When price is range bound (some call it consolidating) or if volatility is usually within your%, you will profit from this strategy. If PPCBTC trends down, fast enough to outpace your switching strategy between assets, you will only buy peercoins ONE time (because iii. says that you have to have bought peercoins to make the swtich). Your loss in terms of BTC will be limited, but you will have to invent a new strategy. It’s likely that you would decide to disregard rule iii. and try the strategy again, i.e. buying peercoins when ration goes down another 10%. If trends keeps on going down and you keep disregarding rule iii. you will in the end have a lot of peercoins but no BTC.
As long as you follow all of the rules, you are likely to make profit until the day volatility whipsaws and break your strategy. The question is then, will you have the discipline to never execute the strategy again? If you do execute the strategy again, you will have broken rule iii. If you break rule iii. you are not following the strategy, hence you trade without a strategy.
The strategy you are using is a pretty common one for people trading gold x silver. What they do is that they look at the historical ratio and identifies when price of silver in terms of gold is historically high or low.
I also follow a similar strategy, but instead of looking at 10% I study “infliction points” where there is buying and selling pressure. You find those when you apply EMA 20, 50 and 200 and look at the price chart in the timeframe most people/bots look at. Start with daily chart and drill down from there. Study the volume and then buy/sell when price is more likely to bounce.
[quote=“RobertLloyd, post:1, topic:3075”]Okay, I have started trading on an exchange. Here is my intended strategy
i) I have chosen two cryptos, both of which I want. I want PPC, and I am also happy to have BTC, so that’s my pair
ii) I have got out of thinking of the dollar price, and think only in terms of the PPC/BTC rate
iii) Assuming I bought some PPC at, say, 0.0022 BTC, I create a sell order for 10% more (i.e. 0.0024)
iv) Sooner or later, they sell and I get the BTC equivalent. I then use the BTC to set a buy order for PPC, but at a price that is 10% lower (back at 0.0022)
v) I repeat this process, back and forth. Basing buy and sell orders on an expectation of 10% price swings is realistic, and exceeds the percentage commission extracted by the exchange for each sale. Since I want both PPC and BTC, I am always happy with the outcome of the trade
vi) From time to time, I will draw off some peercoins and/or a fraction of a BTC to my client or paper wallet, to preserve a modest but growing profit
The risks I perceive are the exchange imploding, or my account getting hacked. But I don’t see any risk in the trading strategy, itself
Any comments or suggestions on how I can improve this scheme? It seems foolproof, which makes me wonder whether I have overlooked anything[/quote]