...chained orders...
I have been experimenting with JJG (and jbreher)s chained order strategy on the BTC/ETH pair.
Perhaps I am being dense...but I am just not getting it.
It goes down, I am buying ETH every 0.001, ok fine, then it goes back up and I am selling ETH at the exact same prices...it looks like a total wash to me.
Did I miss something in the explanation?
Let's leave ETH out of this and talk about USD/BTC pairs, because even if you are attempting to use ETH to accumulate BTC, the pairing is a bit hostile to this thread...
1) chained order is a little bit of an additional concept that was raised by bitserve, and apparently Bitstamp has that service. Neither Jbreher nor I were referring to chained orders because we manually set our orders after they fill. We were talking more about incremental order setting or step setting.
2) example of incremental / step setting in the $8k price territory using a ball park of $500 buy/sell increments. Since, as I type, most recently BTC prices have been coming up from it's dip down to $6k, if you already had this system in place and you were buying .1 BTC on the way down, you would have bought every $500 at $8k, then $7.5k, then $7k, then $6.5k and then $6k. Then you would would have sold all the way back up in the opposite at $6.5k, then $7k, then $7.5k and then $8k. The only way that you accomplish the selling on the way back up is because you have reset all of your sell orders after the buy orders have implemented. In this case you have a $500 increment, but you have a $1k spread. So currently, since your most recent sell order had executed at $8k, your next sell order would be $8.5k, but after your $8k order filled, you reset your buy order at $7.5k.
3) The whole system is not a wash because you are able to either buy more BTC with the same amount of money or accumulate more money by the size of your orders. If you keep the exact BTC amounts, then you accumulate dollars; if you keep the same dollar amounts then you accumulate BTC (or you can do some combination of the two). Recently, I have been working on accumulating more
BTC with my orders.
4) The larger your amounts that you are trading, the more that you can notice that you are making money, and the larger your increments, the more that you make money too. Of course, there is no free lunch because there is risk on both ends. The larger your amounts that you are trading the more likely you could end up running out of money or btc when the price over shoots (which it does in BTClandia) and you could end up employing a kind of gambling rather than a sure thing. Furthermore, the larger your increments, the bigger risk that you run that they will not get filled, and you end up in a kind of trading limbolandia rather than bitcoinlandia.
5) I tend to recommend to folks to begin by setting your price increments really tight in order that you get a lot of practice, and to use really small amounts so you can get a hang of it. As you get better and more experienced you increase your amounts and your increments. For example, I started at 1.5% increments, which covers fees too that can be up to .25% on each end, that would take away .5% of your profits. Currently, I am trading in the 16% territory, which is quite a bit larger than I had planned, but part of that is due to the price dropping down after I converted from $800 to $1k increments (on the way up past $15k - which would have been 7.5% increments at that price point).
6) Ultimately, you need to practice in a way that customizes the whole situation to yourself in terms of your finances, your risk tolerance, your view of bitcoin, how much time you have in your schedule, your timeline for wanting your money etc. You also learn more about yourself by putting this into practice, too... because sometimes you might get emotional and want to do x, y or z, but later on reflection you can tweak your system when you make mistakes. Further, you may not even know what you are going to do by theorizing about it, but if you actually practice, then you get an opportunity to actually put a kind of exact action to your thoughts (and words)
7) Even Jbreher and i have had little skirmishes about the "right" practice, so in the end the actual practice may not matter as much as the fact that you are trying to tailor it to yourself, and perhaps trying to learn from yourself and others, and even my writing out my practice from time to time, helps me to learn from others and from myself.
You remove the "other side" order at the point you just filled, otherwise they will cancel out for sure.
I don't think that "remove" is the correct word choice. I find that when I am playing this whole system and it is going smoothly, then I am never really removing anything, but I am just adding. Once a buy order executes, then I add a sell order, and once a sell order executes, then I add a buy order.
On that same point, I tend to let the price come to me, and rarely do I tweak to reset the order and to expedite the process. Sometimes, I will change a whole bunch of orders at once which is a kind of removal and replace, but that is not part of the regular practice when the practice is "flowing" then I am only adding orders, not removing orders.
Example: you have orders each 500$.
Sell at 8500 on the way up, but remove "buy at 8500 on the way down". Next you'll buy will be at $8000.
Same for the opposite direction, buy at $8000 on the way down, remove "sell at $8000 on the way up".
I am not sure if your example helps.... O.k. we are going with a $500 increment, but if my order to sell at $8,500 executes, then I am not removing anything because I just add a buy order at $8k (because my previous sell had executed at $8k, and I could not do anything until either the next $8.5k sell order executed or the next $7.5 buy order executed. If the price had gone down rather than up, then my $7.5k order would have filled and I would have set a sell order at $8k rather than the buy order that I ended up setting because of the $8.5k sell order that ended up executing first.
Probably, we are saying the same thing, just phrasing it differently.
OK, so for the most part, they still cancel out, you are just harvesting at reversals.
If it runs straight up 4 sells, then straight down 4 buys you only have one "win"
You really win on each one, and the bigger your amounts the bigger your wins. Sometimes it is difficult to recognize the wins in the short run, especially on the way down when your whole BTC value might be decreasing. However, I frequently describe this whole process as stacking and a kind of insurance that really takes a lot of stress out of downside volatility (it does not take out all stress, but it can remove a lot of stress by providing a decent amount of insurance). Furthermore, if you play around with this a bit more, then you will see more and more that you can tweak it to achieve your goals and to increase your amounts, but it does not do service to the whole system if you increase the amounts too much in the beginning and you end up running out of money because you over did the situation. I personally only play with a small portion of my total BTC holdings. I sell about 1% of the value of my total BTC holdings for every 10% price rise (and that is the amount that I am playing with, for the most part)
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