Goomboo's Journal

[Goomboo]

Those who are trading on the hourly should have closed a short for a +5% profit and opened a new long position.

The last three trades were:

1.  Long Feb 1st - 3rd = +5%
2.  Short Feb 3rd - 7th = +5%
3.  Open long Feb 7th ~ unrealized PNL +1%

These percentages are actual price change, not change in account balance.  With leverage, these numbers will be multiplied accordingly (+5% * 2.5 = 12.5% return on account).

As always, leverage is a tool for risk management.  Use leverage consistent with your system.

[1714879712]

1714879712

[1714879712]

1714879712

[1714879712]

1714879712

[Goomboo]

There are a few things that I have been reticent to talk about, simply because I didn't want the general public to know the stuff that "we" know.  However, in the spirit of this thread - helping people to stop losing money - I have decided to share a little.

One of the main and widely-talked about issues is "the manipulator".  After watching time and again as individuals have "the hammer" dropped on them, I figured I might as well shed a little light on what may be happening.  There are several different strategies being used by a few individuals with "lots" of buying power, so I'll talk a little about the main strategy I see on a daily basis.

The manipulator is basically a large trader who is repetitively practicing a strategy we call "the hammer".  It's a simple strategy of deception and can lead to a "crack" in prices.  Prior to applying a systematic strategy to the BTC market, I used to trade with him and make a decent profit.

The Hammer (Long)
1.  Big trader posts large volume on the ask side
2.  Individuals see the ask and try and get in front of him by selling/shorting/lowering their offers
3.  He is simultaneously buying at the bid from the small guys
4.  As soon as selling volume dries up, he pulls his ask and enters long, causing a jump in prices
5.  He sells to the people who buy behind him, scalping a profit

How to Play the Hammer (Long)
1.  Watch the volume from the small traders that are trying to trade in front of him
2.  When the volume dries up and he pulls his ask - enter long
3.  If he doesn't follow soon with a large trade, exit your trade at a scratch or loss

There are several different variants of this strategy, but as a general rule of thumb - if you see a fake bid or ask, the markets are probably going that way soon.

This is more for informative purposes than actual trading advice.  See how subjective this is?  In my opinion, this type of trading isn't scalable and it doesn't possess long-term profitability, which is what this thread is about.  My suggestion is that you take this information as a little "FYI" and stick to a systematic and tested strategy, ignoring the games that go on in the order-book entirely.

[StewartJ]

There are a few things that I have been reticent to talk about, simply because I didn't want the general public to know the stuff that "we" know.  However, in the spirit of this thread - helping people to stop losing money - I have decided to share a little.

One of the main and widely-talked about issues is "the manipulator".  After watching time and again as individuals have "the hammer" dropped on them, I figured I might as well shed a little light on what may be happening.  There are several different strategies being used by a few individuals with "lots" of buying power, so I'll talk a little about the main strategy I see on a daily basis.

The manipulator is basically a large trader who is repetitively practicing a strategy we call "the hammer".  It's a simple strategy of deception and can lead to a "crack" in prices.  Prior to applying a systematic strategy to the BTC market, I used to trade with him and make a decent profit.

The Hammer (Long)
1.  Big trader posts large volume on the ask side
2.  Individuals see the ask and try and get in front of him by selling/shorting/lowering their offers
3.  He is simultaneously buying at the bid from the small guys
4.  As soon as selling volume dries up, he pulls his ask and enters long, causing a jump in prices
5.  He sells to the people who buy behind him, scalping a profit

How to Play the Hammer (Long)
1.  Watch the volume from the small traders that are trying to trade in front of him
2.  When the volume dries up and he pulls his ask - enter long
3.  If he doesn't follow soon with a large trade, exit your trade at a scratch or loss

There are several different variants of this strategy, but as a general rule of thumb - if you see a fake bid or ask, the markets are probably going that way soon.

This is more for informative purposes than actual trading advice.  See how subjective this is?  In my opinion, this type of trading isn't scalable and it doesn't possess long-term profitability, which is what this thread is about.  My suggestion is that you take this information as a little "FYI" and stick to a systematic and tested strategy, ignoring the games that go on in the order-book entirely.

As always Goomboo, very insightful.

Justifies my longer trend trading strategy even more.

[RyNinDaCleM]

...

The Hammer (Long)
1.  Big trader posts large volume on the ask side
2.  Individuals see the ask and try and get in front of him by selling/shorting/lowering their offers
3.  He is simultaneously buying at the bid from the small guys
4.  As soon as selling volume dries up, he pulls his ask and enters long, causing a jump in prices
5.  He sells to the people who buy behind him, scalping a profit

How to Play the Hammer (Long)
1.  Watch the volume from the small traders that are trying to trade in front of him
2.  When the volume dries up and he pulls his ask - enter long
3.  If he doesn't follow soon with a large trade, exit your trade at a scratch or loss

There are several different variants of this strategy, but as a general rule of thumb - if you see a fake bid or ask, the markets are probably going that way soon.

I have actually been observing this since about Mid August or so. I was playing opposite the hammer. I would sell at a point where I thought he (+panic) would spike to, then throw a buy in where he started, catching the panic sells after the spike. Did pretty well for a couple months, at least while he made it obvious by putting up ridiculous walls. Then the strategy changed a bit, which is to be expected. You can't repeat the same play for too long or someone is bound to pick it up.

Thank you for confirming my suspicions!  

[Goomboo]

Bitcoinica - Another thing to keep a cautious eye on

This is just a quick observation about Bitcoinica and how they can lose your money - even if you don't trade.  Bitcoinica isn't purely a broker or an exchange, but rather a large trader.  By allowing individuals to use the "reserves" of Bitcoinica, the business Bitcoinica essentially becomes a large trader betting on movements in the market.  Also, since it actually trades the underlying product rather than a derivative, liquidity can become a serious issue.

Extremely Dramatized Walk-Through of Bitcoinica's Collapse
-Bitcoinica has $100,000 of reserves and $10,000 of customers' deposits
-All customers enter long, fully-levered, at an average price of $5.00 per coin (the trader Bitcoinica is now long 22,000 BTC)
-The market is very thin on the buy-side and a large holder of BTC decides to sweep the book by selling all of their coin
-The price moves from $5.00 to $1.00 per BTC - meanwhile Bitcoinica algorithmically begins liquidating their customers' positions
-Bitcoinica gets an average fill of $.50 per BTC.  The company / trader Bitcoinica now has $11,000 total account balance, losing all of the customers' money and 90% of their reserves

So essentially what is happening here is that the "reserves" are actually capital being used in a trading strategy - even if Bitcoinica doesn't know it.  Sure, this is a "tail-risk" event, but in this type of market, it certainly is a possibility.

Practical takeaways - only put speculative money with Bitcoinica.  Personally, I move money into Bitcoinica to short and out to Mt. Gox when I go long.  This isn't exactly how Bitcoinica works - the point is to say that since you are using someone else's money to trade a product in size, if the market can't accept the size you trade, you can lose more than your initial investment.  If you lose more than your initial investment, this means you are losing someone else's money.

[Goomboo]

As always Goomboo, very insightful.

Justifies my longer trend trading strategy even more.

Thank you for the kind words - I wish you the best in your trading.

I've found that the larger the timeframe I use, the more profitably I trade!

[Goomboo]

I have actually been observing this since about Mid August or so. I was playing opposite the hammer. I would sell at a point where I thought he (+panic) would spike to, then throw a buy in where he started, catching the panic sells after the spike. Did pretty well for a couple months, at least while he made it obvious by putting up ridiculous walls. Then the strategy changed a bit, which is to be expected. You can't repeat the same play for too long or someone is bound to pick it up.

Thank you for confirming my suspicions!  

Yeah, I felt that that was heyday of this strategy, but you'll still see it every few days and when activity picks up in the market.  There are many ways to trade it and yeah, it essentially just goes in a circle as the market adapts to it.

[ineededausername]

Mogambo Guru is a riot, highly recommended

+1. I learned more from him on money and banksters than from the university.

This is what I found when I googled him:
http://www.mogamboguru.com/facts.html


(haven't really read his work yet, but the "mogambo facts" page is awesome whether you agree with him or not)

[gewure]

thanks

[notme]

Good description of Bitcoinica's legitimate issues.  Thanks.

[Goomboo]

Optimization and the 10 & 21 moving average crossover system

In order to determine the robustness of our trading system, I have decided to see how our parameters hold up when they are varied.  To accomplish this, I used NinjaTrader to do an optimization of a variety of periods for our moving averages and I have graphically shown the results below.

This type of analysis shows us very important information - regions of profitability.  For nearly every technical indicator, there are parameters which you input (such as 10 and 21 in the moving averages), which determine how much data it uses in calculating values.  If you have a trading system which only works with a certain combination of parameters, this is a curve-fit system, or a system which will probably not hold up well in the future.

In order to insure robustness, or its ability to hold up in the future, a system must be rigorously tested across a variety of markets and a variety of settings.  In the chart below, you will see 620 moving average combinations with their respective profitability.  It is important to note that the data has been normalized, so the number you see is meaningless - it is just a comparison to all of the other data points.  Additionally, it is very important not to look for the best value, but rather look for a region of profitability.  Markets change over time and the best results today probably will not be the best results tomorrow.  This said, it is important to try and place yourself in the region in which you will more than likely be able to survive and profit in the future.

-Red = below average
-Yellow = average
-Green = above average







The image above powerfully demonstrates the use of a simple technical trading concept applied to the markets.  When you are creating a trading system, you must question where the inputs came from.  Why did I choose 10 for my short moving average?  Why is 21 a good moving average length?  In order to protect your money, you must begin asking "why" to the decisions you make.  I suggest that you critically analyze, quantify, and backtest every aspect of your decision making so that you can behave in a consistent, confident, and disciplined manner as you trade in the markets.

[Goomboo]

For those on the hourly timeframe:

You should have closed your long from Feb. 7th at a 1-2% loss and entered short.  The short position may be another 1-2% loser.

It's in a range-bound market that you get whipsawed using a moving average system, but when the market decides where it wants to go, you'll be trading with the trend.

[Goomboo]

For those on the hourly timeframe:

You should have closed your long from Feb. 7th at a 1-2% loss and entered short.  The short position may be another 1-2% loser.

It's in a range-bound market that you get whipsawed using a moving average system, but when the market decides where it wants to go, you'll be trading with the trend.

The short position should have lost 3%.

If you're sticking with the system, you should now be long and sitting on a 3-4% unrealized profit.

[paraipan]

watching...

[Goomboo]

I'm trading on daily charts.



Long @ $5.94.

[StewartJ]

Goomboo, out of all the prognosticators in the Speculation Forum, your the only I know that says things like

".... you should be sitting on a 3-4% unrealized profit."

How refreshing.

Thanks!
S.

[Otoh]

Goomboo, out of all the prognosticators in the Speculation Forum, you're the only one I know that says things like

"Trust in the Lord with all of your heart and lean not on your own understanding; in all of your ways acknowledge him, and he will make your paths straight." - Proverbs 3:5-6

"The fear of the Lord is the beginning of knowledge, but fools despise wisdom and discipline." - Proverbs 1:7

verily I say unto ye that the TA prophets are upon us

actually in a non religious sense I do agree with both of those proverbs (say 'Lord' = Universe, eternal & infinite or that symbolism harmonious constant change of yin & yang, or any philosophy which isn't trapped in unresolved duality & for 'your' equating to the ego, the illusion of separation from the totality)

& yes, I & those I've invested for are sitting on that unrealized prophet atm

We give Thanks!
O.

[Goomboo]

Goomboo, out of all the prognosticators in the Speculation Forum, your the only I know that says things like

".... you should be sitting on a 3-4% unrealized profit."

How refreshing.

Thanks!
S.

Thank you for your kind words,

There's a saying "the trend is your friend until the bend at the end".  Those who are trading on the hourly and sitting on a 3-4% profit need to know that if the trend ends here, they will probably earn a smaller return and if it dramatically ends, you could lose on this trade.

So basically, don't chase a trade - if you missed it, you missed it - and don't spend money before your earn it!

[Goomboo]

Goomboo, out of all the prognosticators in the Speculation Forum, you're the only one I know that says things like

"Trust in the Lord with all of your heart and lean not on your own understanding; in all of your ways acknowledge him, and he will make your paths straight." - Proverbs 3:5-6

"The fear of the Lord is the beginning of knowledge, but fools despise wisdom and discipline." - Proverbs 1:7

verily I say unto ye that the TA prophets are upon us

actually in a non religious sense I do agree with both of those proverbs

& yes, I & those I've invested for are sitting on that unrealized prophet atm

We give Thanks!
O.

Glad to hear the markets are treating you well.

I firmly believe that those who honestly seek wisdom will eventually end up on their knees before God and the Cross.

The person who wrote those words 3,000 years ago was really an interesting man.  He was the richest king in the world, had 1,000 women, an army of traders, a kingdom...basically anything you're passionate about, he had it.  He ended his days in depression and despair, however because he decided to pursue these things - wealth, women, fame - with all of his heart. 

In his last passage of scripture, Solomon speaks the absolute truth about life:

http://www.blueletterbible.org/Bible.cfm?b=Ecc&c=12&v=1&t=NIV

[Hexadecibel]

No gods or kings only man.

edit: and bitcoins