Order Types And Their Usage In Derivatives Trading

Be it stock market, bond market, financial derivatives or cryptocurrency exchanges, orders are the foundation of any trade that happens on trading platforms. Order is a contract to buy or sell any asset on trading venues. Such contracts can be simple or complicated and can be sent through brokers or direct market access. Crypto derivatives exchange provider provides different types of orders to the traders. Let us deep dive these in detail:

Market Order

Example 

User inputs: Quantity

Market order example

Quantity = 50 contracts

Direction = Buy

A buy order for 50 contracts will be sent to the order book.

Limit Orders

The trader can opt-in for the limit order when he/she is very particular about the price of the cryptocurrency. It is defined by the limit price in which a buyer (limit buy price) and the seller (limit sell price) will set below and above the market price respectively. The order is executed when the market price reaches the limit set by the traders. If the order is not executed, then the limit order is added to the order book. 

Example

Quantity = 10 Contracts

Limit Price = 200

Direction = Buy

A bid of 10 contracts will be placed in the market with a Limit price of 200.

Stop Order

Stop order is carried out only when the “stop level” has been reached. The trader has to input two prices for a stop order namely stop price and the limit price. When the market price reaches the stop price, the stop order is triggered. Once the stop order is triggered, the trade is executed at the limit price. It represents the worst price at which the trader’s order can be matched. 

Stop order is used as a risk management strategy to limit the losses as well as an automatic tool to take a position in the market at the desired entry point without manual intervention. 

Example – Stop Sell

The current price of a futures contract is $10,000. Mr. A has a long futures position and wishes to limit his loss if the price declines. So he submits a stop sell order having a stop price of $9500 and a limit price of $9000. Due to COVID-19, the futures price falls to $9500. This activates the stop sell order trigger at $9000. The futures position will be cleared (sold) at a price of $9000 or higher if there is any buyer for it. 

Example – Stop Buy

The current price of a futures contract is $10,000. Mr. A has a long futures position and hopes that if the price increases to $10100, it can touch $11000. So he submits a stop buy order having a stop price of $10100 and a limit price of $10200. Due to the lifting of lockdown in the COVID-19 situation, the futures price rise to $10100. This activates the stop buy order to trigger at $10200. The futures position will be cleared (buy) at a price of $10200 or lower if there is any seller for it.

Take Profit Orders

Take Profit Orders and Stop Order goes hand in hand with the only difference being in the time of execution. Take Profit Orders are executed when the price moves in a profit-making direction, unlike stop order which is executed when the price moves in an unfavorable direction. There are two types of take profit orders:

Take Profit Market Order: In this type, once the market reaches the trigger point, a market order will be placed.

Take Profit Limit Order: In this type, once the market reaches the trigger point, the limit order will be placed.

Example

Quantity = 50 Contracts

Trigger Price = 200

Limit Price = 190

Trigger = Mark

Direction = Sell

In this example, the trader has opted for Take Profit Limit Sell Order where Mark price will act as a trigger. If the mark price reaches 200, then a limit order will be placed for 50 contracts at the limit price of 190.

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Impact Of Various Industries On Your Business

In recent years due to the progression of cryptocurrencies, there has been a significant impact of various target industries on the business of different kinds. In this post, we will discover about the effects of various target industries like cryptocurrency, fintech, banking and trading on business. Be it a small scale business or huge multinational business, the introduction of cryptocurrency has impacted every company in the market. Many entrepreneurs are even using crypto crowdfunding techniques like Initial Exchange Offering Services for their business.

Impact of cryptocurrency on business

Cryptocurrency, also known as digital currency uses blockchain technology. With this technology, anybody can create their own digital currency, which will be used as an online mode of payment. Some of the famous and acceptable cryptocurrencies are bitcoin, litecoin, dashcoin, ethereum, etc. In 2009, bitcoin was first used in business transactions; after this, many companies started using cryptocurrency for their business. Here are some positive impacts,

• Digital payment facilities: Many companies have introduced cryptocurrency as a digital mode of payment. Now along with payment option like net banking, debit card, credit card, wallets, you can also make payments using cryptocurrencies. It is safe as it is highly encrypted, it is quicker, and the transaction fees are even less.
• World market: By introducing cryptocurrency in the business, companies can now expand and reach the global market. As these currencies are acceptable worldwide, a business can use it reduces waiting time for international transactions.
• New customers: With the ease of it, many tech-savvy people prefer using cryptocurrency. With the introduction of cryptocurrency, companies have gained many new customers.
• Ease of transaction: Transactions done using cryptocurrencies are highly profitable to the business, as there is less transaction fee. It is quicker than normal transactions. There also fewer chances of frauds. 
• Blockchain technology: This technology was first used in the cryptocurrency market. Now it is being used by various business organizations like,
  • Real estate companies
  • Automotive companies
  • Health care
  • Banks

This is how cryptocurrency has impacted business, and companies are being free towards introducing cryptocurrencies. New start-ups are using crypto techniques like ICO, IEO and STO to start a business. With this growing trend, new service companies like IEO Development Company, STO Development Company and Companies providing ICO Solutions are established. These companies specialize in providing ICO, IEO and STO development services to new as well as old businesses.

Impact of Fintech on business

Fintech stands for Financial Technology. This industry comprises of companies using technology like the internet, software, smartphones, applications, etc. to provide financial services. Since a long time, fintech has had a significant impact on businesses. Recently cryptocurrency and blockchain have stated to gain Fintech industry’s attention. Fintech world is ready to explore the crypto world. When these two forces combine, businesses will have a considerable impact.

• First crypto bank: A financial company named Seba Crypto AG, in Switzerland, raised $104 million from investors. This money will be used to start the world’s first crypto bank. Here people will be able to manage both real as well as cryptocurrency in the same bank account.
• Blockchain technology: Blockchain technology have bought new evolution in the fintech world. Most prominent financial players like, JP Morgan Chase and Bank of America are planning to use blockchain technology.
• Higher Investment: People have started investing more money in fintech business to expand blockchain technology. This technology will change the face of business industries.
• Payment solutions: Fintech has developed many applications and software to make payment easier. Now with the introduction of cryptocurrency in the fintech world, businesses will be able to develop new payment solutions for their business.
• New applications: Companies will be able to use new financial applications with the latest blockchain technology. These applications will be safe and secure, as everything will be highly encrypted.

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Importance of Whitepaper in ICO, STO and IEO

What is Whitepaper?

If you want to raise funds in a crypto market through an ICO, STO or IEO, you need to prepare a whitepaper first. To start a crypto project, you need to build tokens and a whitepaper. It is like a business plan for the entrepreneurs and business proposal for the investors. The decision of whether to invest or not invest in the project depends on the whitepaper. Investors will buy the tokens only if they like the whitepaper. Every ICO, STO and IEO has a whitepaper.

A whitepaper is a document which contains all the important information about the project.      It contains information like problems, team players, risks associated, funds usage, revenue model,  competition, and more. It is basically the first thing the investors check before making the decision. If the whitepaper is interesting, innovative and transparent, the project can get many investors. Because of this many entrepreneurs approach professional companies providing Initial Coin Offering Services, STO Development Services and Initial Exchange Offering Services. They help in developing a whitepaper for the crypto project.

Components of a Whitepaper

• About Company: This includes all the necessary information about the company like name of the company, tenure of the company, past projects, future projects, current projects, partners, location, year established, position in the market, target market, etc. These all basic information should be mentioned so that the investors can differentiate between a genuine and fake company.

• Product Information: All the product information should be disclosed like, name of the product, type of product, product development, product timeline, product description, product launch date, product promotion, the safety of the product, etc.

• Problem: The Company should mention the problem they are facing and planning to solve. Every project has a challenge and a solution. The problem should be real, and the company should be able to solve it.

• Solution: It includes the solution to the given problem. The solution should be unique and workable. It shouldn’t be hypothetical.

• Team Members: Information about the people working on the project should be mentioned. Details like the number of members in the team, their designation, work experience, qualification, number of advisors, etc.

• Target Audience: It should include the target audience of the product. Type of audience the product will focus on and the benefits and uses of the product to the audience.

• Competition: Information about the number of competitors in the market and how the company will deal with its competitors.

• Token Value: Information like the value of the token, special features of the token, type of token, rights of ownership of the token holder, trading token, expected token value in the future, etc. should be included.

• Token Distribution: It should include information about the token distribution. How will the token be distributed?

• Roadmap of the Project: How the project will achieve the goals. Timeline of the project, including important dates and events, is mentioned.

• Utilization of Funds: Includes information about the use of the raised funds, allocation of the funds and distribution of the funds.

• Terms and Conditions: Includes important terms and conditions of the company.

• Tables, Diagrams and Statistics: The data about the product and project should be highlighted using tables, diagrams and statistics. The data should be authentic deriving real-time results.

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A detailed guide on how to plan a road map for ICO

ICO refers to the initial coin offering or initial currency offering. When funding is done with the help of cryptocurrencies, it comes under initial coin offering. People can use ICO for raising funds for new cryptocurrency offerings. It helps in data protection by giving advice and guidance. Moreover, ICO development companies promote good practice in securing personal data. Those entrepreneurs who want to launch a new cryptocurrency can go for ICO (initial coin offering) with the help of ICO development services provided by these companies. There is no restriction of government on anyone related to the launching of ICO.

Risks and liability involved in raising a fund with ICO

As bit coin and blockchain technology has become a source of attraction when it comes to investment.  But there are various financial benefits and risks involved in raising a fund with an ICO. This type of investment can help the people to raise money quickly but it can result in loss of money as well. So people must make sure about the risks when they go for investing in an ICO. Here are some most common risks which everyone must go through to have a safe and secure investment:

Unregulated ICO: one of the biggest risks related to ICO is that it is unregulated. Everyone is investing ICOs at a very quick pace but they do not know that this can have more chances of being unregulated in the upcoming future. There are chances that ICOs can lose their value or sold off in the market. Thus, if anyone is looking forward to raising funds from ICOs, just understand this thing that ICO regulation is not known. 

Tax-related issues: apart from non-regulation issues, numerous tax-related issues can easily arise while raising funds from initial coin offerings. This is because ICO tokens can be classified as property, debt, prepaid services, prepaid goods, equity, and others. Each ICO can be categorized as per the need when it comes to tax classification. So always make sure about the holding of ICO token correctly. Commonly, anyone can get tax-related issues with ICO token as the risk related to these tokens are worth taking.

Lack of security: ICO investments are completely dependent on technology and this can be easily affected by cyberattacks. Cybercriminals always keep on trying to find out different ways to hack the systems so that they can steal the cryptocurrency most easily. This creates a greater chance of cryptocurrency being stolen. Moreover, with the help of phishing scams, hackers can steal your identity also. 

Fraud: investing in an ICO also has the chances of being fraudulent cases. This involves stolen individual identity by cyber-attacks and it becomes easier with initial coin offering. There are more chances of occurring fraud internationally and thus it increases more risks as compared to frauds happening inside the united states.

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Evolution of Funding Paradigm – From ICO to IEO to STO

Crowdfunding is the procedure of funding a venture or project by raising some amount of money from a large number of individuals, generally with the help of the internet. Crowdfunding is just another form of crowdsourcing and alternative finance. In 2015, over $34 billion was raised by crowdfunding across the globe. Crowdfunding has been preferred to fund a wide range of businesses for profit such as medical expenses, creative or artistic projects, and community-based social entrepreneurship projects.

Beginning of ICOs

Nowadays, there are many types of funding that are happening by using cryptocurrencies. For example, Initial Coin Offering or ICO is a popular kind of funding, often considered as a form of crowdfunding, nonetheless, a private ICO which does not require public investment is also possible. In the case of ICOs, cryptocurrencies are sold in the form of tokens or coins to investors, in exchange for other cryptocurrencies or legal tender. An ICO can be extremely beneficial for start-up companies as a source of capital. Start-ups can also avoid complying with regulations that help them get prevent from seeking investments from public and intermediaries like banks or stock exchanges directly. Public investment may demand a high investigation or some percentage of joint ownership or future profits. 

ICOs had managed to gain great popularity in 2017. Ethereum also gained a lot of popularity as a leading blockchain platform for ICOs and has more than 80% market share. Unfortunately, Facebook banned ads for ICOs, cryptocurrencies as well as for binary options in 2018. Such ads were also banned by Twitter and Google. But Facebook changed their mind in the same year and reopened their platform for just approved advertisers. This is why there are many people who are still interested in investing in ICO development companies. People are also investing in marketing their ICO project with ICO website development to attract potential investors.

SEC also warned investors to potential scammers that are using ICOs to run their Pump and Dump schemes. This such kinds of schemes, the scammers talk up the value of ICO to create interest and then increase the value of the coins, and immediately dumps the coins for their profit.

Emergence of IEOs – The Major Reason

While Initial Coin Offerings were having quite hard times in fundraising, Binance disclosed a brand new fundraising source called Initial Exchange Offering under its Binance Launchpad’s banner. Although IEO obeys the same pattern to the ICO, the major difference lies in the transactions between contributor and developer are actually facilitated by a third party. That third party is called an Exchange or Crypto Exchange. The IEO is administered by the exchange on the behalf of start-ups that need fundraising with their newly issued tokens. 

Therefore, the token sale is conducted on the platform of an exchange; issuers of the token have to pay a listing fee and a percentage of the token that is sold during the IEO. And in return, the tokens are sold on the exchange’s platforms. Once the IEO is over, their coins are listed. Since the exchange takes a percentage of the tokens that are sold by the start-ups, the exchange is provided with incentives to assist with the marketing operations of the token issuer. 

One of the major benefits of using IEOs is trust. IEOs can remove the risks involved in the scam and various suspicious projects from fundraising through crypto exchanges. Therefore, it has become difficult for fraud contributors with Initial Exchange Offerings. Another benefit of using IEOs is security. The cryptocurrency exchange platforms can manage the smart contracts of IEOs. So, IEOs are safer alternatives to ICOs. Exchanges that have joined IEOs include Binance, Bittrex, BitMax, OKEx, KuCoin, and Huobi. Nowadays, you can easily hire an expert who is certified to provide Initial Exchange Offering services.

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A comprehensive guide to STO

Bitcoin challenged the fiat currency the moment it stepped into the digisphere. The technology behind bitcoin and other crypto assets, Blockchain, disrupted decade-old industries. It is one of the most promising technologies that support crypto assets such as Ether, utility tokens and security tokens. 

A few years later, the security tokens became the next big ‘talk-of-the-town’ in the blockchain revolution. They were launched as a new method of a fundraising strategy to upscale the startups. Originally, ICOs were thought to be shining stars of the space but given its number of scams, the address was issued in the form of STO. 

The security token is still relatively a new concept. Before we proceed to discuss how to plan a road-map for security token offering (STO), we shall first explain what is STO, its categories are and what are the benefits of launching an STO.

What are security token offerings?

STOs are the legalized version of ICOs. They are the tokens based on cryptographic blockchain technology, representing financial securities such as Bonds, Stocks, Equities, Debts, Real Estate, Art piece, assets etc. through digital tokens. Security Token Offering has become one of the most popular ways of fundraising for blockchain projects. This method offers an optimised approach as compared to traditional crowdfunding platforms. 

A security token offering platform offers huge benefits to the investors through STO Platform Development. To name a few, lower issuance fees and enhanced performance. That is why most of the startups have started using STO software or taking assistance from the sto development company to build an STO Website to list their tokens.

What are the categories of Security Tokens?

Security Tokens are being classified into three major types

• Equity Tokens

Equity tokens are issued by the company stock or capital. These tokens display the shares’ value backed by the organization. A company that sells physical goods and services can raise a good amount of capital with equity tokens. Proven, keep control and feel secure with regulations are some of the few benefits of equity tokens.

• Debt Tokens

Debt tokens represent debt assets, for example, real estate. Such types of tokens are issued by the company on the condition of reimbursement to attract debt investors. Composability, universality and OTC trading are some of the key benefits of debt tokens.

• Asset-Based Tokens

Asset-based tokens represent the ownership of different assets i.e. real estate or commodities. The assets are converted to tokens which further can be bought or traded. Accessible, cost-effective, transparency, divisible and immutable are a few of the major benefits of Asset-based tokens.

What are the benefits of launching STO?

Let’s know some of the key reasons why security tokens are more attractive to founders in comparison to the ICOs.

• Higher Success Rate

Security Token Offerings are quite beneficial and have a higher success rate. Where most ICOs have disappeared into the thin air, the track record of STOs shows a positive response. According to the research, STOs have a success rate of 99%. On one hand, where ICOs hardly sold their whitepaper, STOs have built a reputed place for themselves in the market.

Moreover, they are being well-regulated so there are better chances of remaining positive.

• Programmable

One can easily program Security Token Offerings. Compliance protocols can be easily embedded into the actual asset and in case of any modifications, can be revised. There is no limit to the types of rules and systems that a security token can be complied with.

• Woo global investors

Tokens can be easily purchased and traded by investors worldwide. Moreover, security tokens tend to be more liquid as compared to privately held shares, which can be time-consuming and expensive to trade-in.

STOs not only appeal to investors from stock markets or the AIM but also global investors who are looking to make a good return with greater liquidity, want to raise large sums quickly and spread awareness of their business across the world.

• Micro Investments

In Security Token Offerings, micro-investments are possible. This means they allow more and more people to participate in startup ventures that were restricted to accredited investors and venture capitalists.

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Necessity for Token Planning and Tokenomics in Crypto World

What is a Token?

In the real world a visible or tangible representation of quality, fact, feeling is known as token. But, in crypto-verse, a token can be defined as a representation of “something” in its ecosystem. Generally a token represents a utility or asset that a company is having and the companies usually give those during a public sale to their investors.

What is Tokenomics?

Tokenomics comprises of two words “Token” and “Economics”. So tokenomics is defined as the quality of token which will attract the investors or users to adopt it and to help in making the ecosystem for the project which is around the token. It mostly focuses on token supply, token application, and validation. Token usage and its behavior is explained by tokenomics, while conducting a transaction and even after its accomplishment.  

When we are talking about the quality of token, what do we mean exactly? It’s a big subject and it includes a variety of components that we are going to talk about.   

Cryptocurrency and Blockchain projects raise funds using the three most popular methods. These are ICO, IEO & STO. All of them have their own perks and drawbacks, which one should consider before opting one.

• Initial Coin Offerings (ICO) –

The start-up companies which are seeking funds to finance their projects can get to the public directly, without the banks or venture capital interference. But, unlike the regulated stock market, the investors of ICO don’t get to own a part of the company and they don’t have voting options either in the company. However, they are investing in a currency so they get the coins themselves (for example Bitcoin), which can be used later for investments in future or online transactions.

• Initial Exchange Offering (IEO) –

Earlier methods like fund raising or token sale was performed at the issuer’s platform but in IEO fund raising is performed in cryptocurrency exchange platform. IEOs and ICOs are both techniques of crowdfunding, the difference lies in the management. IEO is managed by an exchange platform with help of startups who are willing to raise funds while ICO is managed by the issuer of the tokens responsible for ICO. Since the exchange of token takes place on crypto exchange platform, so the issuer needs to pay brokerage on the listing, IEO works more like a modern day IPO in stock exchanges.

• Security Coin Offering (STO) –

• STO or security coin offering is also used to pool funds for the new project and it is mostly considered safe and secure, mainly due to the program and encryption on which it works.
• STO is a regulated version of ICOs, the project selling tokens to a group of investors to find their work. In STO it is legal purchasing of digital ownership of a physical or digital assets. STOs are built in such a way that it tends to abide by all the relevant securities regulations and operate entirely within legal boundaries.

The team -

A credible project needs a reliable team behind to support it. The people involved in the project are critical in determining the chance of the coin gaining widespread adoption.

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