Bitcoin Forum

this is a continuation of a free series that i will be posting from time to time.
last issue: Decision Point! -or- A Page From Arepo's Notes (https://bitcointalk.org/index.php?topic=392713.0)

SO! Let's take a quick look at the present moment on Gox (for all you bitstampers out there, the prices are largely correlated so this analysis applies equally!)

http://s28.postimg.org/fg67oje7h/trendornotrend.png
http://s28.postimg.org/fg67oje7h/trendornotrend.png

we've got two possible patterns, one a bearish flag the other a rising wedge (usually bearish), depending on which parts of the data can be considered outliers. for the flag, breakout is in 0.5 - 3 hours, for the wedge, breakout in 1-5 hours. however, there is a case to be made for both bearish and bullish scenarios. this is intended to be an overview and a brief tutorial on how to interpret the various indicators available over at bitcoincharts.com. as always, questions and clarifications are welcome and encouraged!

The Bull Case

===

10-day 2-hour scale @ GOX

http://postimg.org/image/yfzanaxz1/
http://postimg.org/image/yfzanaxz1/

===

MFI:
an oscillator that incorporates volume
we've touched down onto a strong moving support, marking the third point of contact that describes a robust trendline*, which is very bullish. this suggests that we've reached the bottom of a correction to the trend, and we will break up out of this pattern.
*a line can be drawn through any 2 points so 3 points is the minimum for a robust linear model for channels, trendlines, and bounds for various other patterns.

StochRSI:
a very light oscillator
upwards movement after an overbought period (blue) on this oscillator is bullish. if it continues, we should break up. a reversal in this indicator would be bearish.

CMF:
an price-volume transformation that acts as an oscillator
not only is the CMF strongly positive, a small but robust upwards trend is visible. as long as this trend continues we will stay on track for the mid-term trend.

PVT:
another price-volume transform
same interpretation as the MFI -- trendline intact, also very robust with 4 points of contact.

The Bear Case

===

10-day 2-hour scale @ GOX

http://postimg.org/image/dht4p7y4d/
http://postimg.org/image/dht4p7y4d/

===

UO:
an oscillator based on moving averages
these data show a retest of an important support, as well as a lower high correlated with the recent peak. very bearish. if the support holds we may see sideways consolidation, but a break under this support would be very bearish.

Mass Index:
volume tracker
this indicator is calibrated to peak during reversals, which are usually periods of high volatility and high volume. the red and blue bounds are critical, intended to show periods during which volume and volatility are significantly higher than during normal trending and consolidating behavior. a short-term peak above this threshold threatens a reversal.

William's:
another light oscillator
in these data we see a broken support, and a consolidation underneath perhaps forming a bearish triangle. if we cannot break above this support, the mid-term trend is likely over.

SlowStoch:
measures the momentum of price movement
similar story here, with a broken support and an even more bearish consolidation. if we cannot break above the 50-line, the trend is over. if we break above the 50-line but consolidate under the old support, we may see sideways consolidation. a break above the old support would be a confirmation of the mid-term trend.

i hope i have given some of you the tools to trade this exciting moment dynamically. here's (http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators) a great resource that has the actual formulas as well as in-depth explanations/interpretations of the various indicators. keep in mind that the linked site is intended for other markets, and that my own personal interpretations have been tested and calibrated specifically for the bitcoin price function, but the basic interpretational intuitions still apply. good luck!

--arepo

I work diligently in my analysis, and share it with you as I can. If you learn from me, help keep it free!
18N9md2G1oA89kdBuiyJFrtJShuL5iDWDz

price action in the last half hour is beginning to look more and more like a wedge on gox, with bitstamp following suit. since the estimated breakout time lands in the nighttime for most western traders, the breakout paradigm may not materialise on schedule. look for a high-volume movement first thing in the morning to get a directionality signal.

Arepo, how are you feeling about the over extension on the 1d and 3d charts?

on the 1-day scale...

the volume associated with the doji at the peak is a sign of a top, at least for the short term. in the bullish scenario this would mean a descending bullish triangle consolidation with today's candle spanning from the $1000 bottom all the way to the descending upper bound of the triangle. the consolidation would take a few days, and then we would resume the uptrend. it does tell us that we will likely not see $1090 again for 1-2 days.

interestingly enough, the peak could also be a longer-term reversal, which yields the bearish scenario. there is some disagreement right now between mtgox and bitstamp because gox has just now broken above the upper wick of Sunday's tall green candle, suggesting a bullish breakout from the pattern in the OP and a formation of the longer-term, multi-day bullish triangle consolidation scenario i outlined in the previous paragraph. this, however, does not yet rule out a downwards breakout, in part due to the fact that biststamp prices still seem trapped by that same serious resistance ($950), and the actual resistance on gox seems to be at $1045, slightly higher than Sunday's high. if bitstamp can break above the upper wick of Sunday's candle, it will coincide with a breakout up from the pattern in the OP, and would most likely be followed by a multi-day descending triangle formation, which, again, would be bullish.

the only other option, of course, is a downwards breakout from the pattern in the OP followed by a red candle retracing the gains made on Sunday within 2 days.

i'm a little confused right now why gox is banging on its own upper bound ($1045) while bitstamp has detrended almost $25 below its own ($950). the markets seem to be decoupled. ??? probably an artifact of nighttime volume.

--arepo

arepo, great stuff, always consistent and interesting, as a go player myself with a bg in physics getting into these market metrics I really appreciate it. I'll send you some tips when I can dude.

At the moment the bear case seems stronger to me, the Bollinger Width on the same scale is nose diving and I think a new ATH in the next few days is a stretch, so down. StochRSI is very cool as the second derivative of price but because it multi dips the thresholds so much I wouldn't take it's current state as a bullish signal yet. I'd also hazard a guess that absolute support has risen from 600 to 700 in the last week.

Cheers

thanks for the feedback!

go + physics seems like our interests overlap significantly ;)

anyway, just a point of clarification, a new ATH after a significant period of consolidation is still on the books. this time the bubble was different. sensible double-top instead of a cusp top, the sell-offs were shallower, and the main bulltrap was higher in relation to the lowest support levels. i'm planning on posting a full diagramming after the pattern is over; i'm using the comparisons with the April bubble and many others as part of my resources right now, and try not to share too too much with the forums -- it causes complications :P

i see what you mean about the stochastic RSI, though, as one interpretation might be that recently visiting the oversold zone after a longer period of being overbought is actually bearish. we shall see ;)

update!

we are breaking out downwards as i type this. however, we're still being held up by the moving support of the uptrend, i.e. breaking into a larger triangle. these consolidation patterns have a tendency to do just that, breaking out and discovering previously invisible supports and resistances within the consolidation channel. of course, we'll need to break through this support, as well, to see a real reversal.

--arepo

the volume of the most recent move down has turned the majority of the 2-hour indicators bearish. i anticipate a retest of the $965/$875 (gox/stamp) low by morning.

Thank you for your work, even more insightful than it usually is.

s'all about natural systems  ;)

what a snap! but yeah def haven't ruled out consolidation yet considering the behaviour of the bubble so far as you said, but it seems like the bubble has a bit left in it. And even though there's a lot of new awareness and money coming in I think most will be waiting to buy lower or when it's a bit more stable. but whatever you never know.

yeah i guess diagrams can be easy to debate, but looking forward to the comparison. I still have a lot to familiarise myself with but i'm interested in trying some numerical analysis in the future if i can find the time. Anyway the next few days should be interesting. It looks like we're already breaking through the 1000 support, china did it with 5600 no problems.

true that ;)


yes, but will anyone be selling? that is the key. if the HODLers hold and the fearful watch, then we will consolidate sideways and not slip into a bear market. the steady underlying buying pressure will buoy us along with the trend, and we will reach Sunday's peak in a couple of days. we need to see some renewed selling pressure today to break us out of this consolidation pattern and into a real mid-term correction.

--arepo

Sorry, couldn't resist!  :D

Interesting situation. Bitstamp looking quite a bit more bearish than mtgox. Both are mostly in a state of suspension though, for now.

Let's assume downward breakout today, or over the next few days. Which to me looks slightly more likely right now than the alternative of resuming the 2 week uptrend... Maybe some price targets? If we do in fact go down with some force, but fin support in the 30d EMA (right now @~830 mtgox) I'd take that as a very strong bullish signal for the near future.

Say we break through it though. We have 2 post-ATH lows, 590 and 460. Obviously, should we fall below 460 all bets are off. Staying above both of them, on the other hand will give some confidence we've seen the capitulation bottom. Not a signal for a big rally, but slowly upwards moving consolidation probably.

In any case, until we actually close under the 6h EMA30, I'm not even going to get active. Not a single downtrend came into motion without that happening first in the last 2 months or so. Until then, I'll sit tight :D (note however that I aim to trade only the medium/large swings, and let most smaller ones slide)

pretty much, but I sense a few whales still lurking ready to manipulate the price, possibly chinese, and still a lot of people ready to short one last dip. It might be already starting, china's dipped below 5000.


ha!


agreed, i'd say if we get to that we'd hit between 650-700

speaking of capitulation,


so that's where we're headed now. bumpy consolidation into a final capitulation event, and then we can finally be done with the craziness of the December crash. however, if the bubble paradigm we've seen so many times before holds we will not see sub $450 and we will likely not see sub $600.

so as the price is, for the most part, playing out the model i presented in the OP and follow-up commentary, i hope my work has helped everyone learn, anticipate, and profit! if you did any of these three, help keep it free ;) and let me know how much you think it's worth.

thanks for the support!

--arepo

Arepo - excuse my wish for precise figures but can you please give me a target I can quote you on?

You know where I stand!

How long until we reach the bottom of the correction you are proposing?
What price will be the low in your opinion?
What would it take for you to accept that the current situation is not in fact the correction you are proposing? What are the odds of this eventuality?

So that it is clear here is a screenshot of the GOX charts right now, so we have a time reference for the future.

http://i42.tinypic.com/2hrmyc4.jpg

Of course you cannot give 100% precise figures. But I would like something I can quote you on if possible. This is not to beat you at any game, but rather because I think that as someone who practises a science that many would feel they must follow if they have no experience themselves, I think you should be happy to be accountable for your predictions.

Thanks,

Stuart

OK so on the main Wall thread you said:

"if the bubble paradigm holds then we will definitely see prices no lower than $450 and likely see prices no lower than $600."

But please give odds on this bubble paradigm holding?

Please can you give a timescale?

Please can you tell me what has to happen in the future (prices, timescale, whatever else) for you to accept definitively that what you are proposing today has failed to materialise?

no issues with accountability, of course; some issues with your request. you see, posting price targets creates a confounding effect that, if enough people know about and "trust" a specific target, and trade according to their best possible actions, the Nash Equilibrium will necessarily invalidate that target as players try to undercut each other for better and better prices. for this reason i usually only provide them in private or in limited release paid reports.

that being said, i'll make an exception in this case, in part because i think many still don't put much stock in my work. also, i'm just going to give you direct answers to your questions and not go into the methods i used to arrive upon these answers. however, i will be suffering an information loss at the hands of the forum, so i propose a bounty.

if i can raise 0.1 BTC by the end of today at the address in my signature, i will post the direct answers. there's already 0.02 in there, so only 0.08 to go!

--arepo

That's a bit unreasonable. That's a pretty specific range for a bottom.

those are just lower bounds. i do have a much more specific target. i can answer the questions "What is the target price for capitulation? What is the expected timeframe? and What price action would invalidate this model?" if i can raise the bounty described in my previous post. i hope this arrangement seems reasonable. i really can't just go around posting my notes in their entirety on a public forum :D

forum members who are interested can feel free use this thread to make pledges so that a number of individuals can contribute small amounts but be confident that the bounty will be reached and the information will be released.

--arepo

Frankly I think that's a bit steep! We have to pay you to be more specific? But you put plenty of effort - must be hours every week on here not to mention the calculations - into reporting impending capitulations and then we ask questions and have to pay?

This is a one-off test of your methods. Rise to the challenge. You have called me out before for not explaining my position better. I have tried - and spent time doing so (time writing is money for me as it's my profession!) - but never asked anyone for anything or even put an address for donations. This is a chat forum!

0.08 BTC is only steep if you're the only one who wants the information, which is what it seems like at this point, unfortunately.


you've got it! i work almost 12 hours a day and the pitiful part is that i don't have enough spare capital to do this for a living. i donate my time and effort all the while working under contract with someone else's capital. i hope by the end of this i will have enough to do it on my own, but for the time being i have to beg, because i have bills to pay, and frankly i spend way too much time doing this for what's actually going into my pocket :P


my methods were thoroughly tested throughout this, and many other posts. i know that you are a bit new to this but price targets are generally only given through subscription services and other paid means. this is in part because of the game-theoretic complications the information asymmetry causes. if you were asking any other kind of question, i probably would not have proposed a bounty. further, im not just releasing this information to you, im releasing it to the entire forum. if 8 people want the price target, it'll only cost you 0.01 BTC each, a sum which you should easily be able to make back if the information is accurate.

if you really just want to "test" my methods, i'd be happy to pm you, personally, the answers to your questions for an amount which we can settle. what is this information worth to you, my friend?

Thanks for the offer - really - but I think I'll just leave it.

The chances are it will be clear whether you are right or not compared to what I think and have explained. If we end up in the middle - then so be it!  :)

I'll make a donation to you arepo if I profit, at this time I'm happy setting my own price targets, but your comments have been helpful as always..

ah Michael! it's nice to see you around these parts again :) i appreciate your support, as always, and i hope my work helps you profit, indeed. i think i'm about done with this issue of "Arepo's Notes" but keep an eye out for the next one!

I'm always around, whether I post or not is a different matter :)    ..will keep my eye out for sure

I'm interested in your target price for capitulation. Would you say that the coming high volume capitulation would have us at lower lows?

i'm sorry, but i can't give out specific price targets for free, but i can quote you this:

Charts on bitcoin exchanges is fun and I got roped into them for a while but all these hours would be best spent finding out the inflows/outflows of BTC & fiat per exchange on an hourly basis.

In contrast, a stock like Twitter goes IPO and many of the variables are known. The amount of stock doesn't just get bought up on one exchange and then sold on another with both having limited constricted funds thus showing rapid dilution and scarcity.  The float available is public and also its % of the whole allocation with insiders having to broadcast their selling (kinda like cold storage doing 'days destroyed' and knowing they are being sold on X exchange) And there are no limits or friction on the amount of funds that can enter those markets

I bet knowledgeable eyes watch the blockchain to see where and when large amounts of bitcoin flow in and out (are the addresses public?  all of them?)
but no one will know the amounts of funds going in and out which would show appetite for support/pump/crashes


as I type, I thought we'd be in for a 770-810 range for a while but we slammed through that on btc-e and hit 751.

charting this is folly, more transparency is needed first in this fog of war

i hear what you mean. i find a lot of the trappings of the trader universe like emas, donchian channels, and marking a chart up with every possible fibonacci retracement to be a little distracting.

i work with a small set of classic indicators including the ones presented in the OP, as well as volume data, and fractal analysis, which is related to Elliot's wave model. fractal analysis attempts to find consistent patterns in the price function which can be used to better understand the "price environment". these patterns include triangle consolidation patterns, double-tops, cusp-tops, and bubble patterns (oscillation model). as for classic indicators, i find that the best indicators are the ones that incorporate volume heavily into the algorithm, because volume is one step closer to the inflow/outflow data you talk about.

and while i'm sure that these data would be a useful indicator in some sense (i'd expect it to look like a transformation of the mass index, peaking at times of of market uncertainty and reversals, correlating with peak in- and outflow), i think actual trade volume is far more important. i have often said that the only two important sets of data are the price function and the volume. i treat these data alone with a scientific approach and strive towards the simplest models that are effective at anticipating price behavior.

that being said, i have found empirically that they have "yielded returns better than chance during the time period which i have employed them". the problem of induction, of course, forces me to consider that this may simply be due to chance ;) so i'm not claiming any superpowers here regarding predicting what is an inherently stochastic function, the price function.

--arepo

I agree the volume is all we really have and good to know you use that as main weight,  I'll go back and read up your earlier work

I did notice the ascending triangles forming that broke us out of that previous downtrend and led us into the 700s.  But these can be like constellations where we kinda see what we want to see most times

update!

calling the short-term bottom here -- we will likely not see prices below $859/$765 (gox/stamp) for the next 3 - 5 days*.

===

10-day hourly scale @ BITSTAMP

https://i.imgur.com/Tl3IZlp.png
https://i.imgur.com/Tl3IZlp.png
price plot for reference (http://bitcoincharts.com/charts/bitstampUSD#rg10zigHourlyzczsg2013-12-30zeg2014-01-09ztgSzm1g10zm2g25zxzi1gCOscillatorzv)

===

1) the amplitude of oscillations in the Chaikin Oscillator is correlated with price volatility. since peaking price volatility is a reversal signal, an increasing range in these data can indicate trend exhaustion.

2) we can look at the volume data as well, keeping in mind that peaking volume is also a reversal signal. the 1-day red candle that was Monday, 06 Jan 2014, UT, had the largest daily volume in the past 18 days.

--arepo

*timescale based on a predictive fractal model of the 10-day price

triangle consolidation patterns, or oscillation patterns, are actually extremely common on all scales. i'm not surprised you noticed a few amongst all this volatility. unfortunately, since these patterns exhibit upwards breakouts and downwards breakouts rather chaotically, simply spotting one doesn't tell you much about price direction. combined with other methods that do, however, spotting and measuring these shapes can help you anticipate the timing of a large price movement in either direction, which is obviously a useful trick for speculators ;)

--arepo

Very good... You noticed that breakthrough as well :D But what to make of it, huh? We're already above again, with exactly one 6h candle in betweedn opening and closing below. By my count, that means there's a good chance we'll revisit this level again in the next days, so: low 900s very well possible.

But apart from that? I've said before, I consider the most likely end of the post-ATH decline/correction/bear market to be in late January/early February, but I also said I can be convinced otherwise if a clear reversal reveals itself. It's still a possibility in my opinion, depending on how we recover from yesterday's drop.

Don't know about you, but I'm not tempted to make a major adjustment to my position yet. Then again, as I said before, there are different trading styles... frequently, with smaller amounts vs. seldom, with larger amounts. I do the latter, almost exclusively. Waiting until I'm sure of a major swing, then put in one or two larger orders -- worked extremely well for me this December.

Lovin your work Arepo.. great thread. Posting here so it's bookmarked and i can keep an eye on it.

My position was being steadily adjusted all day Sunday. I had seen enough signals not to wait for the trend to break. At the least, a minor correction was in order -- though I am feeling more bearish than that. I've played two bounces here, mostly for kicks, but my money (outside of cold storage) is generally in dollars while this consolidation plays out.

Was just curious what your take was since one of your signals appeared to have triggered. :D

So would you consider yourself a trader (aiming mainly for fiat profits) as opposed to a "trading investor"?

I'm just wondering because the thought had of course crossed my mind as well, to sit out the entire correction/consolidation phase in fiat, but to me it seems nearly impossible to do so without taking a hit to your total BTC holding.

I mean, say you would have optimally sold at ~1200. How long to wait til you're convinced the correction is over? 1000? 1100? Anything later than that, and your total BTC position is reduced. Which is okay if you're agnostic about BTC's long-term price target, but if you assume that in the long run BTC will worth much more, it all becomes a game of what, I think, Rampion called "land grab".

So I don't really feel comfortable sitting it out entirely, only during the most obvious and violent downward movements do I turn (more or less) full fiat.

I am not aiming at fiat profits -- not as an end goal, anyway. I am interested in fiat profits in a bear market only to accumulate coins.

I didn't mean to say sitting out the entire correction/consolidation phase -- I have been actively trading. I meant the consolidation I expect from the most recent top (995->765). If I weren't working, I'd probably trade more of the small swings -- otherwise I am comfortable in fiat right now. I've got some wiggle room from my last sells and don't expect a re-test of the recent highs in the short term.

I've always got cold storage. But it's currently only 25% or probably now closer to 20%.

I see. Guess we have pretty similar trading strategies and goals then.

Any update?

I thought the same a few hours ago.
The problem is this does not look like a bottom.
No strength, no rebound.

1-day scale @ bitstamp

https://i.imgur.com/eAdJQ6j.png
https://i.imgur.com/eAdJQ6j.png

===

don't worry guys, lots of selling pressure, but the bids keep filling in. as long as we stay within the bounds of the larger 1-day scale ascending triangle, and continue to see decreasing volume, we're still consolidating. no call on the direction of the breakout, yet, but that support is showing incredible strength and i stand by yesterday's call of 3 - 5 days of consolidation from 08 Jan. in other words -- don't panic! the market is still deciding on a direction.

a closer look:

4-hour scale @ bitstamp

https://i.imgur.com/ofOOtcC.png
https://i.imgur.com/ofOOtcC.png

===

in the last 4-hour period, which has about 8 minutes left, we see a high-volume 'doji' candle (long wicks, small body) associated with large volume. this is a classic reversal candle. on this scale, it corresponds with a bounce off of the moving support of the larger ascending triangle. so long as we don't break below this candle today, the model is sound.

keep in mind that these calls are for swing traders only, and are all micro-term. this 4-hour-scale bounce is not bullish for the coming week, but this selling pressure isn't necessarily bearish either. this is all small-scale fractal behavior within a consolidation pattern within a larger trend.

also, just a note for the curious, since triangle consolidation patterns are fractal patterns, they often have this tendency to break out into larger (longer timeframe) triangle consolidation patterns, finding higher or lower supports each time, so that the final formation can be described as a number of self-similar triangles embedded within one another. in the 4-hour diagram you can see the smaller ascending triangle i was tracking earlier, which did decisively break downwards, but having made a higher low, is forming into the ascending triangle we now see on the 1-day scale. neat, huh? ;)

--arepo

just a quick clarification -- 3 - 5 days from 08 Jan, including that day, so we may see a breakout as early as tomorrow.

Nice to watch the fractal patterns you are pointing out in your posts!

love your posts

Oops! There goes that fractal!

I guess news does trigger things in some cases.

sorry? i'm not sure what you're trying to say. and please come off it with the news thing... didn't Blitz just demonstrate how that whole thing works in the wall observer thread? haha

edit:


thanks! always glad to hear this :)

What? Was that a post explaining that reports are pre-written and when the price moves published if suiting the movement?

That wouldn't apply in the case of the Overstock news.

Perhaps you mean something else? I haven't been checking the threads so much recently. Been working, you know!  :)

no, no, the thing about how news doesn't affect price the way you think it affects price. news affects traders the way traders affect price, i.e. bad news is popular during natural periods of FUD and vice versa -- news can and will be spun according the the emotions of the traders.

what confused me more was your comment about the fractal?


in my last post i correctly identified a micro-term bottom using the fractal model. "oops there it goes!" makes no sense in this context. :P

--arepo

My comment wasn't relating to the fractal in particular - like I said I was enjoying watching it form!

It was just to point out that the Overstock news caused a mini-rally and that this news was not caused by trader sentiment, a market move, or anything else.

Hey Arepo,

Just wanted to say that I appreciate your posts and this thread in particular. I'm as hopeful as T. Stuart is for the long term but not sure how he justifies flippantly marginalizing your hard work, which since I began tracking it, has been extremely accurate.

While I can appreciate his enthusiasm and tend to agree that hodling will yield long term benefit and gain, isn't there value in short term gains in earning some fiat or making the right moves to maximize your btc holdings as well? IDK, I'm just a dumb noob with much to learn.

Not marginalizing Arepo's work.

I regularly ask him questions and they are sincere.

I happen to think he is one of the more balanced analysts.

But I feel like analysts, particularly those who have been around for a while, are spending too much time using data from previous bubbles and not able to keep up with changes in fundamentals. It is not their fault particularly - the situation is difficult to read because it is being influenced by virality and factors difficult to factor into day to day calculations. I have explained this in several posts.

it's funny that you claim to know for sure what caused the move up. i would take the scientific approach and say that the fractal model is sufficient to predict that the price would move up after such a large volume bounce off of the moving support, and so Occam's Razor encourages me to ignore any other data. it is because of this that i believe market forces win against news every time. in fact, i have empirical evidence to support this claim, while you merely assume that it was the news :P


i appreciate the good words and the accountability! it's good to know that many others are also independently testing my work with positive results.

trading on the scales i have been commenting on in this issue of "Arepo's Notes" is a little hectic, and very risky. the longer time scales you apply these methods to, however, the more likely you will make profits, and this is simply due to the stochastic nature of price movement versus the deterministic rules that govern its internal structure. it is simultaneously a fractal with consistent patterns, and a stochastic function that is impossible to predict with 100% accuracy. on smaller scales it looks like a random walk, but as you zoom out it begins to look like a smooth and continuous function, and on scales in-between you will find consistent nested patterns with startling consistency.

that being said, spotting tops and bottoms is essentially the main way to increase your holdings during longer trends. buying as close to market bottoms as possible to make gains in BTC and selling as close to market tops to make gains in USD both work for me, personally. i do believe in the long-term future of Bitcoin and its heretofore undisturbed infinite bullrun, but trading the swings on all scales is not only lucrative, but also very fun :) it's easy to calculate the returns one would make simply holding, and my methods have shown to outperform this benchmark consistently. i would recommend that you pick a simple strategy and test it out for some time period, and then compare your returns to what you would have made simply holding. then divide the amount of hours you spent working with predictive models by the additional gains, and decide whether or not actively trading is a worthwhile strategy for you!

happy trading ;)

--arepo

you should read up on the Efficient Market Hypothesis (http://en.wikipedia.org/wiki/Efficient-market_hypothesis) and consider how much of what you claim is externally influencing price may already be contained within the price and volume data itself. if a sufficient amount of such information is somehow contained in the data already, then the data itself is the complete picture. traders, through their actions, factor things like virality and fundamentals into the price data with their every action, so there's no need to develop models as to how these things might affect the price as if they were external to it. i hope that clears some things up.

--arepo

You are joking aren't you?  :( Come on please. If you can't admit simple facts that everyone (including people who can't do maths, geometry, etc.) can see with their own eyes then what's the point?

So it is just a coincidence that the Overstock news came online and minutes later the rally (which is still going well) happened?

until the big boy exchanges come on board it is not that hard to see the churn that the bots do to grab money so picking ranges between each major moves can be easy money if you don't leave your screen for too long.

I called the 770-810 range and had to adjust a little higher but have made good returns sticking to this.. 5 cycles so far, will the overstock news bring us up or is it the volume consolidation to the bots that they will spike us up now and then level down again?

I've always believed you invest on what you think, but trade on what you think others think  (b-level bots in this case)

http://en.wikipedia.org/wiki/Empirical_evidence

So, were those who expected the bounce this morning -- absent Overstock news -- wrong?

What is your evidence that the news caused the rally? You are suggesting that absent this news, the market would not have rallied. What is your evidence for that?

Good call, arepo. Let's see what the next days bring.

Ignore the people who think it all reduces to news. News matters, but not in the way they think it does.

I don't think it all reduces to news at all. If you have a minute or two please explain briefly how it matters in the way you think it does. I would be very grateful for the insight!

i'm guessing you don't have much of a background in science...

let me first point out that correlation does not imply causation, that is, just because it happened "at the same time" does not mean that A caused B or vice versa. cum hoc ergo propter hoc is a logical fallacy.

secondly, even if you value this hypothesis, you need to be able to support it with some kind of evidence. i'm not saying that it is definitely not the case that the Overstock news prompted the "mini-rally", but you seem to be claiming that it definitely is the case, without any supporting evidence whatsoever. this is a problem. if you don't ever second guess your intuition, you'll never realize how often it is wrong...

some things to consider about the limits of our knowledge:

when?: do you think everyone learned about the Overstock news at exactly the same moment? probably not. if it had an effect on price, it was likely "priced-in" a lot more gradually than your claim assumes.

how?: are you sure that the Overstock news should have an immediate bullish influence on the price? perhaps in the long run, because of increased adoption, but in the short run, there are actually some bearish possibilities (https://bitcointalk.org/index.php?topic=178336.msg4414215#msg4414215).

the answers to both of these questions of WHEN and HOW news events and other external forces affect price are mired in the complexities of the market, and are the farthest, farthest cry from "simple facts that everyone can see with their own eyes".

i hope you took a moment to reflect on these important limitations to the claims we can make about price behavior.

--arepo

so in what way does news matter?

short answer -- we can't know.

good thing is, often, we don't have to know. the market internalizes the information for us.

not sure if you saw the following post, T, but if you parse through what i'm saying i think it might be a profound insight to you.

Just want to say, i am enjoying this thread, y'all are going at it but its all good : - ) Nice to have the lively discussion. Good everyone!

i appreciate the advice but i guess i am a compulsive teacher :D

my only hope is that even if my patient explanations don't find their way into T's thick skull ( :P ) there are lurkers who are following who might now think twice before buying into the rally-on-news-crash-on-news mania.

--arepo

Here's my view of it: Intuitively, one might think that some particular news item x has a clear, maybe obvious effect on price. If you read for example the wall thread, it's pretty clear that's a rather popular idea there. In reality however, while news affects price, the question of *how* and *how much* some news item affects price is not set in stone, but rather dependent on how it is *interpreted*.

So the same news item, in two different market situations, could lead to drastically different results. Example: the SR takedown. Imagine asking on the wall thread a week or two before it happened how price would react if SR is being taken down by the FBI. I'm quite sure the intuitive answer would have been "terrible crash". And during the first few hours after the news, that was indeed the reaction. But then we discovered support, probably because of built up buying pressure, partly also because China had began to enter the game, and people started realizing that maybe it's not all that bad for BTC to cut its ties with the criminal market (not that it really did, but that what it looks like to the outside). And suddenly: huge rally.

So I can't speak for the others, since I'm taking a sort of middle position: news matter, but *how* they matter is heavily context dependent. And while I don't think *any* news can trigger any price action, often enough the market is in such a state that many different types of news can trigger the same price response.

Applied to today: I don't think, for example, that if the news of today would have been "US government outlaws Bitcoin" we would have seen the mild recovery we've seen. In that sense, it did in fact help that overstock made the announcement. But on a different day, the same announcement would have only caused a weak "so what?". So in that sense, it wasn't overstock that somehow caused the trend out of nowhere.

(Bit of a rambling post, sorry. Too lazy to rewrite it :P)

IMO: if the market is in a certain state, it is more or less likely to react in a certain way to different kinds of news. After a huge rally it would take a lot more to make the price go higher even if good news appeared. The market would be in an "exhausted" state from buying and would run out of fuel quickly. Whereas had the news arrived before the rally, it could've helped start it.

Technical analysis can help measure these internal market "states".. and also predict probable future actions with or without fundamentals changing. Nothing needs to change for the price to change, if the change in price is already priced in. lol.

oda atleast your avatar has a unicorn in it to accentuate the fact that you're right :D

But I agree with arepo that we do not know. The world is a chaotic system so a butterfly in Peru could have played a major part in the rally.

Many factors can influence the price but I stongly believe that no factor alone is responsible for a price movement.
 - A whale could have caused it by pumping or dumping.
 - News spreads and people react.
 - The way people react can have a cascading effect. (many quick big sell order makes people scared and start mirroring)
 - People that already wanted out or in.
 - Calculated traders trading in the trends
 - Trading bots reacting in the same frequency using the same parameters.
 - Hacker dumping coins they stole and buying other coins
 - etc.

We simply do not know.
The problem is that people feel the need to explain the world, but as long as you can't test it repeatedly in a lab you will never know if any of the factors have a real influence.
Even if we repeat test it, it is not certain. Many brilliant scientists have been proven wrong after more factors have been factored into the equation.

Note: Technical analysis is an empyrical tool. You do not exactly know what you are measuring. You only know that it has some correlation and you make more money than that you lose (hopefully).

But we all like trolling :D

NewEgg is about to take bitcoin too...  priced in or time to buy and sell the news to a higher level?

it does seem like this current range is finished.   Arepo would be better at predicting next spot we land though

Thanks for your detailed reply Arepo. I can see that this news debate is quite hot with others also!


'If it had an effect on price, it was likely "priced-in"'?? So you're saying the news could have had an effect then. I'm afraid that I won't be drawn into technicalities on the news issue or bother bringing up observational analysis such as Chinese news for evidence (because observations do count as empirical evidence of course). Although I must say that I wonder whether you would be as quick to dismiss your own model if your predicted upwards break had been disturbed by a negative news clip from China for example. Please be careful not to slip into sophistry.


Two can play at that game! Ockham's Razor demands parsimony. I would take the common sense approach and say that "good news causes the price to jump; bad news causes the price to fall" is sufficient. The fact that this would be "priced in" to a more complicated model is not enough to spare this model from Ockham's Razor - it must be cut loose if the simple fact itself is sufficient. There's some sophistry for you!

As I said before I do respect the effort you put into explaining your work and your work itself, but please don't discount something you perceive as "unscientific" - especially if you claim that it may all be "priced in" already. Incidentally that is what lies at the root of your debate with me. I never criticized your prediction; I just said "whoops look how the news broke the fractal pattern". It was a simple point about news. You could have agreed and added that it was priced in to your model. Agreement across the boundary between science and common sense - nothing wrong with that!  :)

PS. Congratulations on predicting this upwards breakout!

Empirical evidence includes observation (ie past news of China creating crash)

I didn't say anyone who was expecting a bounce was wrong.

I did not suggest that absent this news the market would not have rallied.

 :)

I really appreciate your ramble!

And how!  :D

Observation is only the first step. You must empirically demonstrate causation. This, in this case, is impossible.

My feeling was that since you assert that the news caused the rally, that the rally would never have come to fruition without it. Hence, those expecting the rally absent news would have been wrong.

You (and other posters) have definitely changed my noobish mentality on the whole news factor and it's supposed impact.

"good news causes the price to jump; bad news causes the price to fall" isn't even a workable hypothesis, because of the issues with news perception. you may feel bullish about a certain move, like the Overstock news (anticipating adoption), but its actual effect on the market might be the opposite (Overstock may sell their coins immediately after receiving them, thereby increasing the selling pressure in proportion to its effect on adoption rate). what may seem like "good" news to you is very subjective, to say the least! for instance, i would conjecture that the effect that the conversation around GHash and cex.io is bullish, not a cause for panic, because it is a demonstration of how a decentralised network can spontaneously self-organise in an effort of self-protection. beautiful!

anyway, there seems to be a bit of confusion about the price movement. the upwards move in question was not a breakout, it was part of the triangle pattern. the news didn't break anything.. it didn't even register as a blip in the price, if the price was already expected to move up due to simple consolidating forces (https://bitcointalk.org/index.php?topic=402365.msg4414969#msg4414969). evidence for the news affecting price would have been an actual upwards breakout (http://www.tradeforextrading.com/chart_patterns_file/breakout_upwards.png). what you're calling a 'mini-rally' wasn't even a rally, we've been trapped within tightening bounds for about 2 days now.. ??? i can't quite tell if we're talking past each other at this point. i don't mean to draw anyone into technicalities, i was just challenging the validity of your hypothesis, that news affects price in predictable ways.

PS
i'll be careful not to slip into sophistry if you take care not to assume your own hypothesis :P that's some pretty circular reasoning right there.

--arepo

Do what now?

getting closer

http://newsbtc.com/2014/01/09/newegg-inching-toward-accepting-bitcoin/

They find the following to be proof....  ::)


We can only assume they are informing about accepting it. Either some management must approve the idea or some btc merchant service must prove they can handle the load.
Anyhow there is no real news...

buy the rumor...  or I'll be selling ya that news   ::)

Just looking at some numbers:

Overstock Revenue 1.1 billion
Newegg Revenue 2.5 billion
(Amazon Revenue 61.09 billion)

So, Newegg is about twice the size of Overstock, but I presume that it has larger potential for the current mostly geek community owning Bitcoin. Amazon on the other hand is in a league of its own, so any news from them would be VERY interesting.

Newegg would be better served to accept litecoin, I'm sure the sales on AMD graphics cards are already brisk, but if they took litecoins, they would capture much of the miner's income for the other stuff like power supplies and all that other stuff you need to run a litecoin mine.

*sorry to pollute your thread with non-technical stuff, Arepo. I greatly value your work. Thank you.*

no worries, this issue is just about done anyway. by all means, continue the conversation. :)

--arepo

https://i.imgur.com/fXNmuDK.png (https://i.imgur.com/fXNmuDK.png) -Gox
https://i.imgur.com/sKvNTWM.png (https://i.imgur.com/sKvNTWM.png) -China

Looks like we're setting up for the capitulation to flesh out. It's been a strange few days, it seems like there's an appetite to go down but the whales are holding for better prices. As usual gox is bouyant but china retains the initiative. For me that 6hr mass index reversal bulge is the main signal of an impending drop, bollinger's low and stochRSI can accelerate down for a while to make up for the past month. Also despite all the fighting volume is still relatively low compared to the main bubble. I'm not good enough to guess timing but my outlook remains bearish.


exactly, good signals from deep analysis can negate themselves if released, setting a bounty for this is perfectly reasonable, especially if the methods have worked better than chance recently.


i've totally seen a massive surge in btc transferred when a crash stalled midway, i think in that case you can be pretty confident that most of it's replenishing exchanges to dump, which is some idea of the "appetite". But it's probably one of the only cases where watching the blockchain helps. Better than nothing though, and it's a decent signal as btc flows fast compared to fiat.


Awesome, have you seen this book by Benoit Mandelbrot: http://amzn.to/1afxNeA ? I found it a great read, finished it just before he died (sadly). Without giving away too much can i ask do you look for self similarity across different scales? I'd like to give it a try sometime, probably start by minimising squared residuals between plots of varying length within a range. Def agree with sticking to actual trade vol and price as pure datasets, days destroyed/blockchain trans vol/fiat exchange rates etc would be fun to look at but their relevance might only be occasional and otherwise add noise to normal forecasting.