What Is a Bitcoin Wallet?
TRADERPROFX brings you the ‘highlights’ of the most popular financial and trading terms that you should be familiar with in order to be a successful trader, and this time, what a Bitcoin wallet is and why does everyone have to have one?
A Bitcoin wallet is a kind of digital wallet used to send and get Bitcoins. This is analogous to an actual wallet. In any case, rather than putting away actual money, the wallet stores the cryptographic data used to get to Bitcoin addresses and send transactions. Some Bitcoin wallets can likewise be utilised for other cryptocurrencies.
- A Bitcoin wallet is a gadget or program for holding and sending Bitcoins.
- Bitcoin wallets contain the private keys expected to sign Bitcoin transactions.
- Any individual who realises the private key can handle the coins related to that location.
- The most dependable Bitcoin wallets are hardware wallets. Web wallets are the least secure.
- Some Bitcoin wallets can be utilised for multiple cryptocurrencies.
Understanding Bitcoin Wallets
A Bitcoin wallet is a device or program that can associate with the Bitcoin blockchain. Despite the fact that it is normal to think about these wallets “putting away” Bitcoins, a Bitcoin wallet really addresses cryptographic control of a blockchain address.
Each Bitcoin wallet contains a bunch of mystery numbers, or private keys, compared to the client’s blockchain address book. These keys are utilized to sign Bitcoin transactions, successfully giving the client authority over the bitcoins in that address. If an attacker can steal a wallet’s private keys, they can move the Bitcoins in that address to their own wallet.
The main types are desktop wallets, mobile wallets, web wallets, and hardware wallets.
Desktop wallets are introduced on a desktop or PC laptop computer and furnish the client with full oversight over the wallet. Some desktop wallets likewise incorporate extra functions, like hub programming or exchange integration.
In any case, desktop wallets are considered somewhat unreliable, because of the peril that the PC could be compromised. Some notable desktop wallets are Bitcoin Core, Armoury, Hive OS X, and Electrum.
Mobile wallets play out similar functions as a desktop wallet, yet on a smartphone or other mobile device. Numerous mobile wallets can work with speedy payments in actual stores through near field communication (NFC) or by scanning a QR code.
Mobile wallets will in general be compatible with either iOS or Android. Bitcoin Wallet, Hive Android, and Mycelium Bitcoin Wallet are instances of mobile wallets. There have been many instances of malware camouflaged as Bitcoin wallets, so it is advisable to research carefully prior to concluding which one to utilise.
A web wallet is an online service that can send and store cryptocurrency for your benefit. The specific advantage of web wallets is that they can be accessed anywhere, from any gadget, as effectively as browsing your email.
Nonetheless, security is a main issue. Notwithstanding the risks of malware and phishing to steal user’s passwords, there is likewise critical counterparty hazard. Numerous Bitcoin users have logged in to a third-party service, just to discover that their Bitcoins have vanished.
Some of the most known services are Coinbase, Blockchain, and Gemini.
Hardware wallets are by a wide most secure and dependable kind of Bitcoin wallet, as they store private keys on an actual gadget that can’t access to the Internet. These gadgets resemble a USB drive.When the user wishes to make a Bitcoin transaction on their PC, they plug in the hardware wallet, which can sign transactions without compromising the user’s private keys.
Hardware wallets are practically immune to virus attacks, and successful thefts have been rare. These devices often cost between $100 to $200. Ledger and Trezor are both well-known hardware wallet manufacturers.
Special Considerations for Wallet Security
Wallet safety is important, as cryptocurrencies are high-value targets for hackers. Some protections incorporate encrypting the wallet with a strong password, utilizing two-factor verification for exchanges, and storing huge sums in an offline gadget.
Most modern wallets are produced from a twelve-word mnemonic seed, which can be utilised to reestablish the wallet if the gadget is lost or damaged. These words ought to be carefully stored in a protected spot, since any individual who finds them will be able to steal your cryptocurrency.
How to Calculate Risk in Trading?
As ancient Romans observed, success loves preparation, and to be prepared in trading means managing risks well. If you do not analyse and quantify the potential for losses in an investment, you will quickly and surely incur a loss of your entire capital, which can prove irrecoverable. Knowing how to manage your losses in trading is, therefore, the number one skill that any trader has to develop before launching his or her trading career. In the paragraphs below, we are explaining what risk management is, how it works, and what mistakes you need to avoid to turn trading into a profitable business.
What Is Risk Management?
Risk management is defined as the process of managing, assessing, and mitigating losses. This definition applies to investing and any business. Risk management exists in many forms in the financial world.
Examples of Risk Management in Investing, Business, and Everyday Life
If you do not understand what it means to measure risk, do not worry. Think of your daily life. You constantly take measures against risk even if you are not consciously aware that you practice risk management. When you fly abroad, you exchange your local currency for the currency of the country of your destination. You also make sure that your credit or debit card is accepted in the place where you plan to land. These actions are nothing else than smart measures against the risk of finding yourself without money in a foreign country. When you buy an adaptor for your smartphone, you take precautions against losing connection with the people you leave behind at home.
An even more familiar form of risk management is health or property insurance. By buying these types of insurances, you protect yourself against illnesses, homelessness, burglary, and possibly even death. Pension is another valuable example. When you accumulate a fund for later use as a retirement income, you minimise the risk of facing destitute old age. And recently we have mastered another type of risk management: by keeping social distance, washing hands, and wearing facial masks, we have been shielding ourselves from Coronavirus.
In business and investing, you take similar steps to protect yourself against monetary losses and bankruptcy. Suppose you decide to buy a low-risk government security instead of high yield corporate bonds. In doing so, you exercise smart risk management. When you take various types of derivatives and futures securities, you hedge against wide swings in your investment portfolio. Your company might do the same. Firms often use financial derivatives like options and futures and employ such strategies as investment diversification in order to mitigate risks.
- Value per pip;
- The dollar value you are risking on each trade;
- The distance of your stop loss.
You can determine these three constituents in two easy steps. Once you determine them, you have calculated your forex position size and risk involved in your trading. To calculate how much you will lose in terms of pips, take into account your trading edge rules. TRADERPROFX’ trading platform facilitates your calculations with its sophisticated tool which measures the distance from your entry and stop-loss level in terms of pips. Its stop-loss function is designed to limit losses in volatile markets moving in a contrary direction to the initial trade. TRADERPROFX software implements this function by setting a stop-loss level, a specified number of pips away from the entry price.
To illustrate how TRADERPROFX’ measuring tool works, let us suppose you want to purchase the CAD/USD pair and set your stop-loss level 70 pips away from your entry. Then, take the second step: use our calculator and fill in the following information:
- Account currency
- Account size
- Risk ratio in percentages
- Stop-loss in pips
- Currency pair
After you have inserted the required data, push the button that says “Calculate.” Our software will quickly calculate for you your Forex Position Size and Risk. In this particular case, your risk would be $200 per trade. You can enter with no more than 0.286 lots; that is, no more than 28571 units of currency pair.
Or consider another example. Suppose you have $10,000 in yourTRADERPROFX trading account. Suppose also that you are risking 1% on each trade. You want to trade the AUD/USD pair and short it at 1.2700, since it is a resistance line – a price level where rising prices stop, make a U-turn, and start sliding. You also have a stop loss of 200 pips.
The formula used to make the required calculation is as follows:
position size = amount you are risking (stop-loss value per pip)
According to this formula, the amount you are risking equals 1% of $10,000, which is $100. Value per pip for one standard lot equals $10/pip. Stop-loss equals 200 pips. By calculating the numbers given in the second example according to this formula, you will receive these calculations: your position size equals 100/ (200*10), which equals 0.05 lot or 5 micro-lots. This means that you can trade 5 micro-lots on AUD/USD with a stop loss of 200 pips. The maximum loss on this trade is $100, which is 1% of your trading account.
If this formula looks intimidating, do not give up on risk management. You do not need to make these complex calculations by yourself. Please, use our position sizing calculator and it will correctly calculate your risk in seconds. You just need to fill in all the information correctly and trust our cutting-edge algorithms. TRADERPROFX risk calculator will take care of your risk management and will protect you from the loss of your capital.
Financial markets are volatile. At the foreign exchange, currency prices can go up and down within seconds, presenting you with profitable opportunities but also forcing you to face the risk of financial catastrophe. As traders, we cannot foresee all turns in currencies’ trajectories. But we can calculate our risks with a high degree of precision and, in doing so, save ourselves from financial insolvency.
How to Calculate Return on Investment (ROI)
TRADERPROFX brings you the ‘highlights’ of the most popular financial and trading terms that you should be familiar with in order to be a successful trader, and this time, how to calculate your return of investment (ROI).
In the paragraphs below, we are explaining how to calculate Return on Investment or ROI. But if you are new to the world of finance, you might not know what ROI is or might have only a vague notion of this concept. Before we show how to calculate ROI, a few words on the concept itself are in order.
What Is Return on Investment (ROI)?
Return on Investment is a performance measure. It is used in businesses to estimate the profitability or efficiency of an investment. ROI is also used to compare the efficiency of several investments. What Return on Investment does is it measures return on particular investment, compared to its cost.
Simply put, to calculate ROI, you need to divide the return of your investment (your profit) by its cost or outlay. The result is expressed either as percentage or a ratio. But note that ROI does not take into account the passage of time. Hence, it can miss opportunity costs of investing in some other businesses.
Suppose your investment has a profit of $100. If its cost is $100, its ROI will be 1, or 100%.
How to Calculate Return on Investment?
There is a formula to calculate your ROI. To calculate your Return on Investment, you need to subtract the cost of your investment from the current value of your investment. Then, you need to divide the received amount by the cost of your investment.
In this formula, Current Value of Investment is the proceeds received from the sale of the investment of interest. Note that ROI is measured as a percentage. Therefore, Return on Investment can be compared with returns from other investments, which enables you to measure your different investments against one another.
Why Is ROI Popular?
People prefer to use this metric because it is simple and applicable to various spheres of your business. It can help you precisely estimate the profitability of your investments. Whichever investment you make, use the Return on Investment formula to see whether it brings you profits. For example, you can count the ROI on a stock or asset investment, the ROI you expect on growing your business, or the ROI received in a real estate deal.
The ROI formula itself is so simple that even if you are not good at math, you will be able to interpret it. Simply put, if your investment’s ROI is positive, it means your business is profitable and can be moved forward. If you are choosing between several investment options, calculating ROI will come in handy as well. If you see that you have options with higher ROIs, you can easily choose the best option on offer, weeding out those that are less profitable. If you discover that the return on your investment is negative, you will understand that your business is in trouble.
Limitations of ROI
As mentioned, ROI does not take into account the progress of time. When you compare your investments, you will keenly feel these limitations. Suppose you have made two different investments. When you compare them by using the ROI formula, you discover that, say, your first investment was thrice larger than your second investment. Yet you also discover that the time between your purchase and sale was half a year for your first investment but a year and a half for your second one. The ROI formula did not take these significant differences into consideration and disregarded the time value of money. If this is the case, you would need to adjust your year-and-a half investment, accounting for time differences between the two investments.
To refine your calculations and your business management, you are advised to use ROI together with the rate of return (RoR), which, unlike ROI, does consider your investment’s time frame.
Or you can use net present value (NPV). NPV accounts for differences in the value of money over time, due to inflation. Analysts often call the application of NPV when calculating the ROR the real rate of return. Alternatively, you can use such metrics as the internal rate of return (IRR).
What Is a Profitable ROI?
This question does not have a definite answer, because investors have to consider their risk tolerance and the time during which their investment starts generating a return to understand what ROI is good for them. If you hate taking risks, you might be ready to receive lower ROIs, provided you take lesser risks. If your investments take more time to begin earning you profits, they need to generate a higher ROI.
On average, companies listed on such large indices as the S&P 500 have the annual ROI of 10%. But ROIs differ from industry to industry. Tech companies may generate larger ROIs than energy ones, yet ROIs within one industry may also change over time, because of competition, technological innovations, and people’s preferences.
We, at TRADERPROFX we can help you to create the best investment plan so your ROI will always be between great to amazing.
TRADERPROFX brings you the ‘highlights’ of the most popular financial and trading terms that you should be familiar with in order to be a successful trader, and this time, what IPO is?
An unlisted company (A company that isn’t listed on the stock exchange) declares an initial public offering (IPO) when it chooses to raise funds through the sale of securities or shares for the first time to the public. All in all, an IPO is the selling of securities to the public in the primary market. A primary market deals with new securities being given for the first time. After listing on the stock exchange, the company turns into a publicly-traded company and the shares of the firm can be freely traded in the open market.
IPO is utilized by small and medium enterprises, startups, and other new companies to expand, work on their current business. An IPO is a way for companies to secure new capital, which thus can be utilized to finance research, store capital consumption, pay off debt and explore other opportunities.
An IPO will likewise bring transparency into the affairs of the company since it will be needed to inform financial numbers and other market-related developments on time to the stock exchanges. The company’s investment in different equity and bond instruments will go under more prominent examination after it gets listed. The IPO of any company brings an incredible deal of attention and credibility. Analysts all throughout the world report on the investment choices of the customers.
Investment betting on an IPO can acquire attractive returns in case they are wise and have some expertise. The investors can form a decision by going through the plan of the companies initiating IPO. They need to go through the IPO prospectus cautiously to form an informed idea regarding the company’s business plan and its motivation for loading up stocks in the market. In any case, one should be careful and have a clear comprehension of analyzing financial metrics to distinguish opportunities.
An unlisted company (A company that isn’t listed on the stock exchange) reports an initial public offering (IPO) when it chooses to raise funds through the sale of securities or shares for the first time to the public. At the end of the day, IPO is the selling of securities to the public in the primary market. A primary market deals with new securities being issued for the first time. After the listing on the stock exchange, the company turns into a publicly-traded company and the shares of the firm can be traded freely in the open market.
What Bid and Ask Are?
Very important terms, TRADERPROFX brings you the ‘highlights’ of the most popular terms you should know in order to be a successful trader, and this time, ask and bid prices.
The term “bid and ask” (otherwise called “bid and offer”) refers to a two-way value quotation that shows all that expected price at which a security can be sold and purchased at a given point in time. The bid price addresses the maximum price that a purchaser will pay for a share of stock or other security. The ask price addresses the base price that a seller will take for that same security. An exchange or transaction occurs when a purchaser in the market will pay the best offer accessible—or will sell at the highest bid.
The difference among the bid and ask costs, or the spread is a critical indicator of the liquidity of the resource. As a general rule, the smaller the spread, the better the liquidity.
Understanding Bid and Ask
The average investor fights with the bid and ask spread as a suggested cost from trading. For instance, if the current value quotation for the stock of ABC Corp. is $10.50/$10.55, investor X, who is hoping to purchase A at the current market cost, would pay $10.55, while investor Y, who wishes to sell ABC shares at the current market cost, would get $10.50.
Who Benefits from the Bid-Ask Spread?
The bid-request spread works to the benefit of the market maker. Proceeding with the above example, a market maker who is providing a price of $10.50/$10.55 for ABC stock is showing a readiness to purchase A at $10.50 (the bid cost) and sell it at $10.55 (the asked cost). The spread addresses the market maker’s profit.
Bid-ask spreads can differ broadly, depending on the security and the market. Blue-chip companies that establish the Dow Jones Industrial Average might have a bid-ask spread of only a few cents, while a little cap stock that trades under 10,000 offers a day might have a bid-ask spread of 50 cents or more.
The bid-ask spread can broaden drastically during times of illiquidity or market turmoil, since traders can not be willing to pay a price beyond a specific threshold, and sellers may not acknowledge costs under a specific level.
The difference between a Bid Price and an Ask Price
Bid prices refer to the highest cost that traders will pay for a security. The ask price, then again, refers to the least value that the proprietors of that security will sell it for. In the event that, for instance, the stock is trading with an ask price of $20, then, at that point, an individual wishing to purchase that stock would have to offer at least $20 to buy it at today’s price. The gap between the bid and ask prices are regularly referred to as the bid-ask spread.
What’s the significance here When the Bid and Ask Are Close Together?
At the point when the bid and ask prices are extremely close, this commonly implies that there is ample liquidity in the security. In this situation, the security is said to have a “narrow” bid-ask spread. The situation can be useful for investors since it makes it simpler to enter or leave their positions, especially in the case of large positions.
Then again, securities with a “wide” bid-ask spread—that is, the place where the bid and ask prices are far separated—can be tedious and costly to trade.
How Are the Bid and Ask Prices Determined?
Bid and ask prices are set by the market. Specifically, they are set by the actual buying and selling choices of individuals and institutions who invest in that security. Assuming interest overwhelms supply, the bid and ask prices will steadily move upwards.
Then again, if supply overwhelms demand, bid and ask prices will float downwards. The spread between the bid and ask prices are dictated by the overall level of trading movement in the security, with higher action prompting to narrow bid-ask spreads and vice versa.