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Author Topic: Goomboo's Journal  (Read 219718 times)
Goomboo
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February 24, 2012, 11:04:17 PM
 #441

Hi Goomboo, thanks so much for posting this epic thread. I am relatively new to all this, so please excuse my ignorance if my questions are a bit basic. I would really like to ask them though, as I am determined to never use a method which I do not fully understand.

Firstly, the exponential moving averages; the values are 10 and 25. But 10 and 25 what? Is it, as I suspect, 'ticks' which to my understanding is the time period which you select - in this case hours?

Secondly, you mentioned in your original post about checking for liquidity. I understand that this means that you want to make sure there is enough capability of movement in the market such that you don't end up posting a buy or sell order which takes a large amount of time to be accepted, exposing you to the risk of market movement against you in the meantime. Could you please explain how you read the charts related to the website that you linked to in order to determine if there is sufficient liquidity to cover your moves?

I am in BTC more for the fun aspect and because I believe in the technology than to necessarily make a large profit; I have only invested a small amount which I can afford to lose. But I sincerely hope I can make a nice profit so I can give you a generous tip not only for your great advice, but also for your general ethos; one thing I have noted about this site is that people are almost jumping of the roof of the exchange / cracking champagne bottles just about every few minutes depending on the market. It's really refreshing to hear from someone with a level head and real world experience.

Cheers.

Thank you very much for the compliments and I'm more than happy to answer your questions.  We all were new to it at some point, so don't worry :p

1.  The moving average number just says how many data points it is using to calculate the average - in our case closing price of candles (hours).  The number 10 means that it is an average of the 10 past closes.  It's an exponential average which means (skipping the math) that it gives a more "smooth" picture.  For a comparison, I'd look at a simple moving average versus an exponential moving average of the same period, side-by-side and you'll get the "aha!" moment.  The idea behind using a moving average is that it gives us a picture of the trend, or which way prices are tending to travel at that moment.

2.  Liquidity is a fancy finance word that basically is about quantity, not time.  It's an electronic exchange, so when I click "buy", it should be executed pretty much immediately, so time is not really what I'm worried about.  If you look at that website (http://bitcoin.clarkmoody.com/) it shows you the amount of bitcoin you can buy or sell at certain prices.  I'm worried about a concept called slippage, which I'll explain in the below example/picture.

Let's say I want to buy 1,000 BTC right now.  For me to buy, there has to be someone willing to sell me these BTC - and I need to know what his price is.  Since I'm trying to trade for a profit, the price I receive (the average price I pay per BTC), is important because after all my profit is just the difference in my entry / exit prices minus commissions.  Below is a screenshot of the liquidity in the market and the current price at Mt. Gox.  That price at Mt. Gox is fine if you are just curiously looking at BTC, but if you are actually trading them, you need to know what your trading price will be.  For example, to buy 1,000 BTC, you would end up paying an average of around $5.00 per BTC.  This is called slippage - you see the price is $4.98, but your trade will actually cost of $5.00 per coin - you slipped!

Putting it in fancy finance words - liquidity helps prevent slippage.




I wish you the very best in your trading and I am very happy to see that you are doing the research and protecting your hard-earned money.
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February 25, 2012, 12:06:57 AM
 #442

Goomboo, there was a book recommendation you made in this thread a while ago.  What was it?
Goomboo
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February 25, 2012, 12:13:14 AM
 #443

Hey all,

I decided to backtest the hourly strategy on hourly data for the past 5 months (as much data as I could easily get my hands on).  This is the 10 / 21 exponential crossover from September until now.

Below is a summary of how the signals have performed for the past 123 trades.  As always, remember that the dollar values are meaningless (this is simply trading a flat 100 BTC every trade).  Your actual performance should vary with your risk-management methodology.

My key takeaways:
-34% success rate
-.83 trades per day on average
-29 hours in an average trade
-Both long and short profitable across the time period studied






Goomboo
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February 25, 2012, 12:37:43 AM
 #444

Goomboo, there was a book recommendation you made in this thread a while ago.  What was it?

I've been thinking about making a list of great books for interested traders.  This is as good a time as any.

I believe I have only mentioned Trading Systems that Work, Technical Analysis Using Multiple Timeframes, Reminiscences of a Stock Operator, and Technical Analysis: The Complete Resource for Financial Market Technicians.


A list of books I've found to be very good:

Discretionary trading
Technical Analysis Using Multiple Timeframes
High Probability Trading
Technical Analysis: The Complete Resource for Financial Market Technicians

Systematic Trading
Trading Systems: A New Approach to System Development and Portfolio Optimisation
Trading Systems that Work

Psychology of Trading
The Psychology of Trading: Tools and Techniques for Minding the Markets
Trading in the Zone: Master the Market with Confidence, Discipline and a Winning Attitude

All-Time Classics
Reminiscences of a Stock Operator
Extraordinary Popular Delusions and The Madness of Crowds
Market Wizards: Interviews with Top Traders
The New Market Wizards: Conversations with America's Top Traders

Investing
The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel
Rule #1: The Simple Strategy for Successful Investing in Only 15 Minutes a Week!


I really wish someone had handed me this reading list years ago - I think it would have taken years off of my learning curve.
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February 25, 2012, 04:40:12 AM
 #445

Also check out The Mathematics of Money Management.  In fact if you google search it then you will find a mediafire link for download.

Introducing constraints to the economy only serves to limit what can be economical.
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February 25, 2012, 11:06:23 AM
 #446

Exited my long trade. 12+% profit on this one. Grin
Now in a short trade @ 4.92 on bitcoinica. Will also give the multiplier strategy a try.
This means my trade is now at multiplier 1x. If I make a loss on this trade I will use the 2x on the next one.

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February 25, 2012, 04:51:26 PM
 #447

so Op did you sell ? we got a X there

I think OP means original poster (me?)...and yeah there was a crossing there if that's what you mean.
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February 25, 2012, 05:02:34 PM
 #448


(me?)
yes

yeah there was a crossing there if that's what you mean.
so by your method one should sell/short, the question is did you make that ? yes/no, if you dint sell/short, why ?

No - I trade the daily timeframe since I don't have the time to make 1 trade a day.

In that respect, I've been short for 14 days from around $6.00.
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February 25, 2012, 05:11:50 PM
 #449

based on this ?

No, I used the SMA to trigger my entry.
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February 28, 2012, 08:33:41 AM
 #450

Question for you guys.
Do you trade a crossover like this? Market is only moving sideways and the crossover is very weak imo.
Don't really see the crossover representing a change in trend here so moving my position on bitcoinica would be a waste of money.


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realnowhereman
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February 28, 2012, 09:29:08 AM
 #451

Question for you guys.
Do you trade a crossover like this? Market is only moving sideways and the crossover is very weak imo.
Don't really see the crossover representing a change in trend here so moving my position on bitcoinica would be a waste of money.

If we're talking about the actual crossover and not the lines touching, and if I understand the system correctly, then yes you should trade it.

The reason is that you cannot tell which crossover is going to be the last one before the market starts following a trend again.  If you're the wrong side of it when it goes then you miss the profit that is available (this happened to me in the 4.5 -> 4.8 jump, I'd paid my dues in terms of losses on sideways moves, but then was the wrong side of it when it came because I followed the reasoning you are offering).

It's painful to keep trading on a sideways market; watching your money vanish as you make loss after loss.  However, that's the only way you can catch the profit when it eventually comes.

I know what you mean about bitcoinica though -- the spread is so huge that a sideways market is really costly.  I'm hoping that when a large movement happens that that profit will cover all the losses and then some.

To be honest, I'm not sure it's possible to profit on Bitcoinica without a huge dose of luck.  Especially at the moment with an indecisive market and low volumes.

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February 28, 2012, 11:54:02 AM
 #452


Especially at the moment with an indecisive market and low volumes.


Does anyone have any theories on why this is happening?
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February 28, 2012, 02:23:14 PM
 #453


Especially at the moment with an indecisive market and low volumes.


Does anyone have any theories on why this is happening?


Because cats don't like mondays?
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February 28, 2012, 02:29:05 PM
 #454

Ouch, these sideways crossovers are drip-dripping my money away.

Is everybody else bleeding as much as I?

Does anyone have a strategy for pricing their trades after a crossover that would make this less painful?

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February 28, 2012, 02:43:57 PM
 #455

When the market is moving sideways I prefer to simply wait.
Although my trading strategy is larger cycles anyway (going by investor emotions cycles).

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stochastic
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February 28, 2012, 06:23:51 PM
 #456

based on this ?

No, I used the SMA to trigger my entry.

so many people on here have been using the EMA crossover and yet the guru already changed his strategy.  Next time before trading, people should do their own backtesting and not choose a trading strategy based on a few trades of an anonymous person.

Introducing constraints to the economy only serves to limit what can be economical.
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February 28, 2012, 06:32:59 PM
 #457

based on this ?

No, I used the SMA to trigger my entry.

so many people on here have been using the EMA crossover and yet the guru already changed his strategy.  Next time before trading, people should do their own backtesting and not choose a trading strategy based on a few trades of an anonymous person.
you are definitely to impatient, as for dealing with any possible strategy out there Smiley

using this, or any other strategy, of course you will be loosing - the question is 'how much and how often?'
you loose on unnecessary swaps, when the market is still.
but following the trend gives you a great advantage when the market is actually moving...

don't blame the guy for giving you hints.
he doesn't promise you to win anything - nobody knows what the market will do in the nearest future, neither does 'the guru'.

but he doesn't sell a bullshit, and I appreciate anything he's said. thank you goomboo!

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February 28, 2012, 07:29:40 PM
 #458

depends:

usualy i ignore them.
i don't ignore them, if MACD-cross-signalline gave a valid signal and divergence/convergence confirm it.

if i whould have sticked to my system and would not have emotions disturb it and would not need to sleep and have the automated trading system already working me and friends are working on, then i would have traded much more profitable Smiley

.. it took me quite some time understanding technical analysis and getting to adjust my system to the bitcoin market.





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February 28, 2012, 09:43:26 PM
 #459


Especially at the moment with an indecisive market and low volumes.


Does anyone have any theories on why this is happening?


Large groups of people following semi-competing strategies might have something to do with the indecision.

In the game Rock, Paper, Scissors, how often do you think you'd win when the opponent knew what you were going to present, every time?

1000 people blindly following EMA is one thing, but you knowing that 1000 people are blindly following EMA is another, and something you can take advantage of. Low volume allows that.

If you don't like what's happening in a sideways market, switch to a wider view and bet based on that (pick higher numbers than 10/25, for example, for a longer term picture).

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February 28, 2012, 10:20:21 PM
 #460

i don't think the actual market has anything to do with this topic.
i think bitcoin is much bigger than your pity speculation investments and the price much stronger than your consecutive inconsequence to follow any strategy you could think of. Tongue

Check out gocoin - my original project of a bitcoin client written in Go, with some unique features.
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