On margin trading and trading as a profession - and Einar Aas

Within the crypto sphere, there are lots of people who have become traders - they sell and buy different crypto currencies based on rumors, different "inside information", technical analysis and/or pure gut feeling. Yes, I've to some extent been there myself. The market rate wobbles up and down, buy while it's down and sell while it's high, how difficult can it be? Quite many are earning good money on this. It's possible to up the gears through margin trading, if one is betting right one will be able to multiply the profits with some constant. If one got the bet wrong, one ends up losing big time. I've only once tried margin trading on a very small scale - that's not for me. Well, if one really do know things the rest of the markets don't know, then indeed one may have an edge.

Comics stolen from dilbert.com

Yes, I actually do quite a big profit on trading myself - but that's a difference, I'm converting local currency with cryptos, and I always take a commission. If the rate doesn't move much, I win on it. If I have trades going in both directions at the same time, I win on it. Even when there is much flux in the markets and everyone tries to "buy the dip" or sell before the dip, I expect to go with a profit, the risk is just much higher.

Some people will be buying and "hodling" some currency because one has read up on it, understands it and seriously believes it's much better than the competing coins - yes, that way one can also possibly expect to earn money in the long term - by actually doing a proper due diligence one may have a long-term edge over the rest of the market.

With those few exception, I believe day trading on different crypto currencies is nothing but gambling, it's a null-sum-game, whenever you earn on it, someone else (probably) loses, and vice versa. Except, the house always have the edge. In the end of the day, the exchanges will for sure earn money on the trading ... they never lose on it ... or?

There is some buzz in Norwegian media those days, one man has been gambling successfully on the power markets for more than a decade, he has over and over been placing the right bets on the electricity forward markets and for the last few years he's been among the handful of people having the highest taxable income in Norway. Well, this year his gambling has turned pretty sour. Within few days he has become bankrupt. It doesn't end there, the exchange (Nasdaq Clearing) is also losing more than a hundred million EURs (though, they are able to push most of the losses forward to other clients). Some few days of heavy rainfall in Norway after an extraordinary dry summer, plus a rise in carbon prices in Germany, that was all that was needed for this man to go bankrupt.

The bottomline? Never invest more than you can afford to lose, stay away from margin or derative trading unless you know very well what you are doing, and do remember that trading is essentially gambling. If you're really sure you have an edge you may expect to earn some money on it, but keep an eye on the risks, and don't let some few successful trades convince you to quit your dayjob.

Sources in English, with some different viewpoints:

• The Economic Times
• Financial Review
• News in English.no
• DailyFX
• Reuters Breakingviews
• The News