Raystonn's BTC/USD Probability Forecast

[K128kevin2]

Conditions are always changing. If the price has moved against your prediction, do you report that? Or do you wait for the fluctuation to swing in your favor?

Let me illustrate: Suppose that at 1 pm, the price is at $570, and Alice and Bob disagree on the next price movement. Alice says: 99% chance up before my next forecast, 1% chance down. Bob says: 99% chance down before my next forecast, 1% chance up. Reality: at 2 pm, the price is at $575, at which time Alice declares that her prediction was correct and she gives her next forecast. Then at 6 pm the price hits $565, at which time Bob declares that his prediction was correct and he gives his next forecast.

This is exactly what I was saying but he didn't have any response -_-

[Raystonn]

Conditions are always changing. If the price has moved against your prediction, do you report that? Or do you wait for the fluctuation to swing in your favor?

What you suggest would only work if I was picking tops and bottoms in a range-bound market. The minute we hit a trend my position would be destroyed, and I'd have to sit with it and hope it came back.  This is not what I'm doing.  I have clearly reported a couple losses when conditions changed and my system changed its forecast.

[BTCtrader71]

Conditions are always changing. If the price has moved against your prediction, do you report that? Or do you wait for the fluctuation to swing in your favor?

What you suggest would only work if I was picking tops and bottoms in a range-bound market. The minute we hit a trend my position would be destroyed, and I'd have to sit with it and hope it came back.  This is not what I'm doing.  I have clearly reported a couple losses when conditions changed and my system changed its forecast.

In a market that is not range bound, what I suggest (and what I suspect you are in fact doing) would not be guaranteed of success 100% of the time, but it would work a lot of the time. I gave a very clear example of a situation where it would work very nicely.

[Raystonn]

Conditions are always changing. If the price has moved against your prediction, do you report that? Or do you wait for the fluctuation to swing in your favor?

What you suggest would only work if I was picking tops and bottoms in a range-bound market. The minute we hit a trend my position would be destroyed, and I'd have to sit with it and hope it came back.  This is not what I'm doing.  I have clearly reported a couple losses when conditions changed and my system changed its forecast.

In a market that is not range bound, what I suggest (and what I suspect you are in fact doing) would not be guaranteed of success 100% of the time, but it would work a lot of the time. I gave a very clear example of a situation where it would work very nicely.

That's a range bound market.  The price went both up and down.  In a strong trend this is a very low probability scenario.  In any case, my calls are not tied to price action.  They are based on specific analysis of bid and ask order quantities on the book.

[BTCtrader71]

Conditions are always changing. If the price has moved against your prediction, do you report that? Or do you wait for the fluctuation to swing in your favor?

What you suggest would only work if I was picking tops and bottoms in a range-bound market. The minute we hit a trend my position would be destroyed, and I'd have to sit with it and hope it came back.  This is not what I'm doing.  I have clearly reported a couple losses when conditions changed and my system changed its forecast.

In a market that is not range bound, what I suggest (and what I suspect you are in fact doing) would not be guaranteed of success 100% of the time, but it would work a lot of the time. I gave a very clear example of a situation where it would work very nicely.

That's a range bound market.  The price went both up and down.  In a strong trend this is a very low probability scenario.  In any case, my calls are not tied to price action.  They are based on specific analysis of bid and ask order quantities on the book.

Your last two predictions were 60% chance of up (most recent) and 49.1% chance of up (the one before that). By your definitions, do numbers like that qualify as being in a strong trend, or range bound?

[Raystonn]

Current price: $587.00
Forecast until my next post:
    44.4% probability of going up.
    55.6% probability of going down.

[bitsmichel]

Current price: $587.00
Forecast until my next post:
    44.4% probability of going up.
    55.6% probability of going down.

how are these probabilities determined?

[Raystonn]

Current price: $582.00
Forecast until my next post:
    50.8% probability of going up.
    49.2% probability of going down.

[Raystonn]

Current price: $587.00
Forecast until my next post:
    44.4% probability of going up.
    55.6% probability of going down.

how are these probabilities determined?

I compare the bid and ask orders sitting on the book at Bitstamp.  It's a proprietary technique.

[bitleif]

This thread got me thinking, what's the best trading strategy based on this kind of information?

More specifically, say you get a string of perfectly accurate up/down probability predictions. (Ie. if it says 63% up, that means ~630 out of 1000 times it WILL actually go up.)

How do you choose when to buy/sell based on such information? And how much, or how often? You could do the same placements as percentages (ie. 63% BTC / 37% USD based on the number above), or you could go all-in up or down on every guess, or some hybrid strategy. What strategy would give the most profit over time?

[K128kevin2]

This thread got me thinking, what's the best trading strategy based on this kind of information?

More specifically, say you get a string of perfectly accurate up/down probability predictions. (Ie. if it says 63% up, that means ~630 out of 1000 times it WILL actually go up.)

How do you choose when to buy/sell based on such information? And how much, or how often? You could do the same placements as percentages (ie. 63% BTC / 37% USD based on the number above), or you could go all-in up or down on every guess, or some hybrid strategy. What strategy would give the most profit over time?

I don't think you could profit at all using the information on this thread given you have no idea whatsoever of the time intervals between predictions. Furthermore, the percentages are not accurate. For almost every single one of his posts, the price has gone in the direction of the higher probability, which is extremely unlikely given the probabilities and number of posts he has made. And even furthermore, you don't know how much the price is going to move. I am almost positive that there is no way you could actually make money by following this unless you just got very lucky.

[oda.krell]

This thread got me thinking, what's the best trading strategy based on this kind of information?

More specifically, say you get a string of perfectly accurate up/down probability predictions. (Ie. if it says 63% up, that means ~630 out of 1000 times it WILL actually go up.)

How do you choose when to buy/sell based on such information? And how much, or how often? You could do the same placements as percentages (ie. 63% BTC / 37% USD based on the number above), or you could go all-in up or down on every guess, or some hybrid strategy. What strategy would give the most profit over time?

At least the "how much to invest" part can be answered with certainty by the Kelly criterion, if you do assume that your highest ranked goal is maximizing your (profit) growth rate.

[bitleif]

At least the "how much to invest" part can be answered with certainty by the Kelly criterion, if you do assume that your highest ranked goal is maximizing your (profit) growth rate.

Thanks, that was pretty much exactly what I was looking for! I figured someone must have done the theory on this already.

@K128kevin2: I wasn't necessarily thinking about the numbers in this thread in particular. I just wondered how to act on it IF you had perfect predictions. As the wiki article oda.krell linked points out, the best way to deal with imperfect information is simply to bet less.

[BTCtrader71]

Current price: $587.00
Forecast until my next post:
    44.4% probability of going up.
    55.6% probability of going down.

About an hour after that prediction, the price rose above $590. Did you make your next prediction then? No, because your above prediction would have been "wrong." So you waited another hour and a half for it to swing down, so you could declare the above prediction "right:"

Current price: $582.00
Forecast until my next post:
    50.8% probability of going up.
    49.2% probability of going down.

I don't actually know for sure that that's what you're doing, but it sure as heck looks like it.

Incidentally ... as I type, the price is $580.

[bigdave]

Current price: $587.00
Forecast until my next post:
    44.4% probability of going up.
    55.6% probability of going down.

About an hour after that prediction, the price rose above $590. Did you make your next prediction then? No, because your above prediction would have been "wrong." So you waited another hour and a half for it to swing down, so you could declare the above prediction "right:"

Current price: $582.00
Forecast until my next post:
    50.8% probability of going up.
    49.2% probability of going down.

I don't actually know for sure that that's what you're doing, but it sure as heck looks like it.

Incidentally ... as I type, the price is $580.

I think he is pulling numbers out of his ass and wasting a forum thread and everyone's time for reading it.

[frienemy]

I think he is pulling numbers out of his ass and wasting a forum thread and everyone's time for reading it.

Naaaah, I think he is indeed doing some research, but as he admitted, he can't predict when parameters change so that there are no fixed intervals. Therefore the analysis might not be pulled out of his behind, it might even work for him, but it is difficult to prove to others and has only restricted value for others. Interesting, though.

[BTCtrader71]

I think he is pulling numbers out of his ass and wasting a forum thread and everyone's time for reading it.

Naaaah, I think he is indeed doing some research, but as he admitted, he can't predict when parameters change so that there are no fixed intervals. Therefore the analysis might not be pulled out of his behind, it might even work for him, but it is difficult to prove to others and has only restricted value for others. Interesting, though.

I have no reason to doubt that Raystonn has an algorithm that he is using for his predictions, and he wishes to test it to see how well it works. But Raystonn, you need to be more rigorous in your overall approach. Neither your predictions, nor your assessment of your algorithm, are useful in their present form.

[K128kevin2]

@K128kevin2: I wasn't necessarily thinking about the numbers in this thread in particular. I just wondered how to act on it IF you had perfect predictions. As the wiki article oda.krell linked points out, the best way to deal with imperfect information is simply to bet less.

That is a very interesting question, and of course it would depend on the actual percentages. There are some good AI techniques out there that could find the optimal manner of making buy/sell decisions given this limited information. The first thing that comes to mind for me is a technique called Q-Learning, which involves learning how to make optimal decisions in an unknown environment. I'm sure there are dozens of other techniques that could be applicable too.

[BitchicksHusband]

And I still want him to compare against buy and hold.  He hasn't done that for a while.

C'mon Raystonn, show us the numbers!

[Raystonn]

Current price: $582.00
Forecast until my next post:
    50.8% probability of going up.
    49.2% probability of going down.

There really doesn't seem to be much interest here.  So at this point I'm going to discontinue the public predictions.  Current price is 584.88.