Well, sort of, at least for the majority of ordinary and wannabe traders. It is relatively easy to earn money on a rising market but it becomes a completely different matter when a sideways market sets in like it is now in the cryptoverse. There are two major factors that turn trading into gambling for most players in this type of market which are presented below.
First, in any financial or speculative market, where Bitcoin rightfully belongs to, you can earn only if you take money from someone else. It could appear as if everyone earns with the rising price but things reveal their true nature when the price stops rising. It is kind of obvious but accepting this is necessary to understand why you can be the one losing the game in the end.
Second, some market participants have an unrestricted edge over the rest of the pack which means that under no circumstances they will be losing. These are arbitrageurs, insiders, exchanges and their likes. For example, it is impossible to beat exchange since it is 100% sure money for them when they can front run your orders and do a lot of other nasty things which you can't.
Given these two circumstances, it is easy to see that if you do not belong to the group of market participants mentioned above, trading pretty quickly turns into gambling for you. So your only chance to win is pure luck. But luck is not a friend of consistency, therefore the only consistency you can reliably expect is losing to someone who has an undisputed edge over you and the market.
Feel free to comment and post your thoughts and ideas here.
Your analysis is quite spot on but at least you have lesser chance to lose money when trading. You can lose all your money instantly when you are gambling. On the other hand, you will only lose all of your investment on trading if you failed to get out on time or when exchanges close. Most of the times, you would only lose a percent of it but not all. Still, it doesn't change the fact that you take money from someone else when you profit from a trade. Strictly speaking, it is not quite so. You can lose all your money in trading just as easily and as fast. For example, if you are trading using leverage and you lose control over your actions (by being too greedy), you can get a margin call when the price goes strongly against you. Then all of your deposit gets completely wiped away in less than no time. On the other hand, you don't have to bet on everything in gambling. And if fortune smiles on you after a few losing bets, you can make up for the losses and hit a jackpot. |
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The strategy that short-term trading should account for only a (relatively) small portion of your portfolio seems to be good one to me, and it is something which I have followed too. If you truly believe in Bitcoin, then the long-term coins that you hold will give you the returns. The smaller portion, which you use for day trading, can provide a further boost to your portfolio value.
I hope many novice traders will look into this approach without having superstitious fear about day trading. As long as you manage to keep things under control (not overdoing it), it is quite doable as well as financially rewarding and emotionally fulfilling. By employing the tactic described here, you are making stats work for you. No one knows how the price will behave even in the near future but we can be dead certain that volatility, and short-term volatility specifically, is not going anywhere, so why not take advantage of it? |
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Important aspect for any trader is avoid trying to take advantage of each potential market movement. In case of the near peak levels of last year, it comes down to common sense, because it was pretty obvious that there was no room for any up movement left anymore. I have been a day trader as well, and the urge to constantly try to exploit the movements were what was holding me back. I turned out to make much more profit while take distance for a good moment, than being active all day in a forced manner. And yes, I do agree that if you did end up buy yourself in the market at what later turns out to be a horrible price, liquidate your positions as soon as possible. In some cases you just have to accept that the market is always one or two steps ahead of you, and that you have to take a hit. It should be considered collateral damage as long as you make more profitable than losing trades.
I love where you said it should be considered collateral damage as long as you make more profits than losses. Nevertheless, what I will point out is that we have a lot of noobs in the market and most of them trade without any strategy. How will you expect someone who does not have any trading knowledge and is busy buying low and selling high to know where to place a stop loss or when to know when a market is going bearish ? Any smart trader should know already that you plan an exit immediately from the point you are planning an entry and that includes stop loss. As long as you know what you are doing, even if you play with any trend in the market, you can always readjust your strategy to make some profit from it, but always know what you are doing. Traders are not the only force which is active in the market. There are also long-term investors which are not looking for quick profits. They are more like Warren Buffett type value investors rather than speculators like George Soros. If they see a genuine potential in a coin, they would consider any dip as an excellent opportunity to buy more, at least as long as they feel confident about the coin's future. Obliviously, the idea of stop-losses simply doesn't make much sense to them. If their attitude changes for whatever reason, they will just get rid of this coin as soon as possible irrespective of its current price. |
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Well, sort of, at least for the majority of ordinary and wannabe traders. It is relatively easy to earn money on a rising market but it becomes a completely different matter when a sideways market sets in like it is now in the cryptoverse. There are two major factors that turn trading into gambling for most players in this type of market which are presented below.
First, in any financial or speculative market, where Bitcoin rightfully belongs to, you can earn only if you take money from someone else. It could appear as if everyone earns with the rising price but things reveal their true nature when the price stops rising. It is kind of obvious but accepting this is necessary to understand why you can be the one losing the game in the end.
Second, some market participants have an unrestricted edge over the rest of the pack which means that under no circumstances they will be losing. These are arbitrageurs, insiders, exchanges and their likes. For example, it is impossible to beat exchange since it is 100% sure money for them when they can front run your orders and do a lot of other nasty things which you can't.
Given these two circumstances, it is easy to see that if you do not belong to the group of market participants mentioned above, trading pretty quickly turns into gambling for you. So your only chance to win is pure luck. But luck is not a friend of consistency, therefore the only consistency you can reliably expect is losing to someone who has an undisputed edge over you and the market.
Feel free to comment and post your thoughts and ideas here.
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Are you sure that the poll tax was so easily avoided? I'm not very familiar with its history, but as far as I know almost everyone had to pay it even if they didn't have the money. In Great Britain, for example, it was levied on every person since age 14 as a percentage of the value of their property. So it was more like a property tax today. And if you mean that it was a light burden, then I can't quite agree with you.
It's not even about how easy it was to avoid, but how hard it was to collect. Back in the day people had no bank accounts and didn't keep the books. You couldn't prove that somebody has the money or not and the taxes were being gathered by the collectors. Many people didn't want to let them in, so they were letting themselves in. This lead to fights, quarrels and the whole process was taking too much time and resources. Read about the poll tax in GB. There are many sources available. Yes, it was like a property tax, but you didn't have to own anything to pay it. That looked like a bad thing, but it was much better than the taxes we are paying today. Just imagine that you'd only have to pay once, just a property tax, wouldn't that be great? People don't know what they have until they lose it. Yes, I read about the poll tax introduced by Margaret "Iron Lady" Thatcher in 1980s in GB. It was highly unpopular there and said to have contributed greatly to her political death in early 1990s. On the other hand, which tax is popular anyway? With that said, we shouldn't forget that the majority of today's taxes are paid on your income, either directly via income tax itself or indirectly via VAT and similar taxes, which you pay when you buy stuff in your grocery store. If you don't have income and limit your consumption, you don't have to pay a lot of taxes. I'm not very fond of taxes myself, but modern tax systems are by far more flexible and progressive than what we had in the past. |
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i would never trust a coin made by Venezuela government
yeah much better to trust some random coin made by unknown people  The whole point of Satoshi Nakamoto's cryptocurrency design is that trust plays no role. The code tells you exactly what it does, therefore you don't trust anything or anyone, you know how the coin works. Sorry if I'm missing something in the bigger picture, but even with a decentralized currency like Bitcoin you have to trust the network. And in case of Bitcoin specifically, you have to trust the consensus of miners, which can have their own agenda. And given heavy mining centralization as of recent, it doesn't look like particularly different from trusting a fiat currency printed by a central bank. It seems there is no way around this bottleneck, though I'm not very familiar with trust issues of POS coins which may be a way out. On topic, I agree that this coin is mostly a ridiculous shit show. |
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Profit earned is all that counts in the end. Note that I'm not saying that day trading is profitable for everyone or it is a losing game for every trader out there. But it simply can't be gambling if you accept that trading as such is not gambling. There is no other choice because all price growth starts small, even profits from long-term investment are made of small price moves. Capitalizing on the volatility which results from these small moves allows you to earn higher profits because there is no growth without corrections, however small those can be. Add to this that you can't always be right in your assessment of the future growth and even more so in respect to the extent of it.
First of all you talk about capitalizing on short term volatility like it is easy to do, and like people are capable of doing it consistently. When you buy an asset with the intent of trading it intra-day, how do you know it is going to go up and not down? You can lose money as easily as you gain it. There is no way to accurately predict price movements on this small of a scale CONSISTENTLY. Day traders will lose just as often as they win over a long enough period of time, and because of fees, this will end up putting them on the losing side overall. Also, profit earned is NOT all that counts. If I am day trading in the stock market and earning 8% ROI in a year, but the S&P500 returns 12%, all of my work figuring out what to sell and buy and when, was just a waste because I could make more profit by just holding an index fund. Same with bitcoin - if you day traded bitcoin in 2017 and made a 200% return, you have failed because you would have made more money by just holding bitcoin. All of that day trading not only failed to help you make money, but it resulted in a massive amount of wasted time and wasted potential profit. As I have written in OP, there is a lot of confusion about day trading. Day trading doesn't necessarily mean that you buy and sell all you have within just one day. Day trading refers to your trading activity, how many trades you make daily. In this way, there is no precise definition of it. It is a loosely defined concept where many different trading strategies fit. You determine the trend in the same way as you do for long-term holding, and then you capitalize on short-term volatility. As long as you can make profits consistently as in arbitrage, which is also day trading, it is not gambling. This is the difference I want to point out. |
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Just to start off, I believe that all trading... Even the mpst basic concept of trade and commerce, are exposed to some element of luck. Bitcoin's extreme volatility has made day trading an incredibly viable method of profit taking but also increases this exposure to luck.
That said, I think the most successful traders with the most consistent performances understand this element of luck and use their experience and skill to minimise reliance on luck, otherwise known as external factors beyond their control. If you think about it, you will see that day trading is there to take away the element of luck and at the same time capitalize on it. It may sound strange but there is a lot of sense in this. Even if you can correctly estimate the growth potential, you won't be able to say where the actual top will be because it will be completely unpredictable bordering on random. In turn, it means that you have to sell now and then. Day trading just takes this way of action to its logical conclusion. From this perspective, long-term holding itself with a specific price in mind as a target is the gambling. |
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First of all, day trading is no more gambling than any other trading. If the price rises you ride the wave, if it doesn't you wait until it does. That's pretty much all. In this sense, if day trading is gambling, then all trading is essentially gambling. Besides, arbitrage is also day trading which involves quite a few trades (actually, twice as many) albeit it is anything but gambling.
You are incredibly wrong here and very misguided. Day trading absolutely is gambling. It is gambling because it is luck based and not based on any type of valid research or methodology. Strategies for trading assets intra-day by looking at charts do not lead to consistently outperforming the market over the long term, and there are tons of studies and data out there that show this. Almost no day traders consistently beat the market in which they are trading as a whole. Profit earned is all that counts in the end. Note that I'm not saying that day trading is profitable for everyone or it is a losing game for every trader out there. But it simply can't be gambling if you accept that trading as such is not gambling. There is no other choice because all price growth starts small, even profits from long-term investment are made of small price moves. Capitalizing on the volatility which results from these small moves allows you to earn higher profits because there is no growth without corrections, however small those can be. Add to this that you can't always be right in your assessment of the future growth and even more so in respect to the extent of it. And you completely write off arbitrage which belongs to day trading as much as day trading is concerned. What statistic are you talking about that suggests the best trading strategy would be capitalizing on both short term volatility and long term growth? It sounds like you are just saying the best way to trade is sell at the top of every peak and buy at the bottom of every dip. This is not realistic.
You would need to use trading bots for that and take into account trading fees obviously. Ultimately, it all comes down to how efficiently you allocate your trading capital so as not to lose profit on bigger price moves. It looks like you think that day trading excludes any possibility of "seeing a long-term value in an asset". This is another misconception, of course. |
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There seems to be a lot of confusion, misconception and misunderstanding about day trading and its advantages as well as disadvantages. Some people even say that it is a form of gambling. In this topic I want to explain why it is not and also address the most common issues which day traders encounter and how they handle them. Thank you for your attention.
First of all, day trading is no more gambling than any other trading. If the price rises you ride the wave, if it doesn't you wait until it does. That's pretty much all. In this sense, if day trading is gambling, then all trading is essentially gambling. Besides, arbitrage is also day trading which involves quite a few trades (actually, twice as many) albeit it is anything but gambling.
Further, there is a question of limited profitability. This question has some substance but it seems that people who raise it don't fully understand what day trading comes down to. Many erroneously think that it is mostly about missing good profit opportunities. In fact, nothing can be farther from truth than that. Day trading if done right is actually about maximizing your profits, not losing them.
Statistically, your best trading strategy would be capitalizing on both short-term volatility and long-term growth. Since most price moves happen in a rather narrow range followed by relatively rare but big price changes, an optimal strategy would be dividing your trading capital into parts, smaller parts for catching short-term volatility, while bigger parts for capitalizing on longer-term growth.
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It is not so much about placing dumb stop-loss orders or other trading techniques aimed at minimizing losses as about your mental disposition or general attitude to immediately get out of what can be loosely called a decision limbo when you basically don't know what to do. In other words, search for the exit where the entrance is and do that fast.
This is why a trading plan is important before making a trade. Many people do the mistake of just buying a coin because he read and heard somewhere that it's a good buy so he bought without even bothering research about the coin and what is the position in the market. He would only notice afterwards that it's a mistake he bought that coin when it dumps and he finds out it was pre-pump. This is usually applicable in altcoins. Panic buying and panic selling makes the market movements rapid that's why many traders have bigger losses when this happen because they don't know when to exit and if ever there is still a chance to not be in a lose, they would still hold the coin hoping that it would go up more becoming more greedy only to see the price continuously go downwards. Having a thought-out plan and good strategy is all important. As experienced traders often say, if you don't have a plan plan to lose. But then again it is not what I'm trying to focus on here. You can't foresee everything which is possible and still less which is impossible even though it still happens. But however good and broad your trading plan can be and no matter what you do or ready yourself to, you will get caught unprepared and off guard one day. This is the part I want to address in this thread specifically, and as I come to think the common tendency among most traders just to sit passively on their hands in such situations is the root cause of most if not all their woes and sorrows. |
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The biggest mistake that day traders make (especially crypto day traders) is believing that they have an edge over everyone else because of the charts they look at. The biggest mistake is not believing that day trading is 100% gambling, because that is exactly what it is. The only way to consistently make money over the long term is to invest based on value and fundamentals.
Exactly, I usually consider day traders as gamblers whom have decided to take massive everyday risk. With the unstable price of bitcoin, I do wonder how they make their gain; though some traders claims it very gainful. Its takes one with huge capital and heart hardened to become a day trading. Because for me alone, bitcoin trading is a perfect risk on it own. I most times soley depend on long time investment. You don't have to necessarily day trade with your whole capital, and if you do, then I would most certainly agree with you. On the other hand, if you set a small percentage of your deposit for day trading, you take the opportunity of both short-term volatility and long-term trends. This topic is likely worth a separate discussion of its own. For now, I can just say that it is definitely a profitable strategy if you know how to properly handle it. Besides, day trading also includes arbitrage and it can be quite profitable as well if done right. I hope you won't call arbitrage gambling. |
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Save for the Dip and then Buy the Dip. Instead of buying every month, what is the chance of you saving that money in a separate savings account and then buying on the Dip? I also followed your strategy, but that lead to situations where I bought at the peak. If you buy low and sell high, you will maximize your profits.  This strategy is called dollar-cost averaging (DCA), which is about buying a certain dollar amount of bitcoins regularly. In the OP case specifically, you buy when you have some spare money, regardless of the current price as the DCA approach suggests. It makes perfect sense because you can't know in advance whether you are buying at the actual dip or top. I mean price can always plunge deeper as well as rise further below or above your entry point. In other words, while looking for dips, you may lose an excellent opportunity to catch a major uptrend. And even if the price goes lower later, you will still be able to average down at the next buy. |
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I don't really get what you're saying here. But I'm assuming that you're saying that people should ready themselves for anything and even if when SHTF they have a clear strategy of what they want to do instead of following their emotions?
If that's true, then yeah. It's definitely one of the skills you have to have trading and speculating on bitcoin.
Basically, you can't ready yourself just for anything which may potentially happen. It is simply impossible to prepare yourself for every shit that is likely going to hit the fan. But it is not required. And this is where I draw the distinction. Some people become kind of frozen when they get into an unchartered territory. Their instinctive impulse is to sit and wait till things get sorted on their own. I consider this a wrong attitude or approach. Whenever you find yourself in this type of predicament, you shouldn't wait, you should get out of it immediately until it becomes too late. Trading is just a particular activity where the devastating consequences of not making a decision at the right time are most visible and apparent. |
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It is gambling even if you say that you know what you are doing. Your above example isn’t a good one for me: For example, you buy a few bitcoins at a December high and expect the price to continue rising, which is kind of obvious. Instead, the price starts crashing down and you find yourself in a situation that you didn't envisage or consider beforehand. So your best option would be to bring things back where they were as fast as possible even if it means some loss.
As a long-term holder, I just HODL. That saves me a lot of headaches and a lot of trading commissions. You just put an example of what newbies do: to buy after the last ath out of FOMO and to sell after the dip out of panic. This is the opposite of what I usually recommend. Actually, I have no problem with this approach. It is your choice and I'm okay with it. In fact, I also follow something similar with coins which I think are worth holding. But you seem to be missing the whole thing I'm trying to demonstrate here. It is not what you do specifically, selling or holding, or whatever, it is how you do it, whether you are doing it because you have no other option left and out of despair, or it was your choice planned beforehand. This is where I'm trying to draw distinction here, not between certain actions like closing or sticking to a losing position. |
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An active day trader myself (sort of), I often think about common mistakes people make in trading. And it seems that I have traced back most if not all such mistakes to their root cause. In a nutshell, it all comes down to being unable to back out if something goes wrong. For example, you buy a few bitcoins at a December high and expect the price to continue rising, which is kind of obvious. Instead, the price starts crashing down and you find yourself in a situation that you didn't envisage or consider beforehand. So your best option would be to bring things back where they were as fast as possible even if it means some loss.
It is not so much about placing dumb stop-loss orders or other trading techniques aimed at minimizing losses as about your mental disposition or general attitude to immediately get out of what can be loosely called a decision limbo when you basically don't know what to do. In other words, search for the exit where the entrance is and do that fast.
The most common mistake would be panic selling and weak hands, honestly. If you invest in bitcoin then you are probably going to have to prepare for the long term. Trading bitcoin short term will mess up your entire trading psychology because you'll keep on trying to go for just that little more profits. If you are trading bitcoin short term, make sure that you have a stop loss level in mind, and a target where you sell your coins. Otherwise, you'll always fall into the hole of selling low and buying high. You make a fair point. Positions are there to be liquidated, you don't always have to close a position with a profit. You win some, you lose some. But you need to be mentally prepared for anything before you invest. It may of course be the most common mistake but I'm trying to trace this and other mistakes to their root cause in this topic. I'm not defending short-term trading vs long-term holding because these approaches to trading (investing) have their cons and pros. And frankly, I don't feel like my trading psychology is messed up or even fucked up. As per OP, it is not so much about closing a losing position, it is more about your whole mental outlook you have in trading as well as in other activities. For example, you buy at the top but you expect the price to plunge and decide beforehand that you won't get out even if Bitcoin goes down to zero. Then you won't be liquidating and that's okay because you know what you are doing. |
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I only wish that more people read this and understood how the system works.
It never ceases to amaze me how the state has kept on adding taxes on top of taxes and nobody opposed this. 200 years ago all people had to pay was a poll tax. It was a common tax in many countries around the world and one of it's main downsides was that it was easy to avoid. If somebody had no money and didn't pay the tax there wasn't much the state could do about it as there was no wealth or property that it could seize. It was just though, as all people had the same amount to contribute.
Are you sure that the poll tax was so easily avoided? I'm not very familiar with its history, but as far as I know almost everyone had to pay it even if they didn't have the money. In Great Britain, for example, it was levied on every person since age 14 as a percentage of the value of their property. So it was more like a property tax today. And if you mean that it was a light burden, then I can't quite agree with you. |
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I'm not sure what you mean by dumb stop-loss orders. Stop losses should be set together with entrance, prior to making any trade. If the trader just makes a random decision on where stop loss is then okay, that is dumb, but basic trading means you make clear headed decisions as to where you want to enter and where you want to exit (not so much when). However, if those exits never arrive, which is unlikely if you are a medium and long term trader, then yes, of course you make decisions to rethink.
Okay, I will try to explain. For example, some novice trader reads it in a book on trading that he should always place stop-losses, so he blindly does exactly that but still ends up always losing. The market knows everything about your stop-losses obviously, and it may go specifically after them. This is what flash crashes basically are all about, to trigger a lot of stop-loss orders. On the other hand, an experienced trader takes into account these tricks and cannot be fooled by such attempts because he follows some other metric in his trading decisions. It doesn't mean that he will never close a losing position. It means that he is well prepared for this hunt for triggering stop-losses. The biggest mistake that day traders make (especially crypto day traders) is believing that they have an edge over everyone else because of the charts they look at. The biggest mistake is not believing that day trading is 100% gambling, because that is exactly what it is. The only way to consistently make money over the long term is to invest based on value and fundamentals.
I don't know why you think that day traders believe that they have an edge over the rest of the pack. I for one don't feel like that. I'm a day trader in some assets and a long-term holder in other assets. Though I agree that short-term trading is mostly gambling unless you know what you are doing. But this is the whole point of this thread. |
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Important aspect for any trader is avoid trying to take advantage of each potential market movement. In case of the near peak levels of last year, it comes down to common sense, because it was pretty obvious that there was no room for any up movement left anymore. I have been a day trader as well, and the urge to constantly try to exploit the movements were what was holding me back. I turned out to make much more profit while take distance for a good moment, than being active all day in a forced manner. And yes, I do agree that if you did end up buy yourself in the market at what later turns out to be a horrible price, liquidate your positions as soon as possible. In some cases you just have to accept that the market is always one or two steps ahead of you, and that you have to take a hit. It should be considered collateral damage as long as you make more profitable than losing trades.
I don't particularly disagree with your approach. To tell the truth, I stick to it myself with fiat currencies where I'm definitely a long-term holder based on fundamentals. Also, I am a strong believer in Litecoin, and thus I do keep some coins there long term too. But that's not quite my point. What I'm trying to convey here is more about your overall attitude toward what you are doing, in trading or elsewhere. It is not about particular trading techniques or anything, it is more about being completely intolerant to situations in which you get caught unprepared, those which you don't consider, take into account, or allow for in advance. Indeed, you can't plan for all possible outcomes, but it is not about that either. It is about how you deal with the unexpected and unforeseen when it actually happens, when the shit hits the fan. |
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