Why you need to know about ECNs before you trade Crypto-currencies

by , 06 March 2019
Why you need to know about ECNs before you trade Crypto-currencies
Q. “I want to start to trade Crypto-currencies. I heard that I don't need to worry about ECNs ever again. I don't even know what an ECN is, let alone worry about them. Could you explain this in layman's terms. I find that the definitions on the internet, are far too complicated to understand?”

 
A. I'll try to explain what an ECN is with an easy to understand analogy. 
 
ECNs stands for Electronic Network Communications. 
 
Let's say the JSE stock market is built on a tiny island.  
 
Other islands around the would also like to trade different JSE markets. 
 
And so, each island decides to build a bridge to connect to the JSE directly, so the people of each island can have access to trade. 
 
Once each bridge is built, a whole bunch of broker houses and market makers (ECNs) decides to open shop across each bridge to offer different trading instruments to the inhabitants of each island. 
 
Each market maker (ECN), will in return charge "tolls" or fees for the people on the island, to use their networks and services.  
 
With Crypto-currencies, there are also islands with built bridges connected directly to the inhabitants of each island. 
 
However, there are no market makers or broker houses (ECNs) in sight on any of those bridges. The transactions you make are directly from one trader to another.  There is no middle man with no hidden and extra costs.
 
Having no ECNs is one of the biggest benefits when crypto-currencies.
 
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There's no big secret. No flashy equipment. No pie-in-the-sky schemes...
 
Quite simply, I'm going to make you an extra R5,100 a month from trading...
 
The SMS’s I'll be sending you will each contain simple, profitable trade instructions.
 
Sceptical? I understand…
 
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Q. “Thank you for the trading suggestions up to now. The stop loss closed me out on the new BID CFD trade yesterday. Is it advisable to re-enter the trade today?”
 
A. The Bidcorp CFD trade should NOT have hit your stop loss at all.
 
On 27 February I told my Red Hot Storm Traders to go long (buy) Bidcorp at R299.60 and set a stop loss at R291.00. The next day the market only reached a low of R293.26.
 
This is a R2.26 rand difference away from your stop loss.
 
This means there are only two possible ways you could have had your stop loss hit.
 
First, you might have set your stop loss higher than the suggested price level.
 
If this is the case, then sure you can try place your trade again or wait for my next signal… 
 
I will always tell you where to get in, out and when to adjust your trading positions with Red Hot Storm Trader.
 
Make sure you set a stop loss according to what the SMS and the email says going forward. Even feel free to call your broker to confirm what your trading levels are per trade.
 
Second, your broker (other than our recommended ones), might be charging you a larger spread (cost between the bid and offer prices), where the bid price touched the R291.00.
 
If this is the case, your broker is honestly ripping you off as there are others with lower costs which you don’t have to incur.
 
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Crack open a beer, turn on the T.V, sit back and watch your money grow.
 
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Q. “Hey, thank you for answering all the trading questions we have on a weekly basis. I’ve just immigrated to South Africa from New York, and so I have much to learn. I’d just like to ask a quick one.
 
In a year, how many times do JSE listed companies pay dividends? I know in New York City its quarterly.”
 
A. An interim dividend is paid once every six months to it’s ordinary and preference shareholders following the company’s announcement of the half-year and full-year results.
 
You’ll need to call your broker and ask them about how the dividend payments work on their side. I know each broker have different processes to deliver the dividend or exposed dividend to shareholders or to derivative traders.
 
NOTE: If you have a trading question, or you’d like to share any feedback with Timon - feel free to send him an email to timon@fsp.co.za and he will answer your question/s in the next Q&A article.
 
“Wisdom yields Wealth”
Timon Rossolimos,
Analyst, Red Hot Storm Trader
 
P.S: We’ve already banked 4 trading profits in a row 51,95%, 25,54%, 44,75% and 47,77%. Make sure you don’t miss the next profitable trade by going here.
 


Why you need to know about ECNs before you trade Crypto-currencies
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