Bitcoin trading for dummies in 3 easy steps. :)

[Wary]

(I wrote it mostly for myself, so use it at your own risk).

 a) Trading is a zero sum game
 b) Abilities are distributed unevenly among people.

Therefore, trading is a game where 90% gives their money to 10%.

How do they do it? They
 a) Gather information.
 b) Based on the info, make decision to sell/buy.
 c) Lose.

Therefore, knowledge is your enemy. It makes you lose your money, by making you sell / buy when you shouldn't.
And therefore the secret of successful trading is in ignoring information.

How to do it?
There are 3 simple steps.

Step one: Find out how much info you can safely handle.
Knowledge is like poison. In small amounts it is cure, it will make you rich. In big amounts it's, well, poison. The safe amount is different for each person. And the most important thing you have to find out about yourself as a trader is how much info you can safely use. Find out which row you belong to:

Your level	Safe info	Trading strategy	Expected growth per 8 months	Whom to follow
0	None	GTFO	$ x1	Nobody
1	BTC grows	HODL	BTC x1	STRAWB
2	Rallies each 8 months	Calendar trading	BTC x1.3	rpietila
3	Dips & bounces after rally	Dip trading	BTC x2	oda.krell
4	Volatility	Momentum trading	BTC x100	TERA

* calendar trading: Never look at prices. Your only tool is calendar. Three months after last peak, buy. Eight months after last peak, sell. (You can spread sell and buy over a month, by dollar-averaging for buy and BTC-averaging for sell).  

** dip trading: Look at price chart. There will be several dips and bounces after the rally. Try to catch them.

*** momentum trading: use lot of scary stuff: volumes, MACD, MFI, WTF...

Step two: Go one notch down.
That is if you believe you can successfully do dip trading, don't do it! Do calendar trading only. Because most of us overestimate our abilities. Otherwise you'll end up like billyj (all names are made up, all coincidences are coincidental), who was so impressed by TERA's trading that went into leveraged momentum trading himself and lost all his gains for last 20(or so) years of BTC trading.

Step three: After each rally go one notch down.
Because every time BTC grows tenfold, your enemies, the guys you are trading against, are growing tenfold as well. More rich, more professional, more sophisticated.
You can draw lines on chart? Cool! Two years ago you was like a shark among minnows. But now you are like a sheep among wolves.
So, if at the previous rally you were successfully doing dip trading, this rally do limit yourself to calendar trading. And at the next rally - just HODL. And after it - GTFO (aka SSS).

EDIT: typos.

[jofus]

HAHA thank you, very nice post.

[Polyrhythm]

Wow thanks! I thought it was going to be something sarcastic like but it was actually pretty helpful. 

[Wary]

Wow thanks! I thought it was going to be something sarcastic like but it was actually pretty helpful. 

Welcome.  It is slightly sarcastic by form, but absolutely serious by content.

[Wilhelm]

I disagree with the OP, knowledge is key to winning. The point is you need to know yourself and not the game.
If you can identify your own greed, fear of losing and supress giving a ratsass about what other traders are saying then you can trade like a psycho-sociopath-robot you're going to be rich as hell.
Another plus point is you will be able to dump your wife in an instant and get yourself a few 20-year old girls, do drugs and live big without feeling guilty about it.

I'm not yet there  

[serenitys]

I disagree with the OP, knowledge is key to winning. The point is you need to know yourself and not the game.
If you can identify your own greed, fear of losing and supress giving a ratsass about what other traders are saying then you can trade like a psycho-sociopath-robot you're going to be rich as hell.
Another plus point is you will be able to dump your wife in an instant and get yourself a few 20-year old girls, do drugs and live big without feeling guilty about it.

I'm not yet there  

Annnnnd then your wife hires a lawyer with your money, files for divorce, is likely entitled to a minimum of half and since she has boobies too, she'll probably get the house so you'll have to figure out where else to go hang out with the 20 year olds, and for the record, if you're over 29, they all see you as that old dude and if you're older than that, that really old dude but you have money so they'll pay attention to you until your wife bankrupts you, then you won't have a wife, a house, half your shit, or a bunch of 20 year old girls.

And the only thing you'll have left are the drugs, which you'll probably do too much of and wreck your life cause you got cocky and pissed off a woman 

[N12]

"Calendar trading" is nonsensical and a good way to burn all your money; what you're looking for is probably cyclical trading. Reptilia doesn't do that though, he follows a linear regression. Not that that's a much better strategy (spoiler: It'll fail horribly eventually).

What oda does is called swing trading, and he uses the same tools as what you attribute to momentum trading "lotof scary stuff: volumes, MACD, MFI, WTF..." (volume, the most basic info besides price, is scary?) because both base their trading on technical analysis, and that doesn't differ by timeframe.

Just because a few people have divulged their BTC denominated gains doesn't mean anything even if you take it at face value because 1) they are probably not representative to your listed "styles", 2) Bitcoin's path is probably not representative of all future 8 months paths, 3) variance

I have a better suggestion than listening to some people on the internet; learn yourself: http://www.babypips.com/school

[oda.krell]

Your level	Safe info	Trading strategy	Expected growth per 8 months	Whom to follow
0	None	GTFO	$ x1	Nobody
1	BTC grows	HODL	BTC x1	STRAWB
2	Rallies each 8 months	Calendar trading	BTC x1.3	rpietila
3	Dips & bounces after rally	Dip trading	BTC x2	oda.krell
4	Volatility	Momentum trading	BTC x100	TERA

Step two: Go one notch down.
That is if you believe you can successfully do dip trading, don't do it! Do calendar trading only. Because most of us overestimate our abilities. Otherwise you'll end up like billyj (all names are made up, all coincidences are coincidental), who was so impressed by TERA's trading that went into leveraged momentum trading himself and lost all his gains for last 20(or so) years of BTC trading.

That rule applies to me as well, which means I actually am:

Risto!

Look at me. I have a castle.


Seriously though thanks for placing me one level behind wizkid tera... that's pretty high praise :D

You don't mention one element which I think is maybe the most important one: intuition. Some completely lack it, some seem to have a lot of it (tera, masterluc, windjc come to mind). But there's only one way to find out how much of it you have: by actually trading. So I would personally suggest the following advice to all new investors:

After you bought in the first time (i.e. made your first investment in Bitcoin), set aside 1% of your account for trading. Trade with it for a month. You made a profit? Double the percentage. You made a loss? Halve it. Repeat. (But maybe set some upper limit for the percentage, like 50%).


EDIT: Just as a sidenote, the terms "calendar trading", "dip trading", etc. aren't even completely off. I think some of you missed the irony in wary's post. "Dip trading" for "swing trading" is entirely accurate. And the alternative name for the log-linear extrapolation that rpietila does is spot on as well... his own model look at price as a function of time... so calling it "calendar trading" is absolutely justified.

[ShameOnYou]

"Calendar trading" is nonsensical and a good way to burn all your money; what you're looking for is probably cyclical trading. Reptilia doesn't do that though, he follows a linear regression. Not that that's a much better strategy (spoiler: It'll fail horribly eventually).

Agree with this, although as long as you are locking in gains as we are still in the overall bullish cycle then you should be good (which Rptilia is). I dont like HODL because I would become too emotional if I am not taking some profit off the table.

[BitchicksHusband]

Also, some of us HODL for other reasons (although I have learned to buy when Risto says "ROCK BOTTOM"):

I don't love trading.  I don't want to be bitcoin's slave, I want to be its master.  

Also, bitcoin is 24-hour, which has made several people on this forum insane trying to trade at all hours of the day and night with too much worry and too little sleep.  Be aware of this fact if you want to be a trader at the top 2 levels.

I just buy when the time is right (hopefully--learning on that score) and HOLD.  Less stress = better life.  Plus I still have a day job which doesn't allow for me to look at the charts all day, but DOES give me extra money with which I can easily buy and hold.

[Arghhh]

Putting TERA on that list is more or less an insult to everyone else on that list. Case in point:

My new view of the market:



I wouldn't be suprised to see flat for an entire year.

Need I say more?

[yayayo]

You're right in saying that most of us overestimate our abilities...  but that includes the persons you mention we should follow!

There is no proof that ANY of the various strategies - whether simple or sophisticated - offer a positive return in the long run. They might also lead to significant losses (except HODL).

I'd also like to add: When it comes to investment educate yourself and always follow your own insight. If you follow others blindly, you're almost guaranteed to incur losses.


ya.ya.yo!

[Wary]

That rule applies to me as well, which means I actually am:
Risto!
Look at me. I have a castle.

Congratulations!  

But I have to clarify the confusion: I didn't rank anybody's trading abilities. I don't qualify for such judgments. All I put in the table is your recommendations to us dummies . In particular, how often, by your opinion, should we trade. STRAWB advises HODLing, hense the level 1, risto gives one buy area and one sell area per 8-month cycle, hence level 2, you in your recent post gave an example of 3 sells and 3 buys per cycle, hence the level 3. TERA recommends a lot of trading, so the level 4. So no castle handouts from me, sorry.  

You don't mention one aspect, which I suspect to be perhaps the most important one: intuition. Some completely lack it, some seem to have a lot of it (tera, masterluc/lucif, windjc come to mind). And there's only one way to find out how much of it you have: by actually trading. So I would personally suggest the following advice to all new "investors":

After you buy-in the first time, set aside 1% of your account for trading. Trade with it for a month. You made a profit? Double the percentage. You made a loss? Halve it. Repeat. (But maybe set some upper limit for the percentage, like 50%).

Thanks. That's why I started this thread, to provoke veterans into sharing their wisdom.  

[Wary]

"Calendar trading" is nonsensical and a good way to burn all your money; what you're looking for is probably cyclical trading. Reptilia doesn't do that though, he follows a linear regression. Not that that's a much better strategy (spoiler: It'll fail horribly eventually).

What oda does is called swing trading, and he uses the same tools as what you attribute to momentum trading "lotof scary stuff: volumes, MACD, MFI, WTF..." (volume, the most basic info besides price, is scary?) because both base their trading on technical analysis, and that doesn't differ by timeframe.

Just because a few people have divulged their BTC denominated gains doesn't mean anything even if you take it at face value because 1) they are probably not representative to your listed "styles", 2) Bitcoin's path is probably not representative of all future 8 months paths, 3) variance

I have a better suggestion than listening to some people on the internet; learn yourself: http://www.babypips.com/school

"Calendar trading" is nonsensical and a good way to burn all your money; Newbies know that panic/impulsive/emotional trading is bad, but they usually overestimate their ability to control their emotions. One way to achieve it is to avoid looking at charts. The recommendation "Buy and forget for a couple of years" is almost standard one.
Calendar trading (c) is an extension of this approach. It gives you better returns because it adds the second assumptions (1)Bitcoin grows. 2)Rallies each 8 months). It is also more risky because of it. (Trading is trying to guess a future, based on some assumptions. If you assume nothing, you can tell nothing about the future, i.e. cannot trade. More assumptions - more complex models to handle, more input information required, more time you spend on it, more often you trade, more risk and more return in case of winning).

Not that that's a much better strategy (spoiler: It'll fail horribly eventually). Everything will fail eventually. All your assumptions will become wrong at some point. That's why there is the the third rule in the OP: as the time goes, discard your assumptions one by one and move to more and more safe (and ergo - less profitable) strategies and eventually quit the game completely.

What oda does is called swing trading Probably my terminology is a bit too creative  

volume, the most basic info besides price, is scary? Everything is scary in trading. At least for me. Look at my avatar

because both base their trading on technical analysis, and that doesn't differ by timeframe. See my answer to oda. As for tools mentioned, it was misleading indeed.

Just because a few people have divulged their BTC denominated gains doesn't mean anything even if you take it at face value because 1) they are probably not representative to your listed "styles", 2) Bitcoin's path is probably not representative of all future 8 months paths, 3) variance  Sure, mileage can vary(c). But it's the best information available. And it's sufficient to illustrate the point: more info - more trades - more growth (if you can handle the info).
  
I have a better suggestion than listening to some people on the internet; learn yourself: http://www.babypips.com/school Thanks for the link. It will improve my trading or at least my terminology.   But this manual, although very informative, is about forex trading. Bitcoin is different(c), because it rides on top of a technological revolution. Hence the unique features of bitcoin trading: exponential growth, evenly spaced rallies, exponential influx of new traders...

The only honest advice to an average would-be-forex-trader should be: don't trade. (The reasons are in the OP). While in bitcoin an average trader can trade successfully. My one-page "bitcoin trading for dummies" shows them how to do it. This manual, despite it's numerous drawbacks, is the best bitcoin trading manual, because it is the only one (as far as I know). I believe that you and people like you would be able to create much better introduction to bitcoin trading. But will you?

tl;dr; I wrote the OP because you didn't.

[Wary]

Putting TERA on that list is more or less an insult to everyone else on that list.

He is in the list because he is most vocal representative of momentum BTC trading. And he  have mentioned several times that he doesn't base his trading on his super-bearish 'prognoses'. They just help keeping our mind open.

There is no proof that ANY of the various strategies - whether simple or sophisticated - offer a positive return in the long run. They might also lead to significant losses (except HODL).

Agree. I even wouldn't made an exception for HODL. If bitcoin'll fail (which is possible although unlikely) all HODLers will lose their stash. All we can talk about is probabilities. As Stanislav Lem once put it: there is no safe activity.

ya.ya.yo!

+1 

[Wilhelm]

I disagree with the OP, knowledge is key to winning. The point is you need to know yourself and not the game.
If you can identify your own greed, fear of losing and supress giving a ratsass about what other traders are saying then you can trade like a psycho-sociopath-robot you're going to be rich as hell.
Another plus point is you will be able to dump your wife in an instant and get yourself a few 20-year old girls, do drugs and live big without feeling guilty about it.

I'm not yet there  

Annnnnd then your wife hires a lawyer with your money, files for divorce, is likely entitled to a minimum of half and since she has boobies too, she'll probably get the house so you'll have to figure out where else to go hang out with the 20 year olds, and for the record, if you're over 29, they all see you as that old dude and if you're older than that, that really old dude but you have money so they'll pay attention to you until your wife bankrupts you, then you won't have a wife, a house, half your shit, or a bunch of 20 year old girls.

And the only thing you'll have left are the drugs, which you'll probably do too much of and wreck your life cause you got cocky and pissed off a woman 

What's wrong with being divorced, having a porsche, a comb-over and a 20 year old chick

P.S. If you took my post seriously then you could probably move all your money to bitcoin well before you get divorced. I also recommend living in some untouchable country.
P.S.2. 29 is not old.

[bassclef]

The best traders probably don't post here for good reason.

Here's my trading manual, for what it's worth:

Don't trust anyone, not anyone on this forum and especially not emotional traders.

Watch the market for at least 6 months before you put any money on the table.

During those 6 months learn basic TA: trend following, support/resistance, reversal patterns. This is like learning scales when you took piano lessons as a kid. They are not that interesting or fun, but you are laying the foundation.

When trading, no outside influences or distractions. No forums, trollboxes, phones, television, etc. The one possible exception is news feeds. This is non-negotiable.

Don't get greedy when the market goes up. Ignore fear on the way down.

No, it is NOT different this time.

That's it. Easy right? Not at all. Good luck!

[rudius]

Putting TERA on that list is more or less an insult to everyone else on that list. Case in point:

yup, TERA is on every thread criticizing. If you want an opposit view of what you think, you should ask TERA.

I don t remember a usefull post. And i don t even mention using 3day and weekly MA with BTC...

[oda.krell]

But I have to clarify the confusion: I didn't rank anybody's trading abilities. I don't qualify for such judgments. All I put in the table is your recommendations to us dummies . In particular, how often, by your opinion, should we trade. STRAWB advises HODLing, hense the level 1, risto gives one buy area and one sell area per 8-month cycle, hence level 2, you in your recent post gave an example of 3 sells and 3 buys per cycle, hence the level 3. TERA recommends a lot of trading, so the level 4. So no castle handouts from me, sorry.  

Hehe, way to shatter my delusions

After you buy-in the first time, set aside 1% of your account for trading. Trade with it for a month. You made a profit? Double the percentage. You made a loss? Halve it. Repeat. (But maybe set some upper limit for the percentage, like 50%).

Thanks. That's why I started this thread, to provoke veterans into sharing their wisdom.  

Glad you like it.

I'm not sure how likely it is that people would actually follow the advice. Those that are generally rather cautious might not want to enter trading at all, and those who /do/ have the risk appetite for trading will probably look at the rule and go "na! I'll go all in with trading, right from the beginning."

A slightly more aggressive version of the rule (that I used myself) uses a higher starting percentage, say 10%, in case the optimal progression 1, 2, 4, 8% seems a bit too cowardly for you.

Also, I should stress this: the idea behind the rule is to limit your risk exposure as a function of you /ability/. But that doesn't mean you should, at each trade, go "all in" with whatever percentage that rule would give you at the moment. A trader should look into Kelly criterion (or a generalized version of it that allows for leverage, if you want to play like that) to determine/estimate what the size of your trade should be based on your assumptions about risk and profitability in a given situation.