Tag: Trading

The crypto exchange industry has rapidly developed over the past two to three years. We saw the rise of cryptocurrency derivatives. Platforms like BitMEX, Deribit, and FTX seemingly came out of nowhere and consumed the market share of more traditonal exchanges like Coinbase, Bitfinex, and Binance. Now, In steps Interdax.

Interdax aims to even further develop the industry in a different but interesting way. Through gamification. Primarily trading competitions.

The Foundations of Interdax

Interdax was founded all the way back in 2017 by a team of former financial professionals. Hailing from the New York Stock Exchange, NASDAQ, and Goldman Sachs among many others.

Though they were founded in 2017 they remained relatively quiet until late 2018 continuing to develop the platform until they eventually came out of their dark lit room to announce their project. Eventually launching it in beta in 2019.

The Interdax Platform

On its surface Interdax is your run of the mill derivatives exchange. Having what you would expect. A straight forward user interface. Fees for trading are the industry standard. Opening and closing orders is smooth and easy. It has all your standard order types. Limit, stop limit, market, and stop market orders.

Liquidity

Liquidity is okay. Not the best, but certainly not the worst. You will have trouble getting filled if you are trading large sizes but medium to small traders will have no issues. And if the platform can continue to attract more users then these liquidity problems will begin to lessen.

Trading Pairs and Margin

Another issue I have is the lack of trading pairs. At the time of writing there is only one trading pair. A Bitcoin perpetual swap contract. Although understandable that an exchange in its infancy has only one trading pair it would be nice to have more.

Interdax offers the much loved support for up to 100x leverage.

Security/KYC and AML

In terms of security Interdax has standard 2FA as well as support for PGP email encryption.

Interdax though having offices in London is registered in Seychelles. This means that its not subject to strict KYC and AML laws. KYC is thus not required on the Interdax platform.

Interdax Trading Competitions

But reviewing a standard derivatives exchange like above is not really what this article is about. We’re trying to see what new ideas Interdax are bringing. And those new ideas are its trading competitions.

How They Work

Trading competitions aren’t very complex. You simply trade for an allotted time period with a certain amount of capital and the winner is the one who has the highest return.

Competitions on Interdax work exactly like this. You trade for a certain time period and the winner is the one who has the highest return. Also recieving a prize in Bitcoin on top of their earnings from the competition.

How to Sign Up

Signing up for a trading competition is very simple. You simply navigate to the battles tab on the top of the screen as shown.

Once there you will be presented with this screen below. It lists all the current active and future tournaments you can join. It gives information on the prize as well as the required ‘trading stack’. The trading stack is essentially the amount of Bitcoin you will be trading with. You need to have this in your account balance to enter the competition.

During my time using the platform the required trading stack for competitions varied from to 0.01BTC to 2BTC so there’s something for everyone.

To join the competition you click view and will be presented with the screen below. Click join to get signed up.

After clicking join you will be asked to move Bitcoin from your account into your battle sub-account. You can cancel any time before the competition starts and these funds will be moved back into your main account. Similarly after the competition ends these funds will be moved back into your main account plus or minus any profit or loss.

Congrats you’re all signed up. Once the competition begins you can view the leader board and competition from the battles tab to see how you’re doing.

Other Exchange Competitions

Interdax is not the first exchange nor the largest to do cryptocurrency trading competitions. Back in 2019 FTX launched its ‘Battle Royale’ trading competition very successfully with hundreds of traders entering. The competition lasted a number of weeks. But, it seems FTX only used that as a marketing ploy to draw in new users to the platform. They have only ran one smaller competition since.

In comparison to the competition Interdax seems like the only exchange that is actually committed to running consistent competitions for traders with constant open competitions for every type of trader. From ‘Saturday Skirmish’ to ‘Weekly Warriors’.

Conclusion

Interdax is not without a number of flaws which have been pointed out in this article. Lack of trading pairs and liquidity issues to name the main two. But these issues will fix themselves if the platform can continue to grow.

What Interdax does do right however is it trading competitions which I feel is the selling point that will generate the most interest. Crypto trading competitions are good in the sense that if you are an active trader you have nothing to lose. If you lose money that’s money you would of lost anyway on another platform. But if you trade successfully you can manage to net a nice bonus.

Having been in around crypto trading circles for a number of years now there has always been strong demand for attempts at gamifying crypto trading and if Interdax can continue on their positive path forward chances are that they will successfully meet that demand.

As you may know there are a variety of strategy’s in trading. You may have heard of fundamental analysis where traders take all available information about a given market and derive a value based assessment about whether it is a buy or sell. There is also technical analysis which identifies trading opportunities in price trends and patterns seen on charts. However, one which you may not of heard is order flow analysis. Order flow analysis is a method that attempts to anticipate price movements based on the current orders that are visible in the market. It is this type of trading that TensorCharts is trying to make more prominent in the cryptocurrency market.

How Does Order Flow Analysis Work?

There are hundreds of different strategies within both technical and fundamental analysis based strategies. Order flow analysis is no different. In this article we will give a brief run down of some simpler strategies so you can get a feel for how order flow trading works. It will be up to you to manipulate these strategies for your needs and hopefully make profitable trades as a result.

Reading the Tape

This strategy is order flow trading in its simplest form. It is essentially reading the order book and making trades based off of this. For example if we take the below orderbook from BitMEX on TensorCharts. We see that there are large sellers on the book from 7330 to 7350 and so we may choose to sell.

This is a perfectly reasonable strategy and many people use it successfully. However there are a number of flaws with it, One issue is order spoofing. Order spoofing is the act of placing fake buys or sells on the market in order to spook the market and drive it in a desired direction. This can cause issues in our strategy as we may take trades based on large orders that may be removed. The infamous S&P500 flash crash of 2010 is an extreme example of what order spoofing can do to a market. Another issue is that most exchanges allow for traders to hide their orders from the order book so again we may miss crucial pieces of data.

Technical Analysis Confluence

This strategy takes elements from both technical analysis and order flow analysis. In the below image our red box shows our white resistance line and our yellow block from TensorCharts which represents a large resting sell order. Price went up above our resistance line and the large resting sell orders before continuing downwards again. The use of order flow analysis and technical analysis can be a powerful combination to first identify a support or resistance line and then try to identify whether it will hold based on orders in the market.

Scalping Liquidations

This strategy is perhaps the most exciting of our 3 strategies, yet, the most likely to induce heart attacks. It involves fast paced trading on low time frames (primarily on one minute candles) you can use what ever leverage you want but if you want to make it worth your time you are most likely going to have to use higher leverage due to low time frame nature of these trades.

This strategy relies on data from BitMEX so it is recommended you create an account there. To get started on this strategy you’ll want to navigate to the ‘BitMEX stats’ tab on TensorCharts. Highlighted Below.

You will be presented with an interface like the one below. You again want to focus on our beautiful red boxes. The box on top is just your standard Bitcoin price chart, the box on the bottom represents liquidations on BitMEX and is where our strategy lies. You can read the BitMEX documentation to fully understand how liquidations work. But Essentially liquidations create large market cascades which typically reverse.

We first want to identify these large liquidations typically I look for liquidations above at least 5 million and then buy/sell them. In the below chart notice how large liquidations typically reversed.

This strategy requires very stringent risk management as things can go badly very quickly. As mentioned this strategy is very fast and heart palpitations are probable. My average holding time for these types of trades is less than 45 mins you want to take profits relatively quickly as the market can always turn sharply against you. I use this strategy in conjunction with reading the order book to recognize if selling or buying is going to continue or if there is large orders coming in. Again I want to reiterate. If you want to use this strategy make sure you’re using stop losses and take profits quickly.

These three strategies only scratch the surface of order flow trading. Don’t be afraid to dig in and do your own research on different strategies or come up with your own.

Markets

TensorCharts has support for a number of different exchanges. Such as Binance, BitMEX, Bitfinex, and others. It even has support for some traditional markets such as CME currency, agriculture, energy, and metal futures. One slight problem I have is that even though TensorCharts has support for a number of crypto exchanges, there are only a few pairs listed on each exchange. For example, BitMEX only has XBTUSD and ETHUSD and is missing all of its altcoin futures contracts. Binance also lacks altcoin pairs. I don’t typically trade altcoins but if you do this is something you may want to keep in mind.

Scripting

TensorCharts has support for scripting so if you have programming experience that option is available to you. Javascript is the language used. TensorCharts has an active Discord where you can ask whatever questions you may have.

To Conclude

As the cryptocurrency market has grown over the past few years profitable trading has got increasingly more difficult. If you want to be a successful trader you really need a strong edge and a large trading tool belt. TensorCharts is one of the essentials in mine. Whether you’re brand new to trading or have been around the block everyone can find value in TensorCharts and orderflow analysis in general.

Note: Though we are using Bitcoin for simplicity in this article the same futures arbitrage method can be applied on any asset which has futures contracts available. Such as Altcoins, Gold, Oil, and Currencies among others.

At the time of writing this Bitcoin is at a crossroads for traders. Hovering just above 10000$. It might as well be up to a coin toss whether we continue upwards or head lower. Volatility is nearing lows, and low volatility always precedes high volatility. Essentially, there is a large price move incoming but we do not know which way.

Now how do we trade such a scenario? Do we take a side and pray that its right? Risking price moving sharply against us. Do we sell all or coins in hopes we buy them back lower. The opportunity cost being that you lose out if price rises sharply. You could do either of these and bet right and make money or you could lose. We need to find a happy medium between these two. One where our risk to the upside or downside is neutral yet we can still profit off volatility. This is where Futures arbitrage steps in.

Before we get into the actual method for futures arbitrage we will first run through some basic terms and what you will need to carry it out. Firstly you will need to sign up for an exchange that has the ability to short Bitcoin and has futures contracts. We recommend either BitMEX or FTX however there is an ample supply of them so use whatever exchange you feel comfortable with.