Hey all. So i want to start trading, but i have
almost no idea what to do. So i would love if someone would disscus that with me and eberyone else
So, to start trading, i need site for that. I would want to do altcoins/bitcoins trading, i used to know one site but can't find it anymore...
And then, any tips here for me and other newbies? Buy cheap sell expensive is not tip i search for
What mistakes to avoid, what to never do etc.
Thanks everyone!
Let me start with this: crypto trading is insane. Most coins have such a low market cap that just one or a few players can drive the price up or down significantly. It's the Wild West of economy: buying a variety of dormant coins and then waiting for the next pump may actually be a viable strategy. I can't decide if trading crypto is the best or the worst idea, to be honest. With this out of the way...
Read some books from actual traders. For one, Nassim Taleb's "Fooled by Randomness" can help to develop some "understanding about the misunderstandings" about trading (among other things in life, I may add.) Read the classics: Reminiscences of a Stock Operator, Market Wizards. Listen to Podcasts, too: Better System Trader and Chat With Traders are really good.
Avoid crap from those who are not traders. Or those who went bust, which includes Nobel laureate economists behind the Modern Portfolio Theory, who piloted LTCM to the ground, prompting a few banks to bail them out just to save the world economy; "smart money" isn't all that smart, after all. In general, most who write about trading have never traded, haven't traded for decades, or went bust; do yourself a favor and ignore whatever they say (no matter how famous they are; it's all about marketing, after all.)
Investopedia is another cute thing that you may not want to bet your life on. They have really good content but they are trying to please everyone, so they write nice things just about anything, which includes all of the idiotic mystical bullshit that happens to be popular because people
love idiotic mystical bullshit.
As for
this forum, it would be hard to find more immature, ignorant, and generally abysmal trading advices than here. You have been warned.
In fact, this post, however introductory and simple, is still complex enough that I doubt many here will even try to understand; it's kinda sad, actually.Learn about fat-tailed probability distributions: the difference between a left tail and a right tail, why that matters, and how they are related to the two two fundamentally opposing approaches: trend following and mean reversion.
- left tail, mean reversion, buy low/sell high: your upside is limited, your downside is unlimited, so you'll win small amounts quite often, but you'll lose a lot every once in awhile; the challenge is to compound fast enough to recover from the last bust
- right tail, trend following / momentum trading, buy high/sell higher: your downside is limited, your upside is unlimited, so you'll slowly bleed, then you'll win a lot; the challenge is to not bleed out before the next big win
Any actual strategy is probably a mix of those two; read
Laurent Bernut's post from Quora, because he explains it really well, and his "Common Sense Ratio" ties up the two sides very nicely: it has two components, one which measures the mean reversion ("Gain to Pain Ratio") and one that measures the trend following ("Tail Ratio") component of a given strategy.
Interestingly, a Quantopian study (
here's a summary) mentions the Tail Ratio as the most dependable predictor of out-of-sample results for the numerous strategies they verified from their community. This also suggests that trend following is a more robust approach than mean reversion.
As for mean reversion, one sure way to lose a lot of money is "doubling down" on your losses, hoping the price will turn around. Let me break the bad news: if the price is crashing, there's usually a reason for it, and the best thing you can do is to get out of that market ASAP to cut your losses. Stop losses, set before you need them (which means, set before you
enter), can help you with that. That is, if you don't override them (which you shouldn't, ever.)
Forget about "predicting" the price (and don't believe anybody who says they can; they are charlatans, each and every one of them).
Embrace the uncertainty of the market (which is the only way to stay out of excessive risk), and learn to think in terms of probabilities instead of absolutes. You can never be certain about winning, but you can learn to recognize the moments when you have a slight edge. The smaller your edge, the less of your capital you can risk on it; check out the Kelly criterion, though it's not always directly applicable (it works with a normal distribution, but the markets are far from the Gaussian, so it's better to stick with "fractional Kelly.")
Trading isn't "art." We all know artists can't explain why they do what they do, why it works and why it isn't, they go hungry more often than not, and they can't handle money even if it's poured down on them. It's not supposed to be fun, either.
Trading for a good trader is like sex is for a good prostitute: business.Chart patterns: some (like the above mentioned higher highs / higher lows) are obviously good, but the most are just fancy bullshit. "Heavenly Cloud Cover" my ass; excuse my French. Fibonacci everything (retractions, fans, arcs, whatnot), Gann theory, Elliott waves: mystical bullshit without exception, with zero edge.
Many have started out with testing whatever was possible to test (how would you formally define a particular "wave"? ... exactly!) to see if they work, you know, just in case, but: nope. Feel free to waste your time and money on them, but you have been warned.
Forget about magical indicators or looking for the "perfect" entry, and
focus instead on what's really important: position sizing, risk management, money management. Exits matter: that's where everything is decided; therefore, never trade without stop losses.
Do check out Laurent Bernut's stuff. I can't emphasize this enough: they are probably the best intro to the most important aspects of trading. He was the dedicated short-seller for Fidelity ("the" Fidelity) for the Japanese stock market (the longest bear market in recorded history) for 8 years; if that doesn't convince you about him, nothing will. Links:
You may also want to check out Ed Thorp, Andreas Clenow (
http://followingthetrend.com/; he hates bitcoin, btw), Ernie Chan. But I'm sure you'll find many others who are worth to listen to.
Stick with simple signals: complex is unreliable, simple is robust. Here's a simple one for starters: higher highs and higher lows suggest the price has a higher chance to keep going up, and lower lows and lower highs suggest the opposite. So, start with simple and obvious stuff like that, then mold it into a useable system that you can verify.
You need a system. That is, if you don't want to lose all your money.
Don't buy strategies; those are scams. Learn enough about trading so you can build your own strategy (yes, it will take time.) Learn how you can test it (google "walk forward testing", and let me again remind you of the Tail Ratio and the Common Sense Ratio), and if it's working, verify it for some time while only paper trading it (i.e. you pretend you're trading, and log the imaginary results), and only if it's still working should you start trading.
It's a long road: trading is not for the impatient; losing is.As for a site with a large variety of altcoins, Poloniex is not too bad. However, if you want to trade for a living on the long run, you may want to check out larger markets. Crypto is tiny, so the capacity of any strategy will be pretty limited. As comparison, the
daily FOREX volume is several hundred times as much as the crypto market cap, and there are over a hundred
individuals around the world with a higher net worth than all crypto combined. This may change, eventually, but we're far from it yet.
