[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.