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Corrections, Crashes & Bagholding

 

Most investors today are looking to altcoins for profit; they focus solely on altcoin analysis but don’t take into account the main driving factors. Bitcoin and Ethereum hold the largest amount of capital. Ethereum’s market system affects altcoins in the ethereum ecosystem and Bitcoin effects all altcoins in the digital currency market.

Bitcoin is a non-government issued currency that is commonly used to hedge against political uncertainty. Prices are affected when:

  • An Exchange Goes down
  • Governments give legitimacy to Bitcoin (approving it and rewards people for using it)
  • Governments negatively regulate Bitcoin (discouraging and punishes people for it)
  • Political turmoil and uncertainty in a countries market causes people to flee/hedge
  • Bitcoin Governance & Politics like Segwit cause people to flee Bitcoin to alternative cryptocurrencies
  • And So on

Everything is Pegged To Bitcoin

The Value of all altcoins directly correlate with Bitcoin, except on rare occasions known as the flippening. The flippening is when altcoins maintain value and rally independent of Bitcoin – usually a reflection of investors hedging uncertainty with Bitcoin in other coins. To this effect when Bitcoin rises, the altcoins tend to rise with it.

Sometimes this means that when Bitcoin rises in value, altcoins decline in value. Sometimes it means when Bitcoin has a strong rally, altcoins follow suit, and vice versa. If Monday’s are sell days for Bitcoin, then it could very well be a buy day for altcoins and vice versa. It helps to pay attention to what the big coins are doing to understand what is happening to the smaller coins.

Bagholding vs. Selling & Holding

It’s important to make a distinction between bagholding vs buying and holding.

In traditional currency it is called Bag holding when the price of a stock plummets in value until it is worthless. The reasons could be they:

  • Neglected their underperforming portfolio
  • Investor hopes the price will recover
  • Investor has not set good limits on losses
  • Investor does not have a good exit strategy to avoid the situation

In cryptocurrency it is called Bag Holding when:

  • traders buy scam coins or
    good coins during a pump
    n dump
  • hold while the price crash down during the dump
  • and sell at the bottom

If the coin is a scam coin you have to hope for another ‘pump’ before you can exit, and that could take weeks or months or even a whole year or more. If it’s a coin with good fundamentals, the wait may be shorter.

Buying & Holding on the other hand is a strategy used to describe people who buy and hold as part of a long-term strategy. While most people typically buy low, there are some people who buy as part of their strategy a coin at its peak, akin to momentum traders. While their plan may vary these traders have their own methodology, but for the most part, these are people who aren’t buying based on ‘short’ term fluctuations but rather part of a longer term strategy.

 

Corrections vs. Crashes

Corrections are a natural part of the economy. Long term traders don’t really care about them, and may even only make 2-3 Exits per year. Spring and Fall. With Summers and Winters being a common time for accumulations. Corrections are always inevitable after every major rally or bubble. Corrections then are temporary pullbacks that last about 3 months or so, before continuing upward. With a correction you can usually see the slow reversal of a coin rescinding.

Crashes on the other hand are what people shout when they say, “Bitcoin is dead”. It happens much quicker and more sharply, and can result in the traditional market cause a bear market or recession. This recession is because it limits what the businesses who represent the currency can purchase. Cryptocurrency is not the traditional market; In Cryptocurrency you have currency that behave as tokens or shares, and for those members it may be true; but you also have currencies that function as part of a larger machine, and other coins which act simply as an exchange of value. This makes cryptocurrency unique.

Corrections and Crashes can lead to long-term bear markets, where prices are undervalued for a large period of time. This is a great area to buy if the coin has strong fundamentals.

A Good Coin Drops Half The Value Not All Of The Value

Typically when some people think of crashes they think of the price dropping to next to nothing. My opinion is that a good coin:

  • won’t lose more than half of its value that it gained during rally.
  • Will make back the gains in 3-6 months

However if a coin falls back to the price it was before it’s rally then it is not performing well, and as such may have some underlying issues. If it stops at a half-way point, this is a good sign that more growth is on the way.

 

Always Ask Why Is The Price Rising?

Whenever a coin starts to rally I look for the reasons why it is rallying. I want to know Why the coin is having dramatic rises. This is important because it helps me figure out how much is hype and how much is actual demand. When a coin is falling, this too helps me figure out what is hyped up fears vs. actual demand declining. One is driven solely by speculation, hoped for value. It stands on nothing and so it is more likely to collapse. The other is driven by actual value and usage, it stands on something, if people using it were to pull out and stop using it, then there would be concern.

  1. Rallies & Corrections – any coin that has a sudden and abrupt rally upwards, will have a sudden and drop correction downward. At any point that this happens either be prepared to short your positions, or be prepared to go long. Never buy at the top and always stagger your entries. In these areas there’s still room to exit; but also the possibility that you could exit at the wrong place. Use Fibonacci to help determine how far it could correct to calculate your entry and your emergency exits.
  2. Pump n Dumps – a pump n dump has to be timed very carefully. The best way to plan for this is to find an accumulating coin, and set a price that is low but not too high. Buy low, sell at the peak. These sudden ‘peaks’ will have quick drops and can happen quicker than you can actually execute your trade in a matter of seconds.
  3. Natural slow rises – a coin that steadily climbs up in value, and steadily rises down without hype and fud tends to be driven by actual usage case.

A coin that rises gradually and slowly overtime, will have more solid ground to stand on than one that rises out of speculation.

Some Tips For Protecting Yourself

  1. Go 3-6 Months Long or Longer
  2. Develop a Strong Risk Management Strategy
  3. Diversify your Portfolio
  4. Have an Exit plan
  5. Rebalance your portfolio daily/monthly/yearly based on performance

 

 

Long Term Investing vs. Short Term Trading

 

Short Term Trading

 

  • Go short to take small gains now – they flitter back and forth between their fiat currency and cryptocurrency. They go short as part of a short-term strategy.
  • Go short in order to stay long – they are really in a long position, but hedge in a fiat or “stable” cryptocurrency. They go short as part of a long-term strategy.
  • Going short to add to your long position – they are trading as part of a strategy to add to their long positions and accumulate more coins.

 

To trade based on short-term fluctuations can be shortsighted based on your mindset. But just because it’s short-sighed doesn’t mean it is wrong. It just means that you will need to have:

  1. Discipline & Patience
  2. Mental & Emotional Stability to handle the Emotional Stress
  3. A strong strategy
  4. An ability to take losses as part of your strategy
  5. A community of like-minded stable traders (as trading is lonely)
  6. The ability to hold yourself accountable
  7. The ability to withstand a lack of security

The trick is that during the day you buy at the day’s low, and you sell at the day’s high. If you do this consistently you will earn consistent profits.

If you’re day trading you have to follow the one single rule:

  • Never hold your position overnight. Every night hedge your coin in fiat or other cryptocurrency, then start again the next day.

Short-term trading can be emotionally stressful; to reduce that stress:

  1. Understand yourself
  2. Practice Mindfulness
  3. Trade Less Capital

 

Position Traders or Long Term Investing

Long-term traders are not concerned with short-term fluctuations because they believe they believe that their long-term investment horizons will smooth these out. – Investopedia

Investors, Position Traders, Buy and Hold strategy, these are all common terms to describe this type of trader. Such a trader can hold for months or even years. During Market Corrections, many traders will either sell-off or hold. If they’re the 90% group they sell off in response to a fear-based response without a strategy. If on the other hand they are a small group of 10% traders they will if all the indicators are there for the coin, buy and hold and look long.

Corrections are a natural part of the economy. Long term traders don’t really care about them, and may even only make 2-3 Exits per year. Spring and Fall. With Summers and Winters being a common time for accumulations. Coins spend more time accumulating than they do rallying.

Position Traders tend to look for coins that are undervalued and have strong fundamentals.

When I want to amass a lot of coins for the cheapest amount I look for coins that are undervalued and in this price range:

  • Under $0.14 cents
  • Between 0.14 cents and $0.30 cents
  • Under $1.00
  • Under $6.00

I stay within this amount because I can make more from volatile price movements, if the fundamentals are good there’s a promise it could go up, and because it’s great for people who want to invest but don’t have a lot of capital. As an example: You might need $10,000s to make any real profit in a coin that is priced at $5k per coin, but that same 10k can give you many more coins in a lower-priced coin. And while it may never reach 10k, it could reach high enough to help you live comfortably for a few years or more.

I also keep an eye on recently released ICOs (new coins being released or planned on being released) and look for how it performs in its first 3-6 months. Tools like Smith and Crown can help keep track of coins being released; browsing the cryptocurrency forums, is another method.

Position traders have more freedom and flexibility than swing traders. Tend to be analytical, and don’t tend to be glued to their PC on a day to day basis.

How Long Should you Hold a Long Position

Unless a company has suffered a sea change in prospects, such as impossible labor problems or product obsolescence, a long holding period will keep an investor from acting too human. That is, being too fearful or too greedy can cause investors to sell stocks at the bottom or buy at the peak and destroy portfolio appreciation for the long run.

If you’re Warren Buffet he believes he states, “If you can’t own a stock for 10 years, you shouldn’t hold it for 10 minutes.”, in altcoin terminology let’s bring that down to 3-5 years. Can you hold your position for 1-3 years?

 

Go Short To Add To your Long Position

For those who like the adventure of trading, short active trades while having a long position is a viable technique. You take the security and position of a long-term trade; while building your skills as a day or swing trader; and even making those profits.

  1. Find an accumulating Coin
  2. Buy & Hold the Coin (invest)
  3. Take a small percentage of the coin (trade)
  4. Trade that small percentage back and forth
  5. Keep a portion of your gains in the coin you are holding (reinvest)
  6. Hedge a portion of your gains in the currency you are using for daily living (spend)
  7. Trade the rest of the gains actively (trade)

 

There’s a market for every Trading Style.

Different markets are good for day trading. Ideally a good market could be in a steady trading range with clear predictable movements up or down;

  • Swing Traders do better with more volatile markets.
  • Day Traders do better with
    more
    stable markets (trading ranges)
  • Momentum Traders do best with rallying coins (they buy mid-high sell high)
  • Position Traders do best with coins that have a clear trend (go with the flow of the trend)

In another article I will go more in depth of how to identify these types of markets, but for now.

Is Short-Term Trading for the “Masters”

Some people believe that trading short-term positions back and forth is for ‘masters’. This is false because there are no Masters. There are traders who have a strategy, routine or algorithim that they follow consistently to make small consistent profits over-time and
there are traders who consistently lose money when they trade. When it comes down to it, the traders who lose money lack self-discipline and control, they tend to be overwhelmed by emotions, anxiety, greed, fear, and are reactive. They chase the trend.

The “Master” appears to be a Master simply because he or she has found a way to calm their mind and manage uncertainty.

Anyone whether they’re new to trading or have been doing this for 10, 15, 25 years can apply the same method of a calm mind and consistently win. Overtime those wins will turn into consistent profits, and as you get better you will be able to scale and grow those profits. Usually with a simple ‘reinvest’ strategy, where you cut underperformers, and rediversify into other places.

That’s the only difference.

If you can’t trade in the short-term you either have too much on the line for it to be actually fun, or you need to pull out, recoup, and switch to a longer term strategy. Ideally if you are going long you buy after a coin has corrected not in the middle of a coin’s rally.

The Two Main Types of Traders

These are many types of traders but these are the two main types of trader mindsets that I will cover:

  1. The Glorified Insurance Agent
  2. The Gambler

The Glorified Insurance Agent

Traders with this mindset engage in the following:

  1. They make calculated diversified risks,
  2. They focus on small consistent gains over homeruns,
  3. They measure reward over risk for each trade,
  4. They prepare for up or down markets (if X, then Y, else Z),
  5. They find the style of trading that works best for them,
  6. They build a set of rules around this style,
  7. They focus on strategy over patterns,
  8. They focus on what they can control (themselves)

Patience, Self-Control, Risk-Management and Discipline are the three skills that will help people here.

What A Good Trader Does

To be a successful trader you have to think like the 10% of Traders who win consistently. Logical thinking is a minority skill that can be learned.

A Good “Insurance Trader”:

  1. Sell the rumor, buy the news,
  2. Work with the market manipulation not against it,
  3. Be skeptical,
  4. Won’t speculate
  5. Buy low, sell High according to their time-frame
  6. Stick to their rules

A bad trader will do the opposite.

Even a Good Trader can fall prey to a bad mindset from time to time. How often do we hear how people amassed a lot of money in trades only to one day lose it all, either because of a scam they went all in on, or for getting overly confident and taking on the gambler mindset.

Emotions Aren’t Bad, They’re Messengers

People frequently say take the emotions out of trades; but this is impossible. I suggest the following:

  • Manage the emotions,
  • Learn what triggers them,
  • Use them to discover your relationship to money,
  • What answers do you think this will solve,
  • What problems will you think it will cause,
  • Use it as a gauge of determining if you have too much money on the line,
  • Let them guide you to building a better strategy

I frequently view Messengers as symptoms that when investigated can help you get to the root. Ask your emotions questions, so you can understand more about yourself, why they are there, and then manage and maintain them. If your stomach drops every time the stock sinks, then you need to adjust your strategy. Sometimes that means going long, and not watching your portfolio every two seconds, while still monitoring. Other times it means that you short to go long, or short to stay long and maximize your gains. The methods people use will vary. Sometimes the emotions are there to tell you that you are gambling and trying to win the lottery, and that perhaps this isn’t the right career path for you.

The Gambler

Trades with this mindset engage in the following:

  1. They treat trades like a lottery,
  2. They get greedy often putting all their chips on the table,
  3. They risk more than they can afford to lose,
  4. They follow an emotional based algorithim,
  5. They speculate on what they wish or fear the stock will be
  6. They try to predict future outcomes
  7. They are unprepared for unexpected outcomes
  8. They depend on patterns over strategy
  9. They focus on what they can’t control (the external world)

     

Greed and Fear are the two biggest emotions that people need to watch out for here. It leads to irrationality and impulsiveness.

Trading is Not the Lottery

If you want to be successful at trade you have to stop thinking of it like a lottery. The Lottery was designed for one reason only, to exploit low-income individuals with promises of escaping poverty.

This makes Traders vulnerable to people who design systems that are meant to manipulate them. When we think about our life in terms of winning the lottery, we’re engaging in a system designed by those who are wealthy to manipulate the poor.

 

Resources:

The Wealth Formula: Rules for Building & Managing Wealth

This is the Wealth Formula

Resources can be broken down into the following:

  • Time – your life spent, your flexibility, something you gave up in exchange to spend on a product, service, etc.
  • Money (currency) – a n abstract representation of the ROI of your time(priced in value/hour) replaced physical commodities like gold, silver, seashells, cows, etc.
  • Asset or Commodity – an object you once exchanged for time

Let’s break those things down below:

More Assets Than Liabilities

They say “Less” is more, and in some ways that is true. It’s not so much that less is more in this area, but rather what kind of more that you have. Our goal when building our wealth is to reduce our living expenses. Living expenses = Taxes & Liabilities. Liabilities are things that we have to spend money on, that lose value over time.

It’s possible to turn Liabilities into assets by finding a way to cause that liability to generate profit.

As an example a spouse who does not help around the house, may sit and watch TV all day. But should that spouse begin doing housework, taking care of the children, or starting a business that brings in more revenue, that spouse becomes an asset. Historically marriage was seen as both an alliance of the wealthy, a way to manage assets, and as an investment. While some spouses are more expensive than actually hiring help the bundled companionship it can offer, as well as children can seem a bonus.

It’s also possible for liabilities to at some point turn into assets.

In places that depend on farming for their livelihood, children are short-term liabilities that turn into long-term assets. The more children you have (diversification) the more you manage your risk and create less work for yourself in the future. This holds true for people who own family businesses as well in the form of legacy. In countries that focus on education as a means for higher  paying jobs, children are seen as liabilities and are delayed until education and in some cases work advancement is complete. People in these more wealthy societies tend to view children as a liability and can’t understand why poor people in their same society have children, without realizing that children are a future asset for these poor people who will come to rely on their children to care for them.

Once we are able to reduce our living expenses we can then focus on reducing our taxes. As a side note, any time we spend money and don’t receive anything back for the money we spent we have a liability.

For a different perspective and change in mindset Taxes could be viewed as an investment if you think about it in terms of what are you getting back for it, we’ll explore whether we view Taxes as an asset or a liability later. Donations, when we donate to a service or charity could also be seen as a liability, unless we see an indirect return for our money – a pay it forward, karmic effect. Where we invest in things we want to see more of in our society. These items Taxes and Donations don’t make us money but we are investing in something.

Diversification is a Form of Risk Management

Diversification is a form of Risk Management, and in all honesty is the heart of spreading risk (Insurance). Whenever we diversify we are participating in a form of ‘insurance’ risk spreading.

“Don’t Spread yourself Thin” and “Don’t Place your Eggs All Into One Basket” may seem like an oxymoron in this scenario they both true. Slow continuous growth allows you to adapt, and scale up as you feel ready to grow. Sudden Wealth is not necessarily a good thing. One only need to research the “Tragedy of Winning the Lottery” and the “Psychology of Sudden Wealth” to understand. A lot of this relates to poverty mindset and who the lottery targets, and why people who have sudden wealth were not able to build upon slow wealth before.

There are a few keys that I have found for Diversification.

  • You start with one, and scale up
  • Additional Assets = Additional Risk Management
  • Slow continuous growth
  • More Quality (Less) over Quantity (More) Matters

Make Your Money Work For you, Not You For it

More Passive Income = Less Time Spent.

Money abstracts away from the time we have invested into something. Whenever we spend money on something, that’s the hours of our life. When we buy a bottle of water, how many hours did we work to be able to purchase that? Someone who makes $6/hour for their time, and then purchases a $6 burger and fries at Mcdonald’s in that moment has spent 1 hour of their life. Those hours add up. It’s incredibly important to view your money as your time. And then think very carefully on what you want to spend your time on.

For instance, we spend money for many reasons, but the biggest reason is for flexibility and convenience. Someone else invested the time and knowledge in learning something. So when you purchase something from someone, you’re purchasing their Time and Investment spent on something, based on how much you value what that person is doing. And you’re exchanging your own Time and money based on what someone else values what you do.

When you remove away all the abstraction you get to the heart of what drives the entire economy and what the Markets are all based on “Value Creation & Exchange”, how much do I value your time, and how much do you value mine.

Entrepreneurs and people who have a wealth mindset tend to approach Time differently. The use their time to build and invest in infrastructures that will return profits to them over time. They work hard in the short-term, for long-term gain. They invest in themselves to learn skills, and then use those skills to build and buy assets, that allow them to either delegate services to automated technology or employees who sell their time for money.

Society doesn’t necessarily have to be that way; in an automated society as an example society can be designed in a way in which users who purchase objects are seen as investors, minus the utilities that they use. And the original founders who built the system are seen as managers, developers and founders. But our society arose from an agricultural and industrial world before the advent of automation and still require a point of entry (initial Money/time spent).

Distribute & Redistribute Your Income

 

Another important part of the wealth mindset is what you do with your money.

I view Saving as a form of Insurance, and Insurance as a form of Risk Management. The origin of Insurance has been around for a long time. One example is of Wealthy Merchants. If a Merchant had to cross the seas, and sent a single ship full of luxuries to sell had that ship looted, he lost it all. However, if he diversified by sending 10 ships across the ocean instead of just 1, and his ship was either looted or pillaged by nature – he still escaped with some of his profits. Today when we think of Insurance, we think of ‘saving’ for a future disaster, and when we think of saving accounts like investments, a way to save for the day when we can retire. I view Insurance & Retirement as one in the same, the line between them is thin. It’s very easy to think about retirement funds as a form of insurance, “Should the day come where I am unable to work anymore I have to set aside money.” since all humans grow old and eventually die, we don’t view retirement as a form of insurance but as something we can live off of.

I view Savings (for retirement and rainy days), alongside Insurance as two sides of the same coin. These are things that we expect to use at some point in the future and so keep aside a lofty fund when the time comes. I prefer to be my own insurance company (self insurance and captive insurance). Obviously when more people pool their money together it helps to pay for more things, but if your goal is to grow your wealth and build upon that wealth in a self-sustainable circular fashion, then being able to be your own insurance company, and consequently even be your own bank (since the lines between these two are thin) I prefer to view them in that mindset.

Setting money aside into savings account is a form of risk management. You are thinking long-term, what if the 10% you place into your assets fail, how much do you have set aside in your savings, and what about your Living Expenses and Liabilities.

Reduced Tax Burden

In the U.S most people think that the Rich are not taxed enough; and yet the higher up the income bracket you go, not only are you taxed more for your labor, you’re also more likely to be audited. Wealthy individuals scan the legal system to find ways to cut their tax burden. There are various methods they employ to reduce taxes and these methods are methods you can use too. :

  1. Income Modification – keeping taxable income down through incorporations and trusts. By modifying how much traditional income you receive and reducing income, or limiting how much income you actually receive.
  2. Capital Gains Management – those who incorporate own shares, which earn them dividends. They delay realizing those gains for a year.
  3. Tax Deferral – deferred taxes on items like their 401(ks) and similar.
  4. Borrowing – one method is to borrow against themselves are accumulate debt strategically (the kind they can pay off), but a more advanced method is to use debt in ways my mind cannot phantom since I avoid debt altogether.
  5. Estate Trusts – utilizing trusts (which were designed specifically to avoid the Kings who would take property from deceased knights )

You don’t have to be rich to avoid taxes, you just have to adopt that mindset. Changing how you spend, what you spend on and educating yourself in the tax code can help you come up with ways to avoid taxes too. But not just avoiding taxes reinvesting into services you do agree with. Remember Taxes serve a purpose, if we outright don’t pay taxes those who fight in the war will have no food, roads won’t get built and so on. But if we find other ways to efficiently manage our money and fund things in a way that actually tackle the problems at hand that’s another story. If you have no method of helping your community then tax avoidance to grow wealth becomes more selfish than not.

Resources (How the Mega Rich Avoid Taxes)

Tax Mindset: Conscientious Wealth, The Ethics of wealth building

The greatest barrier to reducing tax burden is our mindset. U.S. schools teaches us that taxes are good and needed to fund public services. In a democratic republic these public services are decided by elected officials who decide to represent us. These officials are typically partisan, leaning to the extreme left or extreme right. They often do not spend money efficiently and U.S. citizens often discover money they paid into the system is increasingly covering less and less of what they need. Part of this problem is related to our economic system, a topic I intend to cover in another post. This includes how it’s not taxes themselves we find oppressive but (1) how that money is managed, (2) who gets a say in telling us what we have to pay for – whether we object or don’t object. (3) and what the consequences are when we don’t (property theft and imprisonment).

In spite of all of this many people feel like paying taxes on our labor and for the right to own property (or risk forfeiture or imprisonment) is necessary to our survival. They believe that without a tax system in place that many people would not pay. The Articles of Confederation collapsing and the history of how the Constitution was formed shows this battle playing out indeed.

Changing your Tax Mindset means not just thinking, “How can I avoid taxes so I can keep as much money as possible”, but instead, “How can I avoid taxes and funnel them into services that best serve my brothers and sisters”.

Thinking creatively about an alternative more voluntary tax-based system. I choose to think of taxes in the following way

  1. Subscription-based “Cafeteria Tax”– this system states that if you pay into it, you get to use it, and allows you to pick and choose what you want. Baking alternative solutions into the system. Just like online subscription services you can pick and choose which type of services you would like to use. In the U.S. some systems work like this, but other systems mandatory require you to pay into the system whether you agree to use it or not. The problem with this system is how to handle people who cannot contribute to the service but need resources. Where tax is thought of as Annual or monthly fees.
  2. Free vs. Premium Service – many online games have a free vs. premium model. The free service when designed well offers the basics of what people need, like a basic universal income, basic health services, but added convenience and services can be tacked onto for those who pay into the subscription-based system or fee. Offering flexible payment models that reduce what you have to pay up front can also help; and choosing to pay for 12 Months, 2 Years, or even a Lifetime can also help.
  3. Compulsory Saving – rather than making people pay into a system, instead, make each person pay into an account with strict stipulations for when and how it can be used. Similar to insurance policies and retirement, except imposing a mandatory saving mindset that enforces a sense of responsibility.

Rules for Wealth

  1. The Pareto Principle: Where Less Is More
  2. Make Money Work For You, Not You For it
  3. Have More Assets than Liabilities
  4. View each purchase in terms of Quality Investment
  5. Save, Repurpose & Redistribute ROI into Assets and Self-Insurance accounts
  6. Monitor and Track Performance through portfolios

Rules & Regulations for U.S. Citizens

Terms & Laws U.S. Citizens need to know before engaging with Digital Currency

Disclaimer: This is not legal advice. This is based on only knowledge that I have acquired online in my search for staying within the law. I am no legal expert. Make sure to double check and verify information written here for yourself; as a bonus seek legal counsel if you intend to deal with digital currency: particularly with any medium that has identified you as a holder of digital currency or if you attempt to realize your gains via your bank account. Be aware that in the U.S it is necessary to exercise caution, tread carefully to know how government officials will regulate and treat the new currency. Will it view anyone who uses it as a criminal, make it difficult and expensive to comply, or be open and friendly towards users.

The following is a list of terms and concepts that I not only have had to learn and am still learning but that I recommend that any U.S. citizen engaging with bitcoin get into. Digital currency is part of a grey market and is becoming more and more regulated as time passes state by state, country by country.

  • Terminology
    • Money Laundering – is an umbrella term that once only meant the process of transforming profits of crime and corruption into legitimate assets, now includes forms of financial and business crimes, evasion of taxes and international sanctions to name a few.
    • PFIC – a passive foreign investment company. Where 75% of gross income is poassive derived from investments rather than company’s regular business operations, or, based on the assets where at least 50% of the company’s assets are investments (Trusts, Insurance, Hedge Funds, and/or etc) that produce income in the form of earned interest, dividends or capital gains.
    • Civil Forfeiture (Bank Secrecy Act) – originally designed to target drugs now being used to seize assets of anyone who doesn’t report their cash and digital currency earnings. It allows IRS and authorities such as police to confiscate money and property without a warrant from law-abiding citizens. Burden of proof is up to the individual. 80 – 90% of these scenarios where police confiscate assets are kept and sold by the police.  (read here and here).
    • Liens & Levies – A lien is a legal claim against your property to secure payment of your tax debt, a levy actually takes the property to satisfy the tax debt.
    • Worldwide tax – income tax system imposed not just on local income but on worldwide income. Meaning people who live abroad must pay the local taxes of the country they are in, plus the taxes of the U.S. fed. government based on their income for the privilege of holding an American passport, even if they are dual citizens.
    • Tax Event – A taxable event is any event or occurrence that results in a tax liability. All investors or parties that pay taxes experience taxable events. Two examples of taxable events are if an investor receives dividends or realizes capital gains
  • Federal Laws & Rules –
    • Patriot Act – surveillance laws that allows authority to monitor phone and email communications, collect bank and credit reporting records, and track the activity of Americans on the Internet. It requires similar money transmitter businesses like Paypal to collect and identify information on consumers. Information gathered is reported to the IRS when income reaches over 10k and during IRS investigations included in reports to stop Money laundering.
    • FATCA – Foreign Account Tax Compliance Act – is a 2010 United States federal law designed to target American expatriates, to enforce the requirement for United States persons including those living outside the U.S. to file yearly reports on their non-U.S. financial accounts to the Financial Crimes Enforcement Network (FINCEN). Fatca makes it mandatory for foreign banks to report American Citizen account holders to the IRS, the same way American banks do or face sanctions. Attempts to repeal and challenge FATCA (HR 2054) as of 2017 have been put into place but no ruling as of yet.
    • Bank Secrecy Act – requires financial institutions to assist U.S. gov’t agencies to detect and prevent money laundering. Requires financial institutions to keep records of cash purchases, file reports of cash purchases of more than 10k, and to report suspicious activity that might signify money laundering, tax evasion or other criminal activities in the form of structuring. Made it a requirement for banks to file SARs and CTRs.
    • US Bill 1241 “Combating Money Laundering, Terrorist Financing, and Counterfeiting Act of 2017”– bipartisan bill adds digital currency to civil forfeiture laws, for assets over 10k. Requires travelers both u.s. and non u.s. to declare digital currency at US border just like they would cash. Failure to report holdings will result in civil forfeiture of all assets and up to 10 years in prison. Inside the report is a mandatory requirement that the DHS (Department of home security), U.S. customs and Border Protection agency develop an infrastructure for blockchain monitoring. Note that this bill includes Cash, Digital Currency, Prepaid Phones, Vouchers, Coupons & Gift Cards — electronic and physical.
  • Business Licenses “Exchanges, Banks, Payment Systems, etc”
    • Money Transmitters (State) – In the legal code of the United States, a money transmitter or money transfer service is a business entity that provides money transfer services or payment instruments. Money Transmitters in the US are part of a larger group of entities called Money Service Businesses or MSBs. Many people who sell their own bitcoins peer-to-peer example via Localbitcoins, have often found themselves in some jurisdiction being caught up in sting operations by police who try to get them for operating without a money transmitting license. Like ‘insurance licenses’ these licenses vary from state to state and are expensive to purchase. The average cost of a Money Transmitter License is 176k. Keep in mind in some states it is illegal for children to mow lawns or sell lemonade without a business license.
  • Laws
    • FAST ACT, Fixing America’s Surface Transportation Act, H.R. 22 – gives IRS power to revoke passports for Tax debts owed over 50k including interests and penalties.
    • Civil Forfeitures –
    • KYC. Know your customer (Patriot Act) – is the process of a business identifying and verifying the identity of its clients. Designed predominately to tackle Money laundering such as those attempting to evade taxes and other criminals.
    • AML. Anti-money laundering – set of regulations and controls that require financial institutions to prevent, detect and report money laundering activities. It is up to individual employees and institutions to detect and report suspicious activities.
  • Federal Government Regulating bodies
    • SEC – U.S. Securities and Exchange Commission (SEC) is an independent agency of the United States federal government. The SEC holds primary responsibility for enforcing the federal securities laws, proposing securities rules, and regulating the securities industry, the nation’s stock and options exchanges, and other activities and organizations, including the electronic securities markets in the United State
      • ICOs, IPOs and similar Initial Coin Offerings, tokens that are premined and offered similar to stocks and shares fall under SEC jurisdiction. SEC is currently looking for ways to regulate the cryptocurrency ICO market. Some ICOs launched have tackled this by barring U.S. citizens from participating in ICOs similar to foreign banks not taking U.S. customers.
    • FINCEN – views digital currencies as currency. They regulate banks and exchanges not so much the individuals but do share data with the IRS.
      • FBAR, Foreign Bank and Financial Accounts / Fincen Form 114 – related to Form 8938 but reported to Fincen for reporting foreign financial accounts. If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account (including foreign insurance) that exceeds certain thresholds, the Bank Secrecy Act requires you to report yearly to the Department of Treasury.
      • FinCen Form 112, Currency Transaction Reports (CTR) (Bank Secrecy Act)– deposit, withdrawal, exchange of currency of more than 10k. Multiple transactions must be treated as a single transaction if conducted by or on behalf of the same person.
      • Suspicious Activity Report (SAR) (Bank Secrecy Act)– banks must file a SAR for any suspicious transactions relevant to possible violation of law or regulation. (all banks and exchanges are required to develop a way to detect suspicious activity).
    • IRS – views digital currencies as property. Their main concern is tax collection and enforcement.
      • Form 8621 – tax form that PFIC investors are required to fill out, is lengthy and complicated taking up an estimated 40 hours to fill out. Advised to have Tax professionals complete the form.
      • Form 720 – for those who own a business or shares within a business that deals in goods and services subject to the excise tax (Form 8833 if form 720 does not apply due to treaty-based exemptions)
      • Form 8938 – Report of FBAR, any foreign financial asset must be reported with this form. fine for not filing 10k ( 50% of your account values whichever is greater), including 100k for those who are found to willfully not file. (included as penalties)
      • IRS section 1031
        provides an exception allows you to postpone paying tax on the gain if you reinvest the proceeds in similar property as part of qualifying like-kind exchange.
    • Department of Homeland Security / U.S. customs and Border Protection agency – regulates trade, customs, immigration and travel. It’s main role is to prevent criminals from entering the U.S. illegally along with other contrabrand issues.
      • See US Bill 1241.
  • Legal Counsels
    • CPA, certified public account – specifically one in cryptocurrency.

Blockchain Surveillance “Tools” & Reporters

Many exchanges and services such as Coinbase already monitor incoming and outgoing transactions. Circle as an example used to terminate accounts of anyone who sent money to localbitcoins. Coinbase forbids people using their bitcoin for gambling and likewise terminated the accounts of anyone who were caught sending money to those places. Think of digital currency just like your bank account and connected credit/debit card. Once you link identifying information to it digital currency leaves a paper trail, where you send your money can be followed.

An example of what that might look like can be found here.

Centralized Exchanges are mandatory reporters, those regulated in the U.S. are bound by AML and KYC laws. These laws require that they report to FinCen and SEC who shares data with the IRS. Exchanges are required to ask for your passport, driver’s license and SSN to abide by reporting requirements, and with new bills like U.S. Bill 1241 passing it is only a matter of time before Exchanges are required to cooperate with US Customers and Border Protection, and the Secretary of Homeland Security.

At any point where you are:

  • required to identify yourself
  • purchase bitcoin without using a VPN (i.e. linked to your IP address)
  • purchase bitcoin linked to an email account linked to you
  • did service or gave someone service in exchange for digital currency and they reported it and you on their tax returns

That is data stored in the blockchain forever.

How the Government knows about your Income

Primary Method #1. Being reported via Centralized Choke points (Exchanges, Hot Wallets & Banks) who monitor your transactions. Your bank account is another example. If you use your credit or debit card to make any purchase of bitcoin online. Whenever money exits from a mandatory reporter to another mandatory reporter you are on the radar. Even if you manage to go off radar at some point you have to bring your money to the surface. If you attempt to disguise the money you will be considered evading taxes and seen as a money laundering. Some online wallets may also be a possible target if regulations are put in place that require them to report the same way Exchanges do.

Primary Method #2. People spending a lavish amount of money. When the IRS does a comparison of your net worth compared to how much you’re spending. If you say you only have 10,000 but were able to purchase a 25,000 car out of pocket then they know you’re lying.

Other Methods. Blockchain surveillance & Whistleblower programmers. Anyone you talk to or work with could report you, and blockchains can be monitored both by exchanges, wallets, and law enforcement. There are tools that already do this and some organizations already doing this.

Consequences of not Reporting

With Civil Forfeiture it’s also possible to have your things confiscated with or without reporting if digital currency is treated similar to the way cash is treated. Where having a large sum of cash is considered suspicious.

  1. Civil Forfeiture – all assets and property, not just the money you are owed, but your house, car, bank accounts etc will be seized and sold.
  2. Penalties, Fines & Interest – they can add more penalties and fines that accumulate per year
  3. Imprisonment – variables times on how long
  4. Close down your business
  5. Garnish your wages
  6. Contact your friends, families and employers
  7. and more

While the police and other government bodies can take everything you own the IRS has a list of property that is protected from seizure (Section 6334):

  1. Furniture and household goods up to $7,720 in value;
  2. Tools necessary for the trade, business or profession up to $3,520 in value;
  3. Clothing and school books necessary for taxpayers family;
  4. Undelivered mail
  5. Wages necessary to pay court-ordered child support;
  6. personal residences if the balance owed to IRS is 5k or less.

And while the IRS may be short staffed and unable to handle their work load law enforcement (police) and DHS are more of a concern when it comes to civil forfeiture and being searched.

Countering Blockchain Surveillance

The only counters for this:

Where you Receive your Digital Currency

  • No Account Required Exchanges (altcoins)– sending money through digital currency only exchanges like Shapeshift (shapeshift is low-volume). Changelly is high volume but requires an email account, and ID for dealing with cash.
  • Peer 2 Peer (Bitcoin only) – use localbitcoins or another p2p place. (be wary of money transmitter licenses and scams). Often sells at a premium and requires physically leaving your home. Slow and cumbersome.
  • Decentralized Exchanges (Low volume/liquidity)– there are currently no good, high volume decentralized exchanges but this may come to change. They often require cumbersome software, have low volume and liquidity. Keep an eye out for NVO.io which may change this.
  • Bitcoin ATM (High Premium) – also sells at a premium, but another option. Most altcoins are easier to get with bitcoin, DASH ATMs etc. aren’t as readily as available.

What Type of Digital Currency You Use

  • Purchasing Privacy-Centric Tokens – Dash, Monero, Zcash, and others.

Bitcoin has proposed to add privacy features to it, one example being “Dandelion”, but it still has to work through its scaling and decision making issues.

Where & How you store your Digital Currency

  • Wallets – sending money to wallets with built-in anonymizers (like the Stratis Breeze wallet) or using wallets that allow you to discard and use a different address per transaction. Using hardware wallets, multifactor, and protecting your keys. Essentially there is no way for your cryptocurrency to be confiscated without you relinquishing your keys, so protecting your keys alongside the wallet you choose for your digital currency makes a big difference. Research Wallet Security for Cryptocurrency.

Where/How You Realize Your Gains

  • All Methods that seek to realize gains under the radar is likely to be considered part of the shadow economy and likened to tax evasion. When it comes time to realize your gains seek legal counsel before you do so to best know how to do so. The fees will take a bite of your earnings but if the gains are truly substantial enough to warrant concern, it is worth it.

Countering Civil Forfeiture

Summary: Don’t do drugs, be vigilant, know your rights to avoid incriminating yourself, and keep your assets out of reach if they do.

Main Methods of Civil Forfeiture:

  1. Traffic Stops –a popular method for law enforcement to stop people. Driving within the speed limit, making sure headlights are on and working. Being extra vigilant of state laws when driving out of state. Be polite when officers are speaking to you. Know your rights but don’t be obnoxious about it, keeping hardware wallets and cash out of sight, not giving probable cause to be searched. Keeping your car well maintained. Due to the  4th Amendment states don’t need a warrant to search your vehicle but must have probable cause, such as seeing paraphernalia in plain site, a warrant for your arrest, or you are behaving suspiciously.
  2. Real Estate – preventing inviting people into your home or participating in criminal activities predominately related to drugs (esp. marijuana).  There are conditions where police are permitted to enter and raid your home without a warrant, looking for a criminal who has entered the home or smelling marijuana are often the reasons.
  3. Foreign Trusts/Bank accounts– many people look to foreign trusts such as the Cayman Islands. Though it’s true the Government cannot control foreign trusts, and that trusts have more freedom than businesses; many people have gone to prison as a direct consequence of not voluntarily giving up their assets for seizure.
  4. If Bipartisan US DHS bill passes, then Coming Soon (crossing the border)

Other Solutions & Summary of Basic Tips

  1. Become a Perpetual traveler/World Citizen/Flag Theory  – see link.
  2. Participate Little – Participate so little in the traditional economy that the government pays you no mind. Be less materialistic have less. (when this method is used with Flag theory it can be very powerful)
  3. Don’t broadcast what you do on social media and blogging platforms – specifically where your real name or identity is linked. Be aware that this could be used in an audit against you and that friends and family who want a prize could report you whether you have realized your gains or not. Keep what you trade on a need to know basis: between you, your lawyer, and select people to who you seek advisement from. Even sharing the news with family can be a problem (as they may want to brag or want a piece of the pie). This is recommended not only to stay off the radar for having your digital currency and all assets taken without a trial, but, can also prevent making you a target of theft and even hackers.
  4. Report Everythingplay the game to win the game; be ahead of the game and report every detail that they want to know, comply no matter how burdensome or difficult. Get a legal adviser and an accountant, as it can take more than 40 hours to put together information. (this burden may be an attempt to deter people from digital currency).
  5. Avoid Marijuana on your property at all costs – Marijuana is legal in some states but illegal according to the federal government. Many of these violations and probable causes are related to guns/weapons, drugs (esp. marijuana which has a strong smell).
  6. Keep vehicle maintained, drive the speed limit – When you travel know the laws of the state you are traveling in as they target out of state drivers the most.
  7. Be as polite as you can be – know and exercise your rights but don’t make law enforcement’s job difficult. Their job is already challenging, they deal with corruption within their ranks and hatred from people who mistrust them and commit illegal acts outside their ranks. Some people in a position authority aren’t nice people, but others are, they all get blanketed together. They are trained to view life in black and white manner, not to question. Treat them like a human being, keep hands on the wheel when speaking, keep your car clean and up to date. Obey their orders and never physically resist, if you need to fight — do so in court, like a politican. Mindset matters, approach from a place of compassion and understanding no matter which side of the fence you are on. It will show through your tone and responses.
  8. Be Legally Prepared – Have a dash cam if necessary, a memorized number, and a legal fund in case you need to hire an attorney. Avoid Public Defenders at all cost. The court systems are bureaucratic and not designed with you in mind, so just prepare for that, like a politician. Keep some assets offshore (but remember the law requires you to report and pay taxes on them over a certain amount).

Know Who You Are Dealing With

Understand that there are different departments with different goals, who arise in different circumstances. Most of the laws that allow for civil forfeiture were designed to tackle drug pins. Money laundering  laws were meant to target drug lords, prostitution rings, and organized criminal groups. Local law enforcement who participate in raids and who search vehicles, their laws focus on drugs and anything related to those drugs. They aren’t looking for financial white collar crimes (that’s the IRS’ job). Digital currency is likely to be added to the expanded money laundering laws that also looks at cash suspiciously. Cash does not leave a paper trail the way digital currencies and debit/credit cards do. There are other agendas at work that use the drug war to piggy back their own agenda.

Expanding the definition of money laundering to include those who evade taxes makes the IRS’ job easier. Discouraging people from holding cash and digital currencies that compete against financial institutions which produce, own, and control money and the economy is another agenda. See The Shadow Economy/Black Market, which  includes not just drug lords and prostitution rings but any person accepting cash under the table.

In any case local law enforcement are looking for drug, weapon and human trafficking related crimes. While the IRS is looking for tax evaders. Knowing who is approaching you, when they would approach you, and under what circumstances help. The expanded laws are now being used to tackle people when they are traveling. It may be that you can’t carry your laptop on board a flight and so on. Things that fall under DHS and border control, and what they are trained to look at and prohibit. Learn their procedures.

  • DHS/Border Control/etc – tackles people who are traveling, focused on preventing drugs, organized crimes, and contraband (anything deemed contraband). My basic understanding is that they rely on what they find in your luggage and searches of your records. Typically people are scanned and singled out for deeper searches if they feel they need to do a deeper search. The no fly list, sanctioned countries, crossing borders etc. may be when these people come into play.
  • IRS – tackles people who evade taxes, they are short staffed, but focused on preventing financial crimes. They rely on institutions and banks to report your actions, typically using tools to cross-check records before flags come up.
  • Police – focus predominately on drugs, typically are found on the highway patrol or are called to the scene. They rely on what they physically see. While they have tools to inquire more about a person, my understanding this is done only after they have seen things that they deep suspicious based on ‘sight’.

Handling Taxes

Digital Currency tax is complicated. Simply buying a cup of coffee is a tax event. For the most part bitcoin and digital currency is taxed as property, like-kind may or may not count for altcoin trading, IRS mainly cares about gains being realized (not realizing your gains and waiting for a year can decrease the rate of tax). Because digital currency is so complicated using a bitcoin tax service or hiring an account is often necessary.

It helps to understand that IRS taxes all income that you earn. Here’s a list of what is nontaxable vs. what is in everyday life. Gifts, rebates, child support, and essentially anything not meant to be income are used as income are not taxable. Anything meant to be income including the poverty trap “lottery” are taxable. The IRS tries to keep any loop holes out of the system. Cash and digital currency which the IRS loses billions of revenue through the underground/shadow economy takes a big bite out of their revenue so they are looking to cover up those holes.

Tax evasion is illegal, tax avoidance is legal. 10k is the golden number because the bare minimum amount of money for a single person without dependents or spouse is 10k. After that point the money you earn is taxable. When it comes to digital currency realizing that just owning digital currency let alone the mess of trading it can make you an easy target. When it comes time to realize your gains I recommend seeking legal counsel and an accountant.

One possible solution is not to realize 10k gains in a year, and look to figure out ways to reduce your tax burden. I’d recommend studying how the wealthy do it.

What This Means for you

U.S. citizens might not be allowed to participate in some ICOs due to restrictions, some exchanges may not except some people from certain states or countries. You may  end up having to fill out complicated and lengthy tax forms, similar to PFIC that require you report your holdings of digital currency, just like foreign offshore accounts.

Pay attention to regulations and laws in the news. They change from day to day and vary from state to state, the federal government, and even from country to country.

Recommendations: While I do not recommend breaking any laws. I do recommend avoiding exchanging more than 100 – 1k on an exchange that has your information, until rules and regulations both federal and local are made clear. The rules and regulations can either be encouraging or antagonistic. Keep your earnings that are on the radar small enough that they are of little interest to the big fish they want to catch, and do not realize your gains (your larger earnings) until you are able to afford a legal counsel who can help you once you enter back into radar. I recommend thinking like a wealthy person who wants to reduce their tax liability but not evade it. This will require an account for the increased tax reporting burden, a legal adviser, incorporation/trust (legally compliant tax haven) (added reporting requirements, legal adviser and accountant apply). Note that a tax haven in this sense isn’t to evade taxes but to make civil forfeiture and liens difficult, though also note failure to comply with court requests can put you in prison, hence you need a legal adviser.

Alternatively when you realize your gains pay up all the money the tax accountant says you might owe (without trying to reduce the tax). You will likely be audited the higher your income bracket is and if you’re on their list and get flagged. You’ll owe more but it’s simpler.

It’s likely I missed some things, possible there are some inaccuracies. But hopefully that gives people a good starting point for their own research.

I will update this or post an update if it needs modifications or clarifications.

The Business of Trading: Is Trading For Me

Can I Make A Living Trading

When people ask me can I trade for a living, my answer is it depends. When they ask me how they can get started and I begin to explain all that they have to learn, they quickly lose interest.

Most people become intrigued with trading cryptocurrency as a get rich quick scheme. They heard about “Bitcoin” in the news, how it’s worth $2k and was once worth only $7. “Imagine how rich I’d be today if I had bought Bitcoin then.” People don’t realize that, that was 8 years ago. It has taken Bitcoin 8 years of rallies, corrections and reversals (some lasting years) to be where it is today. Had they bought in 8 years ago would they have held or would they have sold? How would they have fared when they read the stories, “Bitcoin is dead”. How would they handle the emotions driving the price of crypto assets, and the hype/fud surrounding altcoins.

People hear the fancy stories of how those who bought in last year are now rich this year. They see an easy way for them an average joe to get money quick if they choose the right lottery number or the right coin. In their mind Trading is a form gambling. You place your bets and sometimes, sometimes you get to win the lottery. What an easy way to get rich quick. A way to get back all the money they lost or need to buy a new house, get a new car, or live independent and free. They don’t view it as a business or a job, and even the traders I meet who see it as a job, only think what can make them a profit yesterday. Most people are very short-sighted in this regard and react impulsively.

90% of Traders, that’s 2 out of 3, exit at a loss. New Traders fall prey to:

  • Traders of varying levels of experience calling themselves Masters and Gurus
  • Pyramid schemes
  • Scam Organizations and companies offering ICOs (Initial Coin Offerings).
  • Hype and Fud in forums, chat rooms
  • The fake news often written by owners of the coin
  • A community divided between the merciless and the ‘merciful’
  • Empty promises that prey on dreams of escaping poverty and/or the middle-class on a quick way to become rich
  • And more

Behind Every Trade Is a Person, That Person Is You

When I see charts I don’t see arbitrary numbers and candlesticks. I see human beings driving the value of the market based on their hopes and fears. I see a struggle between buyers and sellers, bulls and bears.

In this way behind every trade is a person. Charts are monitors. They track the actions of you and me, people on a global scale. They are real-time vital signs, monitoring emotions. The charts tell a story using candlesticks and volume, all measuring how many people are buying or selling. It’s this process of buying and selling that determines the actual price, the value of what something is worth. It’s this Value Creation that determines the price of everything in our world. Getting good at reading the stories of these charts is a matter of getting good at understanding ourselves and the people beyond us.

Jumping From One Frying Pan To Another

Many people look at trading cryptocurrency as a way to make a lot of money. They jump in without realistic expectations. Trading will allow me to escape poverty. And so individuals merely shift their burdens from one frying pan to another frying pan. The reality of the market is that it moves at the whims of fickle people who are motivated by greed on a day to day basis. Yesterday the market was rallying, prices soaring carried only on the backs of speculation. Today those high emotions exhaust themselves, having nothing substantial to hold onto the price crashes and corrects itself to reflect its true value. The quicker and higher the prices rise, the deeper and harder the prices will crash. Prices return to a more predictable, less volatile trading range representing buyers and sellers who have equal strength and control. There are a few pumps and a few dumps here and there; but ultimately the true value of the coin continues its slow steady growth upwards. If you’re not prepared for how you’ll enter and how you’ll exit, how you’ll hedge, the highs and the lows, how you’ll manage the risk that comes with this emotional volatility; then you open yourself up to the same set of issues you would have had when you were working the 9 to 5 job you thought cryptocurrency would help you escape. Only worse because for some people this may be your entire life.

Gambling instead of Risk Management

Imagine this scenario.

“Yesterday the market was rallying, prices soaring carried only on the backs of speculation. Today those high emotions exhaust themselves, having nothing substantial to hold onto the price crashes and corrects itself to reflect its true value. The quicker and higher the prices rise, the deeper and harder the prices will crash. Prices return to a more predictable, less volatile trading range representing buyers and sellers who have equal strength and control. There are a few pumps and a few dumps here and there; but ultimately the true value of the coin continues its slow steady growth upwards”

If you’re not prepared for how you’ll enter and how you’ll exit, how you’ll manage the risk that comes with this emotional volatility. Then you open yourself up to the same set of issues you would have had when you were working the 9 to 5 job you thought cryptocurrency would help you escape. Only worse because for some people this may be your entire life.

Know Thyself

To trade you must know yourself. Your weaknesses, strengths, desires. Trading is a job, it’s a ‘trade’, a business. Like any business you have to learn is this job right for you? Or are you best suited for something else?

Trading is best suited for people who:

  1. Are Able to Practice Patience & Self-Discipline
  2. Can See long-term over short-term
  3. Take time to Research
  4. Seek opportunities
  5. Manage Risk
  6. Have a Good Wealth Formula in Place
  7. Trade because they are passionate about the market
  8. Can self-assess honestly and accurately

Trading is not suited for people who:

  1. Are living paycheck to paycheck
  2. Like to gamble and take lots of risks
  3. Are unable to delay gratification
  4. Need to be handfed information
  5. Believe everything they read in the news
  6. Have a lot of Debt
  7. Live outside their means
  8. Are controlled by greed and fear
  9. Have a tendency towards panic and anxiety without controls
  10. Only trade because they feel they have to
  11. Are impulsive with no means of regulating those impulses

While not impossible, it’s difficult to be calm and trade with a rational mind when you are worried day to day if you can even pay your bills. It’s hard to focus on learning something new when you’re focused on where you’ll get your next meal. It’s a good way to earn a living if this is what you are good at, but it’s not a great way to earn a living when you’re already stressed out.

Who are You and Why Do You Trade?

  1. Why are you trading?
  2. What are your goals?
  3. What’s your personality?
  4. Are you introverted or extroverted?
  5. Or you rebellious or a conformist?
  6. What’s your risk tolerance?
  7. How well can you handle delayed gratification?
  8. Do you chase the market?
  9. What is your relationship to money?
  10. Have you practiced any paper or virtual trading simulations before entering?

Market Psych Test is a free test that will help you better understand your saving and trading habits. If you tend to be someone who is overly emotional, but still feel passionate about trading the trick would be to find the trading style that best caters to your personality.

If you know that you need to eat healthy but buy cookies every time you go grocery shopping you’re setting yourself up to fail. But if you know that you struggle with delaying gratification and resisting temptation then you need to set up your trading style so that it works with you not against you.

Who are You and What Are you passionate about?

  1. What are you naturally good at?
  2. What are your strengths and passions?
  3. What do you enjoy doing?
  4. What would you be doing if you didn’t have to trade?
  5. What are your values?
  6. What is your Purpose or Mission Statement?
  7. What would you be doing if you could do it for free?
  8. How do you measure success and failure?

Is Independence for you?

  1. Can you handle unpredictable income streams?
  2. Can you afford to step back when things get tough?
  3. Do you enjoy working with people or prefer to work solo?
  4. Can you start and finish tasks independently?
  5. Can you manage money wisely?
  6. Are you able to set up schedules and routines?
  7. Are you able to set up and achieve your own realistic S.M.A.R.T., short and long term goals?
  8. Are you able to focus on your M.I.T. tasks?

Assess your current strengths and weaknesses with these free tools:

Once you figure out what you’re passionate about you then have to figure out how to bring in cashflow that makes sense to you.

As an example: I enjoy writing, trading and helping people learn. I can write about trading all day long, and find it helps me connect with people. I don’t enjoy socializing or participating in day to day chit chat. Since I am both passionate about trading and good at it what I do here has become an option for me.

Know Thy Business

When you start a new business do you dive head first without doing your research? It’s wise to ask questions related to the environment you are about to enter.

A Good Trader asks questions related to the environment they are about to enter.

  • They look to understand their competition (other traders),
  • how do they think, what are they buying,
  • who are the big players in the games,
  • what are the best and worst performing crypto assets
  • what common mistakes do new traders make,
  • how do people fail and succeed;
  • what do I need to do in order to avoid losing and actually gain a profit.
  • How do I need to think.

Striking out on your own means that your income is going to be unpredictable until you can find a steady rhythm. These are a few but not all questions that someone new to the community might ask.

  1. What type of crypto assets do I want to trade?
  2. What exchanges are available to me to trade?
  3. What problems do these exchanges have?
  4. What does it take to bring in “predictable” income streams?
  5. How do I get started trading cryptocurrency?
  6. What do I need to know to do this?
  7. How can I protect myself, prepare, or handle the volatility in the crypto-world?

There are many ways to determine if Trading is for you. The best way to answer that question is to approach Trading for what is, just another job. Some people say passion is overrated. I believe passion is necessary because it helps keep us motivated and committed when things get hard. If we’re passionate about trading it will push us to increase our performance. If we view trading as an extension of our mind and lifestyle we can use it to help us improve our mind, self-discipline, self-mastery, and growth.

A Few Resources:

Top 20 Affirmations Every Trader Needs To Know

 

Repeat after Me

  1. I am responsible for my own life
  2. I hold myself accountable for all my decisions
  3. I manage risk not lottery tickets
  4. I focus on mindfulness, patience and self-discipline
  5. I am flexible and able to prepare for any scenario the market throws at me
  6. I adapt and adjust my strategy to the market, not the market to me
  7. I go with the flow and ride the waves of whatever life & the market throw at me
  8. I am able to step away when my mind is not calm
  9. I see opportunities for entering trades
  10. I create clear exit plans and stick to them
  11. I make continuous profits through my effort
  12. I am focused on growing slowly not quickly and overnight
  13. I use my wealth to add value to the lives of those around me
  14. The more I earn, the more I can serve others beyond just myself
  15. I manage my money wisely
  16. I give value to those who will grow in value and share that value with others
  17. I am the Master of my own life and take ownership of my life accordingly
  18. There is room for everyone to succeed, not just me
  19. I have the potential to make great decisions
  20. I work hard effortlessly, because I love what I do

A Trader’s Disclaimer

Before we begin I need you to understand these 8 things:

  1. Nothing I tell you is unique
  2. Everything I share can be learned for free
  3. 90% of Traders will fail
  4. There is no golden strategy
  5. Trading is a job and a business, it requires effort
  6. You are the bottleneck
  7. You are responsible for you
  8. The market is designed to manipulate you

 

I will elaborate on a few of those concepts here

I am not responsible for your loss or gain

I will never take responsibility for your losses or gains. Nor will I ever make a claim without emphasizing that this is purely speculation. Speculation is wishful thinking, it’s hope, fear, and guesses. Sometimes you guess right, sometimes you guess wrong. We can only know what is present in front of us and prepare for those scenarios accordingly. If this happens then do X, else do Z. That’s all we’re doing, we create a set of rules, parameters and if/else statements. Algorithimic trading is taking these rules and turning them into a bot. Therefore if you are able to create a set of rules and follow them exactly, with continuous profits, you could do the same with a bot. That bot isn’t responsible for your losses or gains either because at the end of the day, that performance is all you. I am not claiming that I am right, only that I’ve built my style of trading around this, and it has helped me win and my hope is that if I share it, it can help you too. It’s up to you to verify and test what I say as true to and for you and your particular situation, not me.

This is not a golden lottery ticket

If you’ve come to this site looking for your next lottery ticket win, you’ve come to the wrong place. I’m not here to help you win the lottery, you’ll need to find a self-proclaimed Master or Guru with raving testimonies whose an expert at helping people find lottery wins because that’s not me.

I teach Mindfulness based trading, Risk & Money management

90% of traders lose. In the cryptocurrency world, it’s often not because of the coin they’ve picked, it’s because of their mindset. The way they approach life, money, their risk management, strategies and trades. You can take a winning strategy and put it into the hands of two traders and one trader performs well and the other fails; what’s the difference between those two traders. Mindset, this affects their approach. In this regard I am not teaching you what to trade; I’m explaining how to develop the mindset and creating winning formulas (i.e. personal habits) designed to achieve your goals. At any point where I begin talking about strategies, understand that without the correct mindset your performance will be poor. This has nothing to do with what I share with you, and everything to do with you.

There is only one strategy

Buy low, sell high. it’s not unique. Anyone who approaches you telling you they have a strategy that will help you win is misleading you for their gain. In all walks of life we encounter scenarios and situations where we have a choice: To buy products at a premium, or look for things selling cheaply either because they’re undervalued by the person selling them – or because they’re on sale. We make these purchases to use them for ourselves or to sell at a higher price later. Those who bought low can sell high, and those who bought high often sell at a loss. Garage sales are an example where people bought a bunch of stuff they’re now selling at a loss, hoping to get some gains back. The people buying at these garage sales are hoping to find hidden gems that they can sell later or use in their household. Black Friday is another example of this. Wholesale retail like Walmart. Whenever you start a business producing products or giving services, you’re hoping to sell something (your time spent) that cost less money than it cost you to produce. Across all walks of life what separates those who make a profit from selling anything is a single ancient strategy: Buy Low, Sell High.

Every other “Strategy” are simply methods (indicators) bundled together to help you more easily identify and confirm patterns in the marketplace. Understand the term ‘market’ just abstracts from the reality of the fact that you’re actually interacting with people, and all these indicators just help you understand what these people are doing and how they are reacting to some scenario that has happened.

Trading is 90% Mindfuck, It’s up to you to be Unfuckwithable

Our life is centered around economy, the economy is the marketplace. 90% of the market is manipulated in order to manipulate you. You will undoubtedly discover patterns of manipulation in these trades, but make no mistake, your pattern isn’t fool proof. All patterns can be breeched and are more often than not already compromised, used to manipulate you, based on the expectations big players know you have. Patterns, they change, they break, people catch onto them. They help a little, but most of those patterns you see, are known patterns that whether intentionally put there or not, are timed to manipulate you. You need to understand this going in that the nature of this game, whether it’s unregulated or regulated is designed as a mindfuck. If you’re not prepared for that mind fuck you’ll lose. If you get angry at the fact that there are people manipulating the coins – you’ll lose. That’s the nature of the economy whether it’s regulated or unregulated, with rules or without rules all life is manipulated, all life is a mindfuck, that’s why you have to be unfuckwithable.

A Trader’s Introduction

My name is Kieran Murghein, a.k.a. Morgan, and I am going to share
with you all that I have learned from the past few years studying cryptocurrency and trading. All the hours I have invested in studying cryptocurrency, back-testing, exploring, failing and succeeding, learning to trade – I am going to share with you.

Like you I view trading as an opportunity, to gain the financial freedom that comes with creating wealth. If you’re part of the 10% audience group I cater to then you also share my:

  • focus on turning knowledge and experience into wisdom
  • emphasis on slow, steady, continuous & sustainable growth over quick oneshot wonders and homeruns
  • obsession over cultivating a mindful mindset
  • instillation of patience and self-discipline
  • belief that there is only one real strategy, buy low and sell high
  • insistence that everything else is just a set-up of styles that can be designed around you (your personality and tendency towards risk)
  • design strategy catering around risk management
  • focus on working with a purpose and goal in mind

Trading is my passion. It is what I do to earn myself a living and plant the seeds for my future and future generations within the world. I do it because it’s a way to both develop and turn skills I am already inclined to, to work that will allow me to live and support my lifestyle and dreams. I chose cryptocurrency for the financial inclusion, enabling me to take a little bit of money and, with time and effort, to grow that money and utilize it.

I imagine some of you were drawn to this page because you were seduced by the allure and promises that trading cryptocurrency would bring to you the financial freedom and riches you would make if you just made that “one” right trade, or found the next future Bitcoin; getting rich quick with little effort. Most of you buy at the top overcome by greed, and sell low overcome by panic and can’t understand why you lost. The vast majority of you approach trading like a gambler, and place bets. Out of every person who has asked me to help them trade for a living, the vast majority want me to speculate (gamble) not trade. They want me to tell them what the future will hold for their coin – to have a greater certainty in their betting positions. But that’s not the type of work I do. Traders who approach this from that mindset will not like what I have to say and will go off to get advice from some guru who promises that: On this day, at this time, if you buy this coin at this price, and sell that coin at that price, you will be rich.

If that’s the type of trader you are then not only am I not the right person to get guidance from, but I can guarantee that being a Trader is not what you are meant to be. Just like any gambler or person playing the lottery you may get lucky once or twice, you may even have an idea of how you’re doing it. But play the game long enough and the vast majority of you with that mindset will eventually lose everything that you made when you ‘just got lucky’.

When people ask me these questions I reply: I’m not an oracle, if I were an oracle I’d be making a living doing something else, probably using Augur or some similar prediction tool instead. The only thing I am going to do for you is show you how to do something by sharing the steps that I personally use to build and cultivate a more mindful trading mindset that has helped me win continuous profits.

I’m going to help you build the skills and cultivate the resources that you need in order to be successful. I’m not concerned about what happens if 90% of the Traders catch on, because the truth is that 90% of the people who come across this page are not meant to be traders; this job isn’t for them. They’ll go off, pay a self-proclaimed “Master” or guru or a broker to use their wisdom and knowledge to make money for them. And that’s fine. Because I’m not talking to them.

I’m talking to you, the 10%, the 1 out of 3 traders who will survive if you commit to adjusting your mindset. I am sharing this knowledge to help you convert poverty mindset to wealth mindset, to find opportunities, to be the successful trader you were meant to be.

What will that look like?

I am going to ask you strange questions like:

  1. Who are you?
  2. Why do you trade?
  3. How much do you really need to maintain your lifestyle?
  4. Are you willing to suffer and sacrifice to achieve your goals?
  5. What are you willing to suffer/sacrifice for?
  6. Can you delay gratification?
  7. And more

I will emphasize trading as a career, as a job, and view it from the perspective of a glorified insurance agent who likes to play video and board games, not, a gambler.

Just like any job you need to learn what you’re doing and commit the time to learning that. I want you to understand that I’m not promising you something that you can put in and get rich tomorrow. I’m saying if you invest the time and effort, right here, right now in learning the skills you need to learn, you can begin to rake in continuous profits that allow you to relax later. With or without being at your desk to execute a trade.

Why share this?

Many people have wondered why I want to share my knowledge so freely. The answer is both simple and complex, one best answered in the form of a roadmap. The simplest answer is that we get what we give, therefore if we want more of something, we must give it.

  • I want to help more people become proactive and mindful traders – because it creates a supportive atmosphere for me and others like me, which in turn creates a community one can use to help stay grounded and feel supported.
  • I want to give to others – because only in giving can I receive the resources I need to help build a better world.
  • I want to create more opportunities to grow – Trading is the economic portion of a 5 leveled project I’m working by which I plan to automate cashflow for and that of my organization so that I and others who stand with me can spend more time working on developing ourselves to add more value into the lives of others and our families. My lifestyle is an extension of my work, and my work an extension of me.

To me I view cryptocurrency as the opportunity to build a self-sustainable automated economy. Where those who invest (proof of stake) reap rewards. Where the initial investment that a person commits in time and money allows them to work less on attaining financial freedom, and more on investing in themselves so that they can follow their passions and use those passions to add and create value to the world. My mission is to make my lifestyle a tool, an extension of my life’s work, one that is sustainable, able to nourish not just me, but others too.

Why would I want to nourish others?

Because the world is a mirror. Our values and beliefs are the metrics by which we measure the world, and that metric is the foundation for our wellbeing. How can I have true sustainable happiness, love, abundance, and wealth (a symptom) if I do not want the same for all beings.

I don’t believe it’s possible. And so that’s why I’m here. Sharing with you is part of my personal journey and if that creates value for you, follow and share with others you think it might help too.