after you enter a trade, be it 10 seconds or 10 hours later. My experience is that it is a 50-50 proposition each way.

 

its just another 'if...then...secenario

If you expect something to occur immediately and it does not exit.

if you expect something to occur by X time as you expect it to and it does not exit.

 

Strategy dependent ....some strategies require immediate gratification and if its not achieved then you are generally wasting time and mental effort is waiting for it.

 

....and yet in that similar point why is it so often people will sit about on a trade that goes no where and yet get out of a trade before they should that is going their way.... :)

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Where did I see a phantom around here? Or was that a phantom of the keyboards? Lol...

I fail to understand the role of time in proving a trade wrong. You never know what will happen after you enter a trade, be it 10 seconds or 10 hours later. My experience is that it is a 50-50 proposition each way.

 

Time as a factor for trading decisions is.........system dependent.

If you're strictly a day trader time is a consideration.

If you only trade at certain times of the day time is a consideration.

If there is only so much time left in the contract.....

If there is only so much time before a jobs no comes out.....

 

If you consistently trade with the odds in your favour then it is not 50/50 overall.

However,specifically you say "you never know what will happen after you enter a trade"..

 

Only 2 things can really happen,stop or target is hit.If your stop and target is hit 50% of the time (50% of trades hit the stop/50% hit the target) then the edge is not in entries/exits but hopefully something else.

 

Since the H/L's are often made within the first hour or so,if the trade does not move your way after that you have probably misread the market.Time in this case is possibly a factor here in proving a trade wrong.

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Hope I hear you loud : If you must be flat at 3:15 NY time, okay: if rollover is imminent, okay.

But as for jobs numbers, it is still a 50/50 proposition. It can add to your profits if already in a trade, or stop you out. In that circumstance, I always readjust my stop, but never close a trade I am in because job no or Bernanke or Draghi speech.

Anything can happen at any time.

 

Time as a factor for trading decisions is.........system dependent.

If you're strictly a day trader time is a consideration.

If you only trade at certain times of the day time is a consideration.

If there is only so much time left in the contract.....

If there is only so much time before a jobs no comes out.....

 

If you consistently trade with the odds in your favour then it is not 50/50 overall.

However,specifically you say "you never know what will happen after you enter a trade"..

 

Only 2 things can really happen,stop or target is hit.If your stop and target is hit 50% of the time (50% of trades hit the stop/50% hit the target) then the edge is not in entries/exits but hopefully something else.

 

Since the H/L's are often made within the first hour or so,if the trade does not move your way after that you have probably misread the market.Time in this case is possibly a factor here in proving a trade wrong.

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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 
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    • Good news is my posts no longer seem to need moderator approval! Beginning tomorrow, I will be day-trading two currency pairs: EUR/JPY and GBP/USD. I'll trade during the morning and afternoon hours, New York time.  I'll be using an Oanda "core pricing + commission" account. I plan to trade a "practice account" through the end of January, then a small "live" account beginning February. I've set my charts up to closely resemble the format popular in the RCRT thread (NinjaTrader + MetaTrader). My trading style will primarily consist of what I've learned from that thread. I'll track my performance in terms of R-multiples.  The purpose of this thread is just for a little fun with some bonus accountability. I've got nothing to sell/teach, and I will probably lose money! 😁
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