The Book of Yolo: COMPLETE GUIDE TO WSB submitted by
The goal of this is to actually create something that all of you WSB newbies can read - because we’re all tired of seeing the endless wave of uninformed and unavoidable stupidity from those who have never touched the stock market. CALLING ALL NEWFAGS AND NORMIES.
If you can’t read, GFY now.
Now that we will be on the popular section of reddit, this has become pertinent. WSB can't avoid newcomers, so we might as well explain how the clock ticks here. This one is for you all
This is to serve as a reference what values we hold, what instruments we use, and as a general place to educated the uneducated.
First off, this is the LEAST helpful stock market-based community for newcomers. Sarcastic answers are the only thing of true value here. It isn't a place to learn, but a place to plan out where you will dock your yacht. Newcomers are usually berated upon asking the inevitable stupid questions that they could learn slowly from reading here, or just using a damn search engine. Instead of embarrassing yourself here, you now have the opportunity to read this and get what we’re all rambling about.
This will help you understand what to expect if you make the decision to undertake a WSB style trading career, so you can stay here and contribute to the yolo lifestyle or otherwise GFY.
I will edit in any suggestions that our frequenting users or mods want to add to this as well.
To begin: Here are our topics for WSB101 -Basics (Equities/Stocks)
; -Futures Trading
Skip if you understand basic stock stuff
Okay, so what is an equity/stock? An equity is essentially what you’d think of as your “vanilla” trading tool. They move up or down depending on market forces, and can range from pennies to thousands of dollars per share. To explain how stocks work, let's define a few terms. Volume:
The number of shares of stock traded during a particular time period, normally measured in average daily trading volume. Spread:
The difference between the bid and the ask price Bid Price:
The current price in which someone wants to buy at Ask Price:
The current price in which someone wants to sell at Volatility:
The WSB favorite. Volatility is referring to the price movements of a stock as a whole. The higher the volatility, the more the stock is moving up or down. Highly volatile stocks are ones with extreme daily up and down movements and wide intraday trading ranges. Margin:
A margin account lets a person borrow money (take out a loan essentially) from a broker to purchase an investment. The difference between the amount of the loan, and the price of the securities, is called the margin. Margin is one of WSB’s popular instruments of wealth and destruction. Dividend:
This is a portion of a company’s earnings that is paid to shareholders, or people that own hat company’s stock, on a quarterly or annual basis. Not all companies do this. PPS:
Acronym for “Price per Share” Moving Average:
A stock’s average price-per-share during a specific period of time. Bullish:
Expecting the stock to go up Bearish:
Expecting the stock to go down
Any raised hands can redirect themselves to here: http://www.investopedia.com/articles/investing/082614/how-stock-market-works.asp?ad=dirN&qo=investopediaSiteSearch&qsrc=0&o=40186
Now that these terms are defined, let's move into the details of why this is even useful. Most people know what a stock is, but how and why stocks move is a different story. The stock market is essentially a big virtualization of supply and demand - meaning that usually high positive volume creates upwards movement in the PPS, where high negative volume does the opposite. This creates a trader’s opportunity; Generally, the most effective time to buy or sell is where the candlesticks (volume data) are thinning out. When you are ready to take an entry point or execute an exit point, waiting till the volatility (candlesticks) thin out is one method to give you best trade possible. WSB FAVORITE EQUITIES:
Of many equities, WSB favors the riskier ones - but avoiding penny stocks is a policy.
AMD - CEO Lisa Su, Next Gen Processors, chips, graphics. It’s the gamers gambit. Up roughly 1400% as of 2/7/2017 since WSB first mentioned it
NVDA - AMD’s sister? Mother? Daddy? Who knows. NVDA has been a sexy semiconductor leader. Is up 400% since gaining traction on WSB.
FNMA / pfds - Mnunchin, Trump, Big fat fannies. Get your self deep in the fannie. We all want it. WSB 10 bagger candidate for reforming the housing market. WSB holds a large cumulative position that can be seen below. Also a good read is the beginners guide to FNMA. Any post by u/NOVACPA
is very often VERY informative on FMNA/pfds. https://www.reddit.com/wallstreetbets/comments/5oissp/results_wsb_fnmafmcc_holdings https://www.reddit.com/wallstreetbets/comments/5t7gba/beginngers_guide_to_fnma_fmcc_read_this_before/
ARRY - A biotech champion that prevailed after a lot of failures and huge losses in the biotech sector. Dark times for WSB. Up ~300% since getting traction on the subreddit.
TWTR - WSB likes to buy put option contracts on her. Exemplary of a social media platform that is unable to monetize itself.
TSLA - Maybe not unanimously a favorite, but loved for it’s sexy volatility, Elon Musk, and ridiculously expensive options.
GILD - A Shkreli pump and dump? The greatest large cap pharma recovery of all time? Who knows. Martin took the time to make a post on this reddit and it is up $5 dollars since. ETF'S
Welcome to the world of investing made easy. Exchange traded funds (etfs) are devices that can be traded like stocks, but often track the value of many companies by investing in their listed assets accordingly. Specifically, An ETF, or exchange traded fund, is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange. ETFs experience price changes throughout the day as they are bought and sold. ETFs typically have higher daily liquidity and lower fees than mutual fund shares, making them an attractive alternative for individual investors.
ETF’s come in beautiful and delicious varieties, often with a BEAR form and a BULL form of each; but the most delicious to WSB are the 3x etf’s. A 3x ETF is one in which the underlying movement of the ETF is leveraged 3:1. Meaning for every movement within the underlying index or stocks, the 3x ETF moves well.... 3x as much.. WSB FAVORITE AND USEFUL ETF’S:
JNUG - 3x Gold Miner Bull - A hit or miss, has extreme intraday movements and essentially tracks GDX (gold miner’s index). Jnug will usually move with a pretty strong correlation to gold, which is affected by the mentioning of rate hikes (negatively), movement of the US dollar (inversely), uncertainty (positively), and supply and demand.
NUGT - Jnug with a different price tag
JDST - The inverse 3x etf of JNUG - or the bear etf. It does almost exactly the opposite movements of JNUG by the tick. Moves for the same reasons, but obviously opposite directions.
DUST - Jdst with a different price tag.
UGAZ - Natural Gas 3x Bull ETF - essentially tracks the price value of the commodity Natural Gas, but more specifically the S&P GSCI Natural Gas Index ER. The index comprises futures contracts on a single commodity and is calculated according to the methodology of the S&P GSCI Index. Natural gas is most affected by Weather temperature conditions (use your brain), petroleum prices, and broader economic conditions.
DGAZ - Inverse of UGAZ
UWT - Crude Oil Bull 3x ETF - extreme intraday movements, closely follows the price of oil. More specifically, it tracks futures. UWT seeks to replicate, net of expenses, three times of the S&P GSCI® Crude Oil Index ER. The index tracks a hypothetical position in the nearest-to-expiration NYMEX light sweet crude oil futures contract, which is rolled each month into the futures contract expiring in the next month. The value of the index fluctuates with changes in the price of the relevant NYMEX light sweet crude oil futures contracts.
DWT - Inverse of UWT
FAS - Financial Bull, specifically FAS seeks daily investment results, before fees and expenses, of 300% of the performance of the Russell 1000 ® Financial Services Index. The fund creates long positions by investing at least 80% of its assets in the securities that comprise the Russell 1000 ® Financial Services Index and/or financial instruments that provide leveraged and unleveraged exposure to the index. Can be used when bullish on US financial services - so banks, lenders, etc.
FAZ - Inverse of FAS
UPRO - S&P500 Bull 3x ETF, essentially tracks the S&P500 and multiplies it’s returns by 3x.
BRZU - Tracks Brazil (in its most basic form). It creates long positions in the MSCI Brazil 25/50 Index.
LABU - Tracks the Biotech sector, or specifically 300% of the performance of the S&P Biotechnology Select Industry Index ("index"). It should be noted that LABU has doubled since just before the election of Donald Trump.
LABD - Inverse of LABU
RUSL - roughly creates 300% of the performance of the MVIS Russia Index.
RUSS - Inverse of RUSL
SPY - Tracks the S&P500, but is not 3x. OPTIONS:
Alright, so half you are going to understand this, and half of you are not. Pull up an options chain now on any stock (penny stocks and specific stocks do not have chains because of their market cap). Options are truly the ultimate way to achieve maximum risk/reward.
An option is a contract that gives the buyer the right to buy or sell 100 shares of a stock at a certain price, on a certain date. This concept makes options a commodity themselves.
A CALL - is the right to buy. Buying calls is taking a bullish position in its most extreme form.
A PUT - is the right to sell.
The underlying - is the stock that the option is covering i.e. AAPL, GOOG, AMZN
Strike Price - the price at which a put or call option can be exercised.
ITM, In the money - In the money means that a call option's strike price is below the market price of the underlying asset or that the strike price of a put option is above the market price of the underlying asset. Being in the money does not mean you will profit, it just means the option is worth exercising.
OTM, Out of the money - a call option with a strike price that is higher than the market price of the underlying asset, or a put option with a strike price that is lower than the market price of the underlying asset.
ATM - At the money - Strike price at the same price as the underlying
Expiration - Expiries for options are every friday of every week usually, with exceptions such as every month, or every other day - depending on the underlying. SPY and SPX are great examples of very active option chains with expiries every other day. On the expiry date or any time before (with american options), an option can be, but doesn’t have to be exercised, meaning the holder of the option can use it to buy or sell shares of the underlying stock at the strike price. Most people on WSB do not exercise the contracts, but merely flip them for increases in value as the underlying moves.
For example, when AAPL was at 120 before its earnings report, Joe Shmoe Yolo buys 10 FEB 17th CALLS at strike 127 for .60 , each. Now .60 cents is really 60 dollars each, because the contract is multiplied by 100 (the right to 100 shares). In total, Joe Shmoe Yolo spends $600 dollars + commision on this trade. The next day, AAPL leaps to 130 upon great news. These same option contracts are now worth 3.50 each. $350 dollars per contract, times ten contracts is $3500 dollars. Joe Shmoe Yolo just turned $600 into $3500 dollars. MAGIC. Spoiler alert: Joe Shmoe Yolo was me.
That same Joe Shmoe later buys FEB 17th XOM calls at 90, hoping for similar results. However, XOM ends up never reaching anywhere close to the strike price, and the options expire worthless. Get it?
Now what determines the pricing of options?
Below is sourced from investopedia
Intrinsic Value: The intrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business, in terms of both tangible and intangible factors. This value may or may not be the same as the current market value. Additionally, intrinsic value is primarily used in options pricing to indicate the amount an option is in the money.
Time Value: Time Value = Option Price - Intrinsic Value. The more time an option has until it expires, the greater the chance it will end up in the money. The time component of an option decays exponentially. The actual derivation of the time value of an option is a fairly complex equation. As a general rule, an option will lose one-third of its value during the first half of its life and two-thirds during the second half of its life. This is an important concept for securities investors because the closer you get to expiration, the more of a move in the underlying security is needed to impact the price of the option. Time value is basically the risk premium that the option seller requires to provide the option buyer the right to buy/sell the stock up to the date the option expires. It is like an insurance premium of the option; the higher the risk, the higher the cost to buy the option. Makes sense, right?
Time value is determined by the expiration date. An expiration date in derivatives is the last day that an options contract is valid. When investors buy options, the contracts gives them the right but not the obligation, to buy or sell the assets at a predetermined price, called a strike price, within a given time period, which is on or before the expiration date. If an investor chooses not to exercise that right, the option expires and becomes worthless, and the investor loses the money paid to buy it. Volatility:
In an options pricing, you see IV. This stands for implied volatility. The higher that is, the higher the options will be priced Volatility is the extent to which the return of the underlying asset will fluctuate between now and the option's expiration. Volatility, as expressed as a percentage coefficient within option-pricing formulas, arises from daily trading activities. How volatility is measured will affect the value of the coefficient used. Decaying Nature of Options:
Decay refers to derivative trading (i.e. options). When you sell or buy a call/put (using those two for simplicity purposes) you don't get an infinite time frame to make your dreams come true. Time is your enemy; the further out the expiration date, the less time decay there is. Time decay really hits the worst the week of expiration. Sound confusing? Say you're buying options of the stock WSB (I hope you're seeing what I did there) - and the option costs $1, the expiration is this Friday. Say today is Monday. You buy a call expecting WSB to take you to the moon and beyond. Each day the stock doesn't move closer to your strike price or remains stagnant/drops, you lose value on your option + the time decay. Meaning if it finishes closer to your strike price, your option could be worthless because of that time decay. Questions? Ask away.
A great example of these factors in action is TSLA.
TSLA’s options are among the most expensive for companies in its price range, why?
An in the money TSLA call expiring this week is worth around $1100 per contract. Insanely expensive. But for a reason. TSLA has extreme intraday movements and calls have an implied volatility of 40.92%. Which is fairly high. In addition to that, it holds high intrinsic value / price per share, and a week of time value. -Futures 101 - The Ultimate YOLO Guide
(thanks to u/IncendiaryGames
Okay, a lot of you have been YOLOing on faggot delights on SPY options. How would you like to trade something with the same or more leverage, 1.0 delta, and no time premium costs? Have you considered futures? What are futures? Unlike options, futures is a contract where both the buyer and seller is obligated to perform the transaction by the expiration. Conversely, in options, only the seller is obligated to perform. That means you can lose more than your investment. Originally they were used by farmers to sell future crops early and guarantee some amount of sales. Since then futures have expanded not just to commodities but currency and equity indices like the S&P 500. Why the heck would I want to trade futures? Here are the advantages: Leverage $5k is the margin requirement for most contracts. For example with the E-mini S&P 500 with 5k you're trading $120k worth of stuff. 1 contract = 500 spy shares. Some brokers offer intraday daytrading margin rates too - TD Ameritrade is 25% of the overnight margin rate($1,250.) Some brokers go as low as $500 an /ES future. SPAN Margin If 24x overnight leverage and 240x day trade leverage didn't give you a hard on there is also SPAN margin, which is like portfolio margin on steroids. The beauty of SPAN margin is you don't need a $125k+ account to be eligible. SPAN will greatly reduce your margin requirements if you hold uncorrelated or inversely correlated positions (up to an 80% discount, here is a list of groups that give discounts) and if you hedge with options. Hedge with the right option or asset and now you have up to 500x day trading margin. 23/7 and day trading Ever get in and out of an equity only to have your broker yell at you to stop doing that or deposit $25k? There is no pattern day trading restrictions on futures. Feel free to day trade and blow up your account as often as you want! You can also trade 23 hours a day. Get trading on how the S&P 500 index will react to news from China right away. Taxes No matter how long or how short you hold you always get taxed under the 60/40 rule. 60% of your profit from futures will be taxed as a long term gain and 40% will be taxed as short term gain. No wash sales. Trade your hearts out. Just remember holding past Dec 31st will treat you as if you closed all your positions that day and you'll be taxed on unrealized gains. Long/Short No need to pay interest or borrow shares as being short a future contract is being a writer, just like an options writer. Options Of course there are options. What fun would it be without options? Unlike stock options each contract gives different number of future contracts. Research what you're trading.
Ok. I'm convinced. I want to strat trading futures! What are some good strategies?
Swing trading Trying to guess/predict/ride sudden market momentum. A low volume average day in the S&P 500 (/ES) for one contract can swing +- $500. Get it right and you can see a huge appreciation of value. /ES is usually highly liquid during regular hours with average volume of 1 million trades and usually bid-ask spreads of one tick. One approach is to buy or short in your direction and put in a stop loss to an amount you're comfortable to lose (say $200.) Since it's so liquid you'll likely be filled at or near your stop loss during the day if your trade goes against you. If you can guess the direction 50% of the time and have trades like this: trade 1 - gain $800 trade 2 - lose $200 Then you may profit over the time period. If you have a 50% chance of being wrong and losing $200 or 50% chance of being right and gaining $800 then over time you'll gain more than you lose. Also, since the present value of your futures contract is included in your margin calculation then if it goes strongly in your favor your position can quickly grow to cover its own margin and you can let it ride for a while. You'll want to be sure you enter a combo buy/short order along with a stop loss order simultaneously, like this for Thinkorswim. Futures can move suddenly and a sudden movement can make you lose a ton of money. Exploiting outdated SPAN margin guidelines There are several out of date correlations between popular futures like oil and say things like wheat that SPAN gives you margin credits on. Take whatever position you want in oil (/cl) then take the opposite in something that doesn't move much day to day with less volatility such as /w (wheat)) and your /cl and /w positions will get a 75% credit, giving you 50% more buying power on crude oil. (2 positions * .25 = 0.5). Trade your heart out on the more volatile future then when you're done close your safer future pair. SPAN is constantly changing but such a complex system definitely has its exploits. Automated/algorithmic trading For you programmer geeks out there it's really hard to algorithmic trade on small accounts due to pattern day trading rules and economies of scale with broker fees. Futures is probably the best way to get your feet wet. Join us on /algotrading
if you want to explore more!
Boring safer strategies
I'm including these for completeness but these belong on /investing
. Scalping With high frequency trading scalping is less guaranteed. Basically scalping is using tiny momentum as usually there are small micro patterns in futures buying and selling activity where it will rise or fall a couple of ticks. Since the notional value of each tick is $12.5 it's profitable for retail investors and small accounts to act as a market maker after fees at the smallest bid-ask spread possible. Spreads Just like you can trade spreads in options, you can trade calendar spreads in futures. Futures have contracts with different expiration dates and the prices are different for each month of expiration based on the market's expectations. You can go long or short the near month expiration and the opposite for the far month. This will hedge out any sudden market moves as that would likely affect both months. Bull markets in general tend to increase the price of the near month faster than the far month. Basically with a spread trade you're making a long term bet on bull or bear for the underlying future. Pairs trading You can go long in one future say the dow jones (/ym) and short the S&P 500 index and profit off the relative growth. This is a hedged trade as any market ups or downs will likely affect both positions with the same % value. For the past 180 days /ym - /es has been really profitable. Even if you don't do a full perfect pairs trade it is still a great option to reduce the leverage too on whatever index future you're trading so you can stay in longer or overnight. Interest rate and optimal leverage plays Since the $5k investment is equal to $120k of the S&P 500 index currently then you'll likely beat out the market by buying one future contract and putting $115k in safe treasuries or bonds or uncorrelated assets. Some people choose to leverage their stock portfolio and you can get the exact leverage ratio of liquid investments to future ratios. In probability theory the max leverage you can gain is determined by the Kelly Criterion which modeling shows indicates the S&P 500 index to be leveraged to 1.40x. Yes, you could do the same with options but even on SPY deep in the money call leaps are illiquid and have a time premium. Even today they are so deep ITM that the options you would need to use have 0 open interest and a bid-ask spread of $5 per share (so $500 per contract.) You'd need ~5 contracts per 120k so you're already eating $2.5k/$120k - 2% interest rate a year for that leverage. SPX isn't better, it's bid ask is 22 so you'd be eating $2.2k/$120k - 1.83% interest rate. It's doubtful you won't get much past the ask as its only market makers providing liquidity and guess what the market maker will do if you buy/sell the option? They will hedge with the underlying futures until their minimum profit is the risk free interest rate. Hedging Going long and short in various non correlated or negatively correlated assets to seek out a high sharpe ratio and have a higher risk free return that is market neutral. Basic hedge fund stuff. The variety and price efficiency of futures makes things pretty attractive in this area. SUBCULTURE
Wallstreetbets is a community that has become infamous for the most wild west, moon or cardboard box trades on the planet earth. WSB is a place where you can take out thousand dollar loans, refinance your homes, cash advance all of your credit cards only to put it all on JNUG, and we will still love you. Your mother won't. Your father will never understand your spectrum of autism, but we will always love you. It is a uniquely beautiful community focused on praising its biggest losers as much as its biggest winners. To begin on the subculture, we should define some key moments in the sub's history.
HISTORY: (As made by u/digadiga
) + my additions
[+1] creates /wallstreetbets
, and word slowly starts to ooze out. 2013: americanpegasus
discovers pennies. AP has seen the light, and is a penny stock evangelist. Jartek & AP have an epic options vs pennies battle - they both lose a couple of hundred bucks, but we are entertained, and WSB is officially born. AP blows up his retirement, swears off pennies and moves onto bitcoins. 2014: fscomeau
[+3] discovers options. He repeatedly bets five figures on AAPL calls before earnings. FS claims a supernatural clairvoyance of AAPL. FS then posts about his chest pains and ER visits. He finally suffers an epic loss. Is he dead? Is he alive? Is he is mother? Is he banned? Who cares? 2015: Photos from the 3rd annual meetup are posted. Where a bunch of dudes hang out on the romantic beaches of Guerrero Mexico. In a completely unrelated event, the wsb banner is changed to thousands of ejaculating dicks. Modpocalypse occurs. Hundreds of random users are added as moderators for a few months. None of the new mods can change the CSS. The constant whining about how "wsb isn't what it used to be" continues. Someone attempts to show how selling covered calls is idiot proof, but gets lazy, bets all six figures on Apple, and suffers significant losses. Robinhood gets popular. Should you buy one share of AMZN or one share of GOOGL? Who gives a fuck. 2016: Everyone starts saying "go fuck yourself." Except me. Because I am what I am. And if you don't like it, you can all go fuck yourselves. u/World_Chaos
performs one of the more impressive yolo's of the sub, starting with 900 dollars, and turning it into 55k. https://www.reddit.com/wallstreetbets/comments/414blh/yofuckinglo_900_to_55k_in_12_days/?ref=share&ref_source=link
preforms what he calls "The Final Yolo", a 300k trade against AAPL before earnings (that I, u/thor303456
inversed), supposedly supposed to net fscomeau 2.5 million or so, in which he will finally stop trading. FSC is featured on several market related articles and newspapers, showing up on yahoo, etc. Later we find proof during his livestream of AAPL earnings that he was paper trading. Even later, FSC writes a near 200 page book called "Wolfie Has Fallen" describing how he trolled the entire internet, some following him into that AAPL trade. Martin Shkreli visits the sub and proclaims that GILD pharma is worth over $100 a share and is deeply undervalued.
KEY FIGURES: Donald J Trump
- He is the Marmalade Manchurian, the Tangerine Tycoon, and our spray tan Stalin. Unbelievable night of election. WSB demographics show a primarily capitalist and right wing (or at least joking to be so) point of view, and thus we are generally pro trump. In actuality though, WSB is focused on pro-market
, which Trump happens to be. u/Jartek
- Founder of the sub, original yoloer. Believe he has retired from reddit for the most part. Mostly inactive. u/Fscomeau
- The Canadian as some call him, and perhaps one of the most profound internet trolls of 2016-2017. A French-Canadian trader who deals with mostly options. The man has been called "The Great Inverse", and for a good reason. Nearly all of the trades or statements he made on WSB were completely wrong or mostly wrong. Truly the strongest technical indicator. Martin Shkreli
- An idol to many WSBers, Martin stands as the master of the biotech sector. A very debated character for very stupid reasons. Martin regularly tweets about the stock market, occasionally does a youtube channel, and livestreams fairly regularly. u/theycallme1
- Educated trader, and mod of WSB. Roasts people often and roasts them good. Ask him the questions that aren't stupid. One of the most active mods. u/world_chaos
- some fucking college student with some real net worth. Sits on 100k or so (needs verification), and was an inspiring yoloer to all, with his 900 to 55k yolo with options. Lingo, Terminology, and Nomenclature:
The Faggots Delights - Truly the most suicidal, yet clearest shot to the moon. This term is usually used to define either weekly, or daily option plays on the SPY/SPX. Some users trade them very profitably, such as u/MRPguy
and many in the past.
Cuck - Truly the worst thing you could be. A cuck is a man who likes watching his wife/girlfriend fuck other guys. Weak, spineless, and a term often throw around here.
The YOLO - You only live once. This is something that is, and should be realized as undeniably true. Why are you sitting on a 5k emergency fund that is making you less interest in a year than what I just made in 10 minutes? Why haven't you used all of the credit on your 5 credit cards or used your testicles as collateral for a loan yet? YOLO or YOLOING is as much a psychological decision to embrace absurdism, and win with everything you have while risking it all. Yolo is what it means to be a WSB trader.
Bagholding or a Bagholder - When you're stuck with the most ass trade of your life, because you know it'll go back up. A bagholder is the 59 year old guy at the grocery store who won't quit his Job because he knows he only has to wait another year until he gets a return on his investment (of his life). Anyone holding SUNEQ is the definition of a bagholder.
Autists - Something we embrace, something we call each other, something we all are. Autism isn't used in an offensive way as much as it is a generally accepted term that defines us. The best traders have autism because of their distance from emotion. I bet you never made it to this part of the reading because you're such a damn autist.
Tendies - Tendies are what you get after you make a small amount of money. "I SOLD AMD TODAY FOR A $13 DOLLAR PROFIT, GOING TO MCD's TO GET MY TENDIES". Tendie money is usually shameful and insignificant, but at least it got you tendies. Chicken tenders at McDonalds are the least expensive for the most cholesterol.
I know some of the writing was half ass, full of errors, or otherwise not the best explanation. But I believe this will serve its purpose, and maybe help to promote new ideas from moderately educated traders. WSB has very strong traders, and the most uniquely risky trading styles on the planet. Hopefully this can serve to better the overall community.
You guys are all faggots, upvote this so we can get the noobs to stop trying to bite on our cocks.
Also I'd really appreciate input on anything to add to this overall. It took my over 3 hours to write up, so I eventually grew tired and probably have missing spots.
Enjoy your time here at WSB.
EDIT: Added a shit ton of stuff, fixed errors. THANKS FOR ALL OF YOUR INPUT, ACTUALLY MAKING WSB GREAT AGAIN
MODS: Can we make this editable by others mods or something? My fingers aren't enough. Seems like this could serve as a good "official" thing. Paging u/theycallme1 u/CHAINSAW_VASECTOMY
I've been intently following the development of NXT by reading as much as I can about it and following along with the developers discussions over at bitcointalk.org's mega-thread. submitted by
Nxt stands out above most other "alternative" digital currencies, mainly because it's not a clone, or "fork" of bitcoin. There are only a few "coins" out there right now that can make this claim. I put the word 'coin' in quotes because another thing that most of the Bitcoin 2.0 currencies have in common is that they tend to shy away from being called coins and put a lot of focus on adding totally new features to what Bitcoin does. They usually like to be referred to as ecosystems, and will often correct you if you refer to their platform as merely a "coin".
The ecosystems who are emerging most prominently include Etherium, Master Coin, Colored Coins, Emunie, Ripple, Nxt and Counterparty.
Out of all the emerging ecosystems, I've decided that Nxt is the one I feel has the most potential. Part of this was getting a bit "suckered in" by all of the existing marketing that made claims that Nxt has "instant transactions" (you only need to look to the right hand side of this page to see an example of this), only to find out that this particular feature has not yet been implemented and the common claims of 1000 transactions per second is possibly unattainable.
Although I felt like I got hit with a classic "Bait and Switch", being that crypto is the new wild west and caveat emptor is very much in effect, I didn't take it too personally. A lot of the marketing is disjointed and uncentralized ( the developers are actually proud to say Nxt has decentralized development) so it's hard to blame any one person for making these claims a bit prematurely.
What's kept me from dumping all my Nxt in disgust over being "lied" to, was the fact the "switch" that I took the "bait" for was actually pretty compelling in itself. This being the upcoming "decentralized asset exchange" which I think has a lot of potential, at least to make my investment grow even if I personally am not interested in creating my very own coin or starting an IPO any time soon (I'm just a shameless and unabashed speculator who would like to make a profit on my holdings-which makes me a bit of a pariah over at bitcointalk.org). The AE goes live sometime in April so I'm holding or HODLING as the wacky crew over at bitcointalk likes to say until I see what happens with the price.
What a lot of people say about Nxt is that it's like "looking at Bitcoin in the future" which it kind of is. Currently you do have to install java and use batch files to get it running, but one click installers are around the corner. Once you do get it up and running though, even the basic client is very much easier to understand and use than Bitcoin is. You only have to manage one address, the interface is right in your web browser (but run locally so no SSL needed) and sending and receiving Nxt is about as close to sending an email as I've seen yet.
Nxt's transaction speeds have been faster than Bitcoins, though I can't say how much of this is due to having a much smaller network or not. You also have to wait for ten confirmations vs. Bitcoin's six to be absolutely sure there are no double-spends so it's really hard to say if Nxt is a lot faster than Bitcoin....yet.
One of the lead developers claims to be working on implementing "transparent Forging" as we speak, which he says will get Nxt to about 10 TPS at first, then 100 and finally 1000 TPS which is about as fast as a Visa Transaction. All in all I agree with the assessment that using Nxt is like using the Bitcoin of the Future.
Another great thing about Nxt is that it's 100% Proof-Of-Stake, meaning Nxt is not "mined" like bitcoin is. The coins have all already been created from the genesis block and this is another way using Nxt is a lot like using Future Bitcoin, because one day all the BTC will have been mined and the "miners" will have to exist on transaction fees alone. Using Nxt, we get a little peek into the future of what that day might be like because the "forgers", who protect the network and verify transactions are rewarded in the same way.
Since nxt has a lot smaller network, it's still hard to say what kinds of rewards 'forgers" might receive for their efforts if and when Nxt becomes more popular. As of right now, Forging is pretty much an act of altruism for all but the largest stakeholders. Also,the transaction fee is currently a ridiculous sum of 1 Nxt, which will either be changed to .01 nxt or .1 nxt in the near future depending which developer or community member at bitcointalk.org you ask. All I know is that it's getting changed to either .1 or .01
The common response is that Forgers will receive about 1% annual return on their holdings and that this is reasonable since there's no expensive, electricity hungry mining equipment involved. You can forge using a cell phone.
One potential problem I've been concerned about with that approach is that .01 Nxt or .1 Nxt might be a reasonable fee right now, since it's trading at about .04 cents each, but what if the price rises unexpectedly by any considerable amount? Seems to me that nxt users will be simultaneously rewarded and punished for holding Nxt and using the system as the fee for using it rises right along with the price. Bitcoin and others also use static fees, but those fees are kept extremely low so the price would have to go up a ridiculous amount for a price rise to have a negative affect on actual trading. With Nxt, even a price rise to $50.00 USD per Nxt would mean a sudden fee of $5.00 USD or .50 cents depending on where they put the decimal.
Nxt's fees in my opinion will be far too close to the value of the main unit for sudden price spike not to potentially have a negative affect on the ecosystem itself. This appears to be one of the consequences of the need to reward miners/forgers with transaction fees alone. Will Bitcoin have a similar problem in the future? Any significant price rise in the asset itself might put a negative pressure on trading as people become unwilling or reluctant to pay the now more expensive fee.
I've been told by the developers that if the price rises that much they will just lower the fee by updating the software, but as we all know, crypto-currency can be very volatile. Do we really want to live in a word where we have to update our clients again and again as the price rises and falls, often rapidly and drastically? Are we to just trust that they will do this quickly enough to avoid the system grinding to a halt or at least slowing to a crawl? The developers already have enough trouble agreeing on what the current fee will be lowered to. How are we to expect them to react quickly and correctly in a crisis while value collapses? I don't even want to go into how one of the developers told me that a drastic price rise will never happen. It's just too depressing. To my mind, programming is the art of anticipating the unexpected and planning for it and not just "crossing bridges when you come to them".
As I've been able to log into the test version of the Asset Exchange I've noticed several things about the system that concern me and most of these things involve these same fees.
If you don't know what a decentralized exchange is, it's basically a trading platform where you can trade a lot of different things without having to sign up with a centralized exchange like Bitstamp or BTC-E. You'll be able to trade right there in NXt's 'ecosystem".
One thing I noticed is that while it's a cool system, there's a fee to do almost anything in it. There's a fee to send, there's a (very large 1000 Nxt) fee to create an asset and worst of all there's a fee to PLACE a buy or sell order on the asset exchange.
Most centralized exchanges like Bitstamp also charge a fee to EXECUTE an order, but NO exchange that I know of charges you a fee just for casting your line into the water.
I'm no expert day trader, but one thing I do know is that traders like to use the order book in an exchange strategically with orders that might not get executed. Some do it to take advantage of potential price spikes or sudden dips they might miss, while others use intimidatingly large sell and buy "walls" designed to inhibit or encourage trading to a desired effect, which they promptly cancel as soon as the action gets too close to actually executing their order.
I've never been able to afford a wall myself, but I have put in a ridiculously high or low limit order in Bitstamp just in case the BTC price spikes or drops rapidly and unexpectedly. Usually my gambit fails and the price moves away from my bid to an impossible range so I cancel the whole thing. In Nxt, I would be charged a fee for this. I'm not sure if this is a deal breaker for me, but I have a strong feeling it might be for many traders considering using Nxt's AE. I can also imagine a fluctuating fee being a pretty big headache for bot programmers trying to figure out how to obtain profit with the slimmest possible margins.
Of course someone who can put up a 2 Million dollar wall can afford paying these fees, but I would hazard a good guess that for many of these traders, who I imagine to have colorful & opinionated personalities, having to pay a fee to merely place an order that they never plan to execute will become a matter of principal and they will refuse to use the platform on this sort of thing alone.
I have tried to bring this up with the developers who congregate at bitcointalk.org as a potential problem for future traders, but I've been told that Nxt needs to charge these fees so that Forgers who protect the network can be compensated. My retort is that if participation is too low because the fees are too high that no one will be rewarded, but so far my concerns do not seem to be shared.
In short, the one drawback I am starting to realize with Proof-Of_Stake systems is that since no one is creating new coins with mining, that the actual stake-holders need to be incentivised to run open nodes (Forging) so the network is secured and transactions are verified quickly. If the incentives are too small, not enough people will Forge and the entire system is endangered and fees will have to be raised til motivation exists. This is something Bitcoin users will have to deal with in the future, when all the coins have been created and it is something Nxt users will have to deal with right now.
People often reference the ethereal but holy tenant of Bitcoin: Decentralization. But, nobody really has a clear definition of what that actually means. The way I see it, there are many factors that contribute to centralization, or as I like to call it - a decision bottleneck. We can look at miners, exchanges, full node count, developers with commit access - all of these things and more are factors that lead to disproportionate say in the hands of 'too few', whatever that magic number actually is. submitted by
But I want to specifically focus on full nodes here, because I often see the complaint that full node count has dropped dramatically touted as a sign that the Bitcoin sky is falling. Is it really though?
I've seen opinions from the 'experts' running the gambit from "literally everyone should be able to run a full node" to "the network would probably work just fine with a dozen full nodes". Obviously, these are mutually exclusive positions to hold. The vision of Bitcoin cannot follow both at once. We are going to have to choose what 'acceptable' decentralization actually is, if only to know when we should be concerned. Without a concrete metric to measure our proposals against, how will we ever make the engineering tradeoffs that need to occur? Will it simply be the loudest point prevails? That doesn't sound like a very good way to solve technical problems to me.
My thought: full nodes need not be run by every end user. In fact, regular end users are extremely unlikely to be targets of SPV attacks - they simply don't move enough money around to make attacks worthwhile. Someone moving many BTC certainly would do well to run a full node, because they're dealing with more money. But the average guy who has a few BTC and uses it to buy coffee with foldapp? The risk just isn't a huge deal.
So right now the cost is fairly low to run a full node. Any user with a decent internet connection and a modern computer can run one, as I do. Will that always be the case? No. But, I think we'll be okay as long as the Bitcoin economy grows.
As people are moving more and more value, and as businesses handle more and more value, those businesses will have incentives to run full nodes for the security it provides. Even if regular consumers have little to no reason to run a full node, in a healthy ecosystem that spans the globe and contains millions of bitcoin-accepting businesses, we'll be more than decentralized enough should even a small fraction of them opt to run a full node.
So I think a good metric to gauge health of the full node space is whether a bitcoin business can easily run a full node in house.
What are your thoughts? Am I off the mark? Are we doomed if you can't run a node on a toaster? Are we doomed if we can?
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