You are completely right. Every asset has it’s risk. Gold can be stolen, an encrypted crypto wallet not. A successfull company can fail in short time, if a corrupt or unprofessional managing board does wrong decisions, gold can not. This is the reason for spreading the property over several real assets with hopefully different risks.
My constraint does not mean, that you must invest, you can wait as long as you want, and clarify the situation. But you must not run with the herd. My last trades have been with many small limit orders. This way I keep the spread myself. But I also can wait on large price jumps and buy/sell against a “wall” at once.
Goog morning. Nice run. Now it’s time to explain why it can be better to wait on large price jumps.
The last three days I have profited from large volatility around a spot, as you can see in my order execution list. In the last run, while all my small orders have been executed all the way up the run, my gain in coins is very low. It had been better to have no limit orders and wait on this jump. The direction does not matter, if you have no preference.
Can you really make money in them [stocks] without taking a serious risk? Yes indeed if you can find enough of them to make a diversified group, and if you don’t lose patience if they fail to advance soon after you buy them. Sometimes the patience needed may appear quite considerable. [But] most of the bargain issues in our experience have not taken that long to show good profits.
Benjamin Graham
The wait on large price jumps has many advantages. You can leave the exchange in between the jumps, so not beeing burned in an exchange shutdown. You have time for your real live, doing more reasonable things. You can make your holiday. If you are lucky, you had a price run or crash all along your absence. If there was a price spike, you lost only an opportunity, not your assets. You will miss many opportunities, but they are coming again and again.
What is your goal here? To hedge currency risk/volatility? To gain purchasing power? To ensure you’re invested in the long term cryptocurrency leader? I agree on your choice of coins, but can’t possibly convince myself to hold equal value in PPC at this time. There just isn’t the infrastructure and I’m uncertain if proof of stake will be integrated into a BIP at some point. If so PPC could really suffer if it hasn’t established a market niche for itself.
I’ll be interested if your strategy could result in a long term increase in absolute quantity of both types of currency.
My goal is a riskless rise in total wealth. I want a gain in coins. I wouldn’t compare it with hedging, because I own the real assets. Hedging is like an insurance or option on an asset. I don’t need this, because contrarian trading is doing the risk balance automatically.
It’s on your choice to take another target balance, perhaps 80% in BTC and 20% in PPC. This makes the calculation moderately more sophisticated.
The contrarian strategy makes this impossible. I can buy the falling asset, and sell the rising one. You can see the movement of my two assets, BTC balance is rising, PPC balance is dropping.
If you own gold and it rises heavily, you should sell all or part of the gain of your gold. Nobody expects you to hold more gold even after a heavy price increase, but for you are a gamer.
An increase in wealth of nearly 0.6% (2013-10-01 19:46:40) is incredible high for a contrarian strategy for one day only. It’s due to the massive spikes in both directions that we have seen.
If I had waited on the price jump before selling PPC against a wall, my gain would be much higher. But I do not predict anything, and I have not foreseen it.
Hi whifmoi, your strategy is very interesting. What’s your indicator to go out of a currency completely? Or, when do you stop your investment? Is there some point you whould say: That’s enough, I don’t see more potenital (for example in PPC) I will invest in “whatever”?
This simple calc tells me, I can buy PPC below 0.00263, and sell some PPC over 0.00263.
If you have a dozen different assets, you can sell your gain as a maximum, or buy the descend as a maximum. Waiting on large jumps is more profitable. In this special case with only two assets half of your gain can be sold, or half of your descent can be bought.
I never go out of an asset completely, that I believe in. It’s always a compromise.
I see a potential in PPC, but not in the sense you and most others think of it. I think of it as a useful tool to help people to move payments easily all over the world. The gain in price is simply lucky, and I have to spread the gain in one asset to my other assets to reduce risk. Because it can come to a sudden end as any other asset can do also.
That is where the slippery slope is. Sometimes the price of an asset can go down and down for years. Usually at these times there are all sort of stories, theories, evidences, and real possibility that the price will never go up again, or worse, that the asset will go bust. How can you objectively make a judgement to hang on or to stop loss (which probably would look like a “run with the herd” because the herd have been leaving due the reason you are to accept). BTC is less than 5 years old. PPC is even younger. These are high risk assets.
The contratian method has its place. I have been using a slightly different one between BTC and LTC and telling people about it. However one has to understand the risk with this method.
Next day has gone, my gain in coins is 0.469%. This is a very surprising rise to me, because I missed to place the sell orders up to 0.003, where the last spike finished.
Please be patient, I will answer every question. Need some time to express my thoughts in a comprehensible fashion.
Sounds like you speak of gold. There are rumors that gold is manipulated down.
I don’t know, but it’s possible. Manipulation can last years, we don’t know when it stops. If you sell your gold on falling price, they’ve got you. This long lasting manipulation is the reason of why someone has to spread his assets. No more than 10% into one asset. One has to wait this long time before selling his low priced gold, manipulation will fail at some time. And if it fails, the jump into the opposite direction can be excessively.
With gold it’s the same as with other real assets: I think about a buy after a panic sell, I can wait even longer if I want.
Objectively I can not make a judgement on how the exchange rate will develop, but for I’m an insider. This is the reason I do not use stop loss, because I stick to the price of my limit order.
This becomes even more important with buying/selling company shares or investment fonds. Because I do not anticipate the price movement, I cannot set a stop loss. I expect that I have to reinvest in about 50% of all executed stop loss orders, so my loss is 50% of fees and spread at least. It’s for sure a win to banksters, and I will not support them. The only orders I use are limit orders.
[quote=“mhps, post:12, topic:383”]… How can you objectively make a judgement to hang on or to stop loss (which probably would look like a “run with the herd” because the herd have been leaving due the reason you are to accept). …
… However one has to understand the risk with this method.[/quote]
There are no risks on exchange rate movement, if you believe in the merit of your assets. I now explain why.
In my lesson above with the two assets Bitcoin and Peercoin, you own 10 BTC and 5000 PPC at an exchange rate of 0.002 BTC/PPC. After some time the exchange rate suddenly drops to 0.001 BTC/PPC.
a) If you believe in BTC only your wealth dropped
b) If you believe in PPC only your wealth increased
c) If you believe into BTC and PPC nothing changed
For payments there are ounces of gold and silver only, and you own 10 ounces of gold and 500 ounces of silver at an exchange rate of 0.02 gold ounce/silver ounce. After some time the exchange rate suddenly drops to 0.01 gold ounce/silver ounce.
a) If you believe in gold only your wealth dropped
b) If you believe in silver only your wealth increased
c) If you believe into gold and silver nothing changed
For savings you own 1000 USD and 100 shares from the Intel company at an exchange rate of 10 USD/Intel share. After some time the exchange rate suddenly drops to 5 USD/Intel share.
a) If you believe in USD only your wealth dropped
b) If you believe in Intel shares only your wealth increased
c) If you believe into USD and Intel shares nothing changed
Please do not answer impulsively, take your time to think about it. This makes it absolutely unnecessary to set stop loss limits, if you believe in both assets. And you should only own valuable assets, that you really believe in.
I have read these days that the cash of Warren Buffet is 60 billion USD. A few years ago it was 40 billion USD. Probably he does not think this radically as me, but the result is the same. Take the gain of the rising company shares (distribute assets) and wait on the next crash. Bitcoin movement learnt me that downwards is as good as upwards.
My Wealth
Because I have no preference for one coin, have no preference for any real asset I own, I will calculate my inital wealth and intermittent wealth in both PPC and BTC. And no, Dollars or Euros are no assets for me, there’s no reason why I should calculate the wealth in fiat money. Looks good, but makes no sense.
[tt]
Date Time BTC_Balance PPC_Balance Spot BTC_wealth PPC_wealth gain
2013-09-29 01:57:46 4.93166438 1155.82162320 0.00180 7.01214330 3895.63516764 -
2013-09-29 21:03:36 3.73659314 1802.02271033 0.00192 7.19647674 3748.16497075 2.324%
2013-09-30 18:11:10 3.82984372 1763.68924129 0.00215 7.62177559 3545.01190176 0.206%
2013-10-01 19:46:40 3.97725437 1719.51428627 0.00240 8.10408866 3376.70360710 0.598%
2013-10-02 23:35:57 4.00221177 1724.93960439 0.00240 8.14206682 3392.52784189 0.469%
2013-10-03 16:35:12 4.05946641 1720.53960440 0.00240 8.22283918 3426.18299190 0.992%
2013-10-04 23:58:20 5.25114522 1337.16048899 0.00400 10.59978718 2649.94679399 -0,367%
2013-10-05 23:43:27 4.99617018 1434.11029585 0.00345 9.94385070 2882.27556541 1,038%
2013-10-06 23:33:47 5.09171915 1412.97349526 0.00355 10.10777506 2847.26057977 0.215%
[/tt]
Hey, what’s that, a negative gain for the last day! How did this happen?
There have been no spikes, that I could profit from. Instead there was a long run up (for PPC, down for BTC), that I sold my PPC all the time. So I’ve got no gain from this, the worst case scenario is a gain of 0 with this strategy. Why is the gain negative?
a) It can happen if oneself miscalculates the maximum amounts to sell or to buy. This way oneself violates the riskless strategy. It happened to me the way up, where I sold too much of my PPC. It’s better to underestimate the amount to sell or buy.
b) I yet don’t know if my calc of the gain is accurate enough. With the huge increase of the exchange rate from 0.00240 to 0.00400 between the two days, my calc could be insufficient. I expect for this next day a readjustment of the gain on a high positive level again, because I did some contrarian trades already.
My lesson will last for the next 24 hours, then I will finish this. Discussion persists.
Again and again we are seeing this walls. Some of them seems honestly, until they are countervailed. Others are jumping around like clowns. Don’t panic, do not permit this to influence your strategy. I had to buy against a wall to balance my assats again, see timestamp 2013-10-03 16:35:12 and the panic buy before.
Regardless of gold is manipulated down, and you do not hold some ounces of gold or silver, buy them and hold them. The manipulators perhaps build up something like a huge gold sell wall, but this will not last forever.
To phrase this more theoretically: If you see their walls, but they do not see yours, you have an informational advantage about them. Benefit from it. Sometimes it happened that a wall suddenly jumped in front of my nose, and I had to rebalance my assets.
[quote=“whifmoi, post:16, topic:383”][quote=“mhps, post:12, topic:383”]… How can you objectively make a judgement to hang on or to stop loss (which probably would look like a “run with the herd” because the herd have been leaving due the reason you are to accept). …
… However one has to understand the risk with this method.[/quote]
There are no risks on exchange rate movement, if you believe in the merit of your assets.[/quote]
You do have to assume that your assets will have a certain price belavior. You will lose your asset totally due to at least one type exchange rate action if you strictly execute your strategy: the exchange rate drops down monotonously and never goes up again. Let’s see what happens if the exchange rate of one of your chosen coin, coin A, loses 50% against the other coin (coin B) you choose every year.
In year 0 The exchange rate between the coins is 1. You have 50 coin A, 50 coin B. You want to keep the asset allocation 50%-50% between coin A and coin B. Your total asset is 100 in unit of coin B.
In year 1 you have 25 coin B worth of coin A and 50 coin B and you rebalance to sell B and buy A so that you have 37.5 coin A (in unit of coin B) and 37.5 coin B. Your total asset is 75 in unit of coin B.
In year 2 you have 18.75 coin A (in unit of coin B) and 37.5 coin B and you rebalance to sell B and buy A so that you have 28.125 coin A and 28.125 coin B. Your total asset is 56.25 in unit of coin B.
This is what happens to your assets ( in unit of coin B) in the following years round to 1 decimal digit
Essentially you will lose all your asset unless you bail (or stop loss) at some point. Given that cryptocurrencies have less than 5 years survival experience under their belt, It’s very likely that any one of the coins will lose its popularity, hence price, due to technical or social reasons.
[quote=“mhps, post:21, topic:383”][quote=“whifmoi, post:16, topic:383”][quote=“mhps, post:12, topic:383”]… How can you objectively make a judgement to hang on or to stop loss (which probably would look like a “run with the herd” because the herd have been leaving due the reason you are to accept). …
… However one has to understand the risk with this method.[/quote]
There are no risks on exchange rate movement, if you believe in the merit of your assets.[/quote]
You do have to assume that your assets will have a certain price belavior. You will lose your asset totally due to at least one type exchange rate action if you strictly execute your strategy: the exchange rate drops down monotonously and never goes up again. Let’s see what happens if the exchange rate of one of your chosen coin, coin A, loses 50% against the other coin (coin B) you choose every year.
In year 0 The exchange rate between the coins is 1. You have 50 coin A, 50 coin B. You want to keep the asset allocation 50%-50% between coin A and coin B. Your total asset is 100 in unit of coin B.
In year 1 you have 25 coin B worth of coin A and 50 coin B and you rebalance to sell B and buy A so that you have 37.5 coin A (in unit of coin B) and 37.5 coin B. Your total asset is 75 in unit of coin B.
In year 2 you have 18.75 coin A (in unit of coin B) and 37.5 coin B and you rebalance to sell B and buy A so that you have 28.125 coin A and 28.125 coin B. Your total asset is 56.25 in unit of coin B.
This is what happens to your assets ( in unit of coin B) in the following years round to 1 decimal digit
Essentially you will lose all your asset unless you bail (or stop loss) at some point. Given that cryptocurrencies have less than 5 years survival experience under their belt, It’s very likely that any one of the coins will lose its popularity, hence price, due to technical or social reasons.
edit: typo[/quote]
I not yet got your description in total, but I believe, you asume a drop in the value of A. Why do you not think about a rise in the value of B?
I finish my lessen now, with much more success I expected. The average of the gain over the last 7 days is 0.437% for every day. I did not include the first day here, because I had to invest higher amounts for firstly balancing my assets.
The massive volatility on btc-e last night improved my result. But my gain last day was lower as I expected, because the volatility on vircurex was much lower. Any other contrarians here, that are my only competitors?
Nothing changed on the characteristics and quality of Peercoins, so this massive dump is simply destroying his own wealth. Remind a PPCoin stays a PPCoin independently of its exchange rate. You loose nothing if you do not trade anything, your wealth stays the same. The trade essentially does change your wealth: buy low/sell high you have a loss, buy low/sell high you have a gain. This contrarian constraint explained herein forces you to withstand greed an panic. If you follow it, worst case is mean gain of 0.