Goomboo's Journal

[pwi]

News is perceived differently depending on the juncture of the market. It is not the cause, only the trigger.

Also, some of those things you listed did nothing, or they were reversed immediately. An example is the DHS/Dwolla news and the VCs/the conference. You could create a bigger list of events that ended up in that category.

In my short journey with the bitcoin market, I've noticed two trends with 'news'. There is the kneejerk reaction to the news, and the reality of the news. The reality sets in after the immediate impact and often has no bearing in the medium - long term. The kneejerk reaction usually impacts only short term expectation unless the reaction was rooted in reality. Both impact the savvy trader in their own way. The buy & hold group can optimize their position as a result, but are not likely to be impacted too greatly.

I like the maths mixed with a little social confidence or feeling . Realistically, I'm likely just fooling myself with both.

Goomboo, this is one of the premier threads in the forum. Thank you!       

[lebing]

I don't agree with you.  I believe that people overstate their ability to see the "effects" of developments in markets.  Having Bloomberg and CNBC on the trade floor makes you pretty skeptical of "cause and effect" in the markets.  "Markets are down 2% today on fears of Europe".  Really?  The reporters know the collective reason why hundreds of thousands of individuals bought and sold?  Even better is when the market ends the day positive following a loss: "Markets are up 1% today on European optimism".  Nonsense.  I've even seen the Bloomberg terminal spit two news articles in the same day telling me why the markets moved up and down, each just a rephrasing of the same news.  It's human tendency to assign a cause to something and when it comes to trying to say why trillions of dollars and hundreds of thousands of people collectively behaved a particular way is just silly.  It's human arrogance at its finest: "I know why it happened, I am smart and in control."

I was referring to the events which actually have the potential to move the market. Specifically the cases of bitcoin Reddit or wordpress accepting bitcoin will have a large affect on the user base and transactions over time, not only because of their effect individually, but in this case because it set a precedent for others to follow. I am talking long term fundamentals, not some BS that a TV station tries to cook up to maintain ratings.

[Goomboo]

Throughout the course of this thread, we have discussed the importance of creating, testing, and using discipline to execute your strategy.  In this post, I will detail a key component of trading systems, which has received very little attention.

For your trading system to be a success, it really has to make sense.  If you are unable to describe your method on the back of a business card to the average person in less than 30 seconds, your system is probably nonsense.  Take for example the following situation in which you are asked to explain your system to a potential investor:

Situation 1 – The Moving Average Crossover
“So, what is your trading method?”

“I trade a moving average crossover.  Basically, I have a theory that price increases and decreases in relatively predictable trends, so I try to be long when price is increasing on average and be short when price is decreasing on average.  I have found that this method allows me to almost always be positioned with the trend.  I have backtested it, and it has proven profitable across nearly every financial market for the past 150 years.”

Situation 2 – The Fibonacci Gann Master
“So, what is your trading method?”

“I trade Fibonacci retracements, expansions and Gann angles.  I have a theory that there is a hidden order to the markets and price moves in the same mathematical pattern that a few things in nature exhibit.  Basically, it’s super complex but don’t worry, I’ve read a book or two.  If you’re interested, I’ll allow you to pay me for my analysis…but be warned, I am not actually making money using it.  Also, I haven’t actually tested it, so…”



Where would you entrust a $100,000,000 investment?

Throughout my life, I have found that the true masters of fields are those who are able to express advanced concepts in terms that the common person can understand.  Trading is no different.  Without fail, the most successful traders I have met have been those who are able to take their decades of experience and logically present their method in less than 30 seconds to the listening ear.

The serious trader should ask himself if his method actually makes sense.

[Frozenlock]

Goomboo, what has driven you towards Bitcoin?

Was it some kind of upward trend? Price volatility?

[Rampion]

Goomboo, what has driven you towards Bitcoin?

Was it some kind of upward trend? Price volatility?

I guess an asset which price was $0.079 on May 2010 and $266 on April 2013 has quite an appeal for traders

[Frozenlock]

Goomboo, what has driven you towards Bitcoin?

Was it some kind of upward trend? Price volatility?

I guess an asset which price was $0.079 on May 2010 and $266 on April 2013 has quite an appeal for traders

Except he began trading Bitcoin way before $266.

[Rampion]

Goomboo, what has driven you towards Bitcoin?

Was it some kind of upward trend? Price volatility?

I guess an asset which price was $0.079 on May 2010 and $266 on April 2013 has quite an appeal for traders

Except he began trading Bitcoin way before $266.

$0.079 to $32 is good enough

[Goomboo]

Goomboo, what has driven you towards Bitcoin?

Was it some kind of upward trend? Price volatility?

I'm attracted to the volatility and profit potential of BTC trading.

[Goomboo]

In this thread, we’ve covered a variety of different topics.  Each of these topics combines into a simple, central truth of trading.  The job of a trader is very straightforward: make the value of your account increase through time.  All of the activities which a trader participates in - strategies, techniques, risk management, psychological discipline – are all about making the line go from bottom left to top right.

This is the sole objective of the trader: profit.  A good trader is not concerned about being “right” in his market call.  A good trader does not care about selling the top or buying the bottom.   The great trader gets rid of his ego and focuses on what works: trading with an edge.

So what is an “edge”?  An edge is quite simple really: trading with a positive expectancy.  Rather than boring you with math and statistics, I’ll present two hypothetical traders.  Which trader do you think has an edge?  Which trader would you let manage your hard-earned money?

Trader A
-   Wins 70% of his trades
-   The average winning trade earns $100
-   The average losing trade results in a $500 loss

Trader B
-   Wins 30% of his trades
-   The average winning trade earns $1,000
-   The average losing trade results in a $100 loss

At first glance, you may think “Trader A rocks – he’s right 70% of the time!”  Wrong.  The truly successful trader is one who is able to structure his trading in such a way that even if he loses the majority of the time, his winners are of such a size that they more than compensate for strings of losses.  The chart below powerfully demonstrates this concept.  This chart is just a simple random simulation of the two traders above.  It shows the amount of money each trader has in his account after 100 trades.



So I ask you again: which trader would you trust with your money?  Can’t you see that trading really isn’t about being right?  It’s about making money.  Check your ego at the door and stop trying to be right in calling market direction.  After all, Trader A is right about market direction 70% of the time.  He's the guy who sold at the top and bought at the bottom - the market guru!  But at the end of the day, he's dwindling away his money because he doesn't understand the simple truths of trading.

Would you rather look smart or make money?

Oh and by the way, Trader B lost 14 trades in a row at one point.  Do you have the discipline to continue trading your system even in the face of 14 consecutive losing trades?  Most don't - but then again, the majority of people lose money in the markets.

[smoothie]

In this thread, we’ve covered a variety of different topics.  Each of these topics combines into a simple, central truth of trading.  The job of a trader is very straightforward: make the value of your account increase through time.  All of the activities which a trader participates in - strategies, techniques, risk management, psychological discipline – are all about making the line go from bottom left to top right.

This is the sole objective of the trader: profit.  A good trader is not concerned about being “right” in his market call.  A good trader does not care about selling the top or buying the bottom.   The great trader gets rid of his ego and focuses on what works: trading with an edge.

So what is an “edge”?  An edge is quite simple really: trading with a positive expectancy.  Rather than boring you with math and statistics, I’ll present two hypothetical traders.  Which trader do you think has an edge?  Which trader would you let manage your hard-earned money?

Trader A
-   Wins 70% of his trades
-   The average winning trade earns $100
-   The average losing trade results in a $500 loss

Trader B
-   Wins 30% of his trades
-   The average winning trade earns $1,000
-   The average losing trade results in a $100 loss

At first glance, you may think “Trader A rocks – he’s right 70% of the time!”  Wrong.  The truly successful trader is one who is able to structure his trading in such a way that even if he loses the majority of the time, his winners are of such a size that they more than compensate for strings of losses.  The chart below powerfully demonstrates this concept.  This chart is just a simple random simulation of the two traders above.  It shows the amount of money each trader has in his account after 100 trades.



So I ask you again: which trader would you trust with your money?  Can’t you see that trading really isn’t about being right?  It’s about making money.  Check your ego at the door and stop trying to be right in calling market direction.  After all, Trader A is right about market direction 70% of the time.  He's the guy who sold at the top and bought at the bottom - the market guru!  But at the end of the day, he's dwindling away his money because he doesn't understand the simple truths of trading.

Would you rather look smart or make money?

Oh and by the way, Trader B lost 14 trades in a row at one point.  Do you have the discipline to continue trading your system even in the face of 14 consecutive losing trades? Most don't - but then again, the majority of people lose money in the markets.

Solution: don't trade.

Or if you trade trade very infrequently and more on long term cycles.

edit: You may want to include dates on your X-axis.

[EmBison]

The date range and point values aren't really necessary for his example, he's just exemplifying the circumstance of higher losses than gains, despite a higher gain frequency.

Switching to a longer cycle (daily vs. hourly, as an example) will give the proposed EMA cross-over system here more data to form opinion on trends, which would give you a safer number of wins. You wont catch tiny breakouts as often, but your system wont be fooled by nearly as many fake cross-overs either.

But as has been the tone of the thread: finding a risk level you're comfortable with as compared to a win frequency you're happy with.

[scalper]

Oh and by the way, Trader B lost 14 trades in a row at one point.  Do you have the discipline to continue trading your system even in the face of 14 consecutive losing trades?  Most don't - but then again, the majority of people lose money in the markets.

Is it discipline to continue trading after 14 consecutive losing trades or is it a lack of self-awareness? Is the losing due to "randomness" or due to changing market conditions that erode system edge? Trading isn't like poker or gambling where the probability is fixed (for example: knowing that there are 52 cards, 13 of each suit, therefore you have X in the deck to make a flush, etc). The game can change the next day.

If you lose a coin flip by calling tails 100 times after 100 attempts, you're probably a sucker if you still think it's a fair coin.

Just something to think about. No right answers...

[Rampion]

Goomboo: do you use a bot? Could you share your config and explain it?

Sorry if these questions have been answered before, I couldn't find them.

[EmBison]

He's mentioned before that he trades manually, which I'm sure is the safer route, especially when you consider the amount of tweaking and tuning a trading system requires to remain relevant to the changing market.

[hugolp]

He's mentioned before that he trades manually, which I'm sure is the safer route, especially when you consider the amount of tweaking and tuning a trading system requires to remain relevant to the changing market.

How do you trade manually when Bitcoin markets are 24h?

[nii236]

Well he trades once a day he said. So whenever he wakes up, he decides whether or not to do a trade.

[N12]

He's mentioned before that he trades manually, which I'm sure is the safer route, especially when you consider the amount of tweaking and tuning a trading system requires to remain relevant to the changing market.

How do you trade manually when Bitcoin markets are 24h?

Daily bar always closes at the same time. Before that, a crossover isn't confirmed. With hourly bars, it would be different of course.

[Rampion]

Well he trades once a day he said. So whenever he wakes up, he decides whether or not to do a trade.

In that way is quite difficult to catch the hourly EMAs intersecting, there are times when they intersect more times per day, and the spreads are quite small. A bot would be infinitely more effective to follow Goombo's strategy - also because bots have no emotions whatsoever, and hence they always stick to your predefined strategy (which is a must if you want to profit in the long term).

[Rampion]

He's mentioned before that he trades manually, which I'm sure is the safer route, especially when you consider the amount of tweaking and tuning a trading system requires to remain relevant to the changing market.

How do you trade manually when Bitcoin markets are 24h?

Daily bar always closes at the same time. Before that, a crossover isn't confirmed. With hourly bars, it would be different of course.

Goombo said in the OP he uses hourly charts, I guess he changed his strategy - obviously there's no point in using hourly candles to find out if the daily EMA are crossing.

EDIT: here you have the OP

Hi all, Goomboo here!

I'm a Forex / Bitcoin trader and I thought I'd open a thread in which I share my method / trades.

I have tried trading thousands (literally, thousands) of trading strategies for the past 6 years, but I have found that the more simple and less elaborate I make my trading, the more profitable it becomes.  The system I use for Bitcoin is very, very simple and straight forward.

I trade a 10 and 21 exponential moving average crossover.  When the 10 crosses over the 21, I buy.  When the 21 crosses under the 10, I sell short.  I use hourly charts on www.bitcoincharts.com and guarantee that there is liquidity to prevent slippage on bitcoin.clarkmoody.com.



I have a small account in the Bitcoin market, which I hope to grow through trading!  If anyone makes money trading and they take a signal based on my recommendation, please consider donating a small amount of the profits!

[Rampion]

And BTW, here you have the last three months with daily candles and 10 and 21 EMAs as per Goombo's strategy:



Pretty useless, isn't it?