Hey jbreher:
I have been pondering this BTC order increments and spread idea for the past couple of days, and I thought that maybe there is a way that I could attempt to further clarify points of my above post,
I don't think I really disagree with anything in your post. I just find it non-optimal for me. Again, I put a high value on being able to enter offsetting trades (i.e. in the wake of a trade execution) without needing to think about it.
I am not really trying to convert you, either.
I just find it to be an ongoingly good talking point, and helps me also to attempt to think through why I do things the way that I do it, and maybe mystery talking through it might cause me to want to change the way that I do it, or at least to attempt to show the trade-offs that I perceive to exist based on engaging in such practices on a fairly regular basis.
My twelve second claim may be off a few percent one side or another, but it is pretty close to reality.
Might be an idea that I can continue to tease you about. It is an interesting concept.
So, other than step functions in changing my overall increment when price has done a several X, my increments are uniform, and there is a two increment space between my highest standing buy and my lowest standing sell. It just simplifies the thinking. Or actually eliminates the thinking, and simplifies the rote execution.
Surely there is some value in the set increments that causes you easily to know where to put the next order and the amount to put, too.
I have some rote aspects to my system, too, but from time to time, I tweak the parameters into a new kind of rote.. but maybe has a bit more flexibility than yours... Anyhow, I recall that I was with a nocoiner relative on several of those top BTC days in the end of June 2019, when the BTC price had broken above $10k and was proceeding relatively quickly to $13,880.
I was in a place where I did NOT have good internet access, but every once in a while I would get a signal, and I would look at the BTC price, and my no coiner relative was asking me about why I kept looking at the internet when the connection was so bad, and I was telling the relative about bitcoin and the placement of my various sell orders that were being filled, and I remember saying the location of an order because it was in my head, and then I would tell the relative that the order had filled, and said that I could relax because the next order was not until ______. The orders kept getting filled, which was quite surprising to me, but I was not in a place where I could reset the buy orders .. and I kept thinking that it was NOT really a BIG deal because the BTC price kept going in one direction, but I also knew that the backwards reaction could end up being violent, at some time too... so I was kind of keeping in my head where the buy orders would be set in the event that I were to be able to set them.
As for magnitude of increment, yes there is a balance between total profit, profit margin, and effort required.
Yeah but I am not just saying the space between the orders, such as each buy order is $250 apart, but I am also saying the spread between where you had sold and where you bought. I used to use a spread that was something like your, which was that the spread was twice the increments of the orders, but I found a pretty large increase in utility (for myself) to set the spread larger.. and then frequently when the price starts moving continuously in the direction that it had started to move, then even though the increments might be relatively small (as compared with the spread), the profits per order filled is so much greater that it causes me to feel like my time had been put to better use .. because so frequently bitcoin has shown itself to have a kind of frustrating tendency to overshoot and to keep overshooting for quite a while, which causes the larger spread to pay off way more than what value would have come from the few extra fills that would have come from the back and forth price movement (and fills) that would have happened with a smaller spread.
Your profit margin on a smaller increment is smaller than on a larger increment, but seeing as small movements in price happen more often than large movements in price (indeed, it is a power law distribution), overall profit is larger with a smaller increment.
I am not really sure if it is more profitable to have smaller spreads.. maybe slightly, but that is where I am thinking that my extra time (12 second per order) is just not worth it.
As the increment gets smaller, it is true that you start giving more away in cost of sales (trade fee), which at some point makes you question whether it is worth the effort. This is another reason to minimize the effort on any given trade, as that allows you to cull more total profit without feeling unduly burdened.
At least, it works for me.
Fair enough.
Incidentally... 0.5%? Ouch.
I have known quite a few low fees and even no fees, but a lot of that has gone away and even moreso gone away for someone starting out who might not reach some of the volume requirements that might cause fees to go down, and .2% had been quite common for a starting fee, but .5% seems to either becoming a common current going rate or at least with the passage of time, trading fees are tending to increase rather than decrease... and they are higher for people who are just starting out and with less trading volume, so I believe that it is better to presume some level of reasonable trading fees, and .5% seems to be both realistic and fairly easy to calculate...even if sometimes some of the trading fees can be less which keeping the trading fees down or lower does allow for a little bit higher profits, too.. but you do not necessarily want to go somewhere with low fees that might run off with your bitcoin, so there is that part, too.
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