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Author Topic: should I sell and re-buy?  (Read 2356 times)
MrJoshua
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July 06, 2011, 06:57:38 AM
 #21

I'm curious. How are you guys determining whether to buy or sell?

If there was some specific use, it might be easier to predict. Say, if BTC was used as currency in a popular game. You can get some idea of how valuable it will become.

Are you betting someone will eventually develop a killer app, to drive the price up?



Might I suggest a "wedge" approach.  Here's how a wedge works.  Pick a range below the current trade value if you are buying BTC, or above the the current value if you are selling BTC.  If you are an active trader with a position on both sides then you could do both.  Decide for yourself a plausible range that you think volatility might occur.  Say for example the price is $15, then you could decide that $11-$15 is a reasonable trading range.  Put in buy orders for say 10 steps:

(15-11)/10 = .4
So put in orders at: {14.6, 14.2, 13.8, 13.4, 13, 12.6, 12.2, 11.8, 11.4, 11}
Take half your cash, say $6000, so $3000 and put half of that at the lowest bid:

$1500 / $11.00 = 136.363636 BTC (so put in an order 136.36 @ $11)

Then half the amount of your bid each step up:

$750.0       / $11.4 = 65.7895 (order: 65.7895 @ $11.4 )
$375.0       / $11.8 = 31.7797 (order: 31.7797 @ $11.8 )
$187.5       / $12.2 = 15.3689 (order: 15.3689 @ $12.2 )
$ 93.75      / $12.6 =  7.4405 (order:  7.4405 @ $12.6 )
$ 46.865     / $13.0 =  3.6058 (order:  3.6058 @ $13.0 )
$ 23.4325    / $13.4 =  1.7487 (order:  1.7487 @ $13.4 )
$ 11.71625   / $13.8 =  0.8490 (order:  0.8490 @ $13.8 )
$  5.858125  / $14.2 =  0.4125 (order:  0.4125 @ $14.2 )
$  2.9290625 / $14.6 =  0.2006 (order:  0.2006 @ $14.6 )


Here's the principal: Never try to time the market

Everyone thinks they have a system to time the market, but no one does.  It is by definition a chaotic system, and not generally predictable.  So instead of trying to time a $6000 buy order at the perfect price at the perfect moment you hedge.  If the price goes down you pick up a little BTC, if it goes down some more no sweat you pick up some more.  If it breaks below $11 then you are happy because your buy price is closer to $11, then it is to $15 when you put in the orders.  And if it does break through your low price target, you still have half your cash to do another wedge (and you should only use half of that this time).  In fact, with this system you will never really be out of cash to buy more if it goes lower.  Your buying power will be lower, but then so will the price.  

Now if you have a little bitcoin, because you have done this wedge and the price is rebounding, or just because you are starting with bitcoins then the theory is the same in the upward direction.  Pick a range, split it up, and then double your sell order at each increment.  you can do both sides of the wedge at once centering at the current price if you have a position in both currencies, but remember to always split your holdings in half.

This is not necessarily the best system in any given situation, but it has a number of virtues.  It increases the odds that you will buy low and sell hi, without regard to your emotional state, and if enough people do it it creates a trading 'channel' in which it is difficult for the price to break out beyond the combined wedges of hundreds of traders. It also tends to leave you in an active trading position, so that you are not "all in" on one side of the exchange or the other.

The value of bitcoins is not a theory, predictions of it's failure are what is theoretical.
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July 06, 2011, 07:01:03 AM
 #22

I'm curious. How are you guys determining whether to buy or sell?

If there was some specific use, it might be easier to predict. Say, if BTC was used as currency in a popular game. You can get some idea of how valuable it will become.

Are you betting someone will eventually develop a killer app, to drive the price up?

I look at the cost of getting bitcoins by buying relative to mining (see charts in my sig).

There is a specific use, and bitcoin itself is the killer app: the storage and transfer of unseizable funds.  That someone was Satoshi, and his trick for making the funds non-seizable is decentralization.

The network difficulty has been going up, from under 1,000 to 1,500,000, because of demand.  And price has been going up, from under $0.10, because of demand for this killer app: bitcoin in and of itself. 

Bitcoin for buying stuff or using in games (like gambling) is more of a byproduct.

Bitcoin can store and transfer non-seizable funds.  The killer app we were waiting for is already here.

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