"How would I manage 20 cryptos?"
You would not get much sleep trying to do that. If you want to let them sit overnight and not
worry about it too much, pick cryptoassets which trade in a more narrow range. Even if that
range is slightly going up. Generally, professional traders cash out at the end of the day
on their day trades whether or not they have been trading in and out of a position in a
longer strategy.
1. Decide how much your cash pile is. 50%? 70%? 90%? Again if you consider a crypto to
be better than that you can do accounting using it. Have fun! The US Dollar is still the unit of the global
economy. Everything has to have a US Dollar price before it can be sold from a second country
to a third, or from a second crypto to a third. The US Dollar is known as the world accounting
currency, and that will probably be true for a long time, whatever its value is compared to
whatever currency you are using. In the same way, we buy exact amounts of dollars worth,
not some number of coins or tokens. The higher your cash pile in proportion to your cryptos,
the more you protect yourself from volatility. Because volatile up often means down is coming,
and volatile down often means more down is coming.
2. Split your speculation portion into exactly equal parts in terms of the base currency.
3. Set your sell percentage up, and your sell percentage down. Make the sell percentage up
much higher than the absolute value of the sell percentage down.
4. Ride your winners up during the trading session, and stop your losers. If your winners are
way up, your losers are free money.
It has long been recommended that you should sell when you are 20% up or 5% down. You don't have
to be a very good trader to make money by using this system and by sticking to it strictly. If you can
be strict with yourself you are a lot better trader than you might think.
First is a presentation of how well this works.
|
% bad trades
|
30%
|
40%
|
50%
|
60%
|
70%
|
|
This is the percentage of bad trades (sell at -5%) versus good trades
(sell at +20%)
|
|
Calculation
|
(1.2)^7*(0.95)^3
|
(1.2)^6*(0.95)^4
|
(1.2)^5*(0.95)^5
|
(1.2)^4*(0.95)^6
|
(1.2)^3*(0.95)^7
|
|
This is how you calculate the result of n bad trades versus m good
trades over 10 trades. n and m must add up to 10.
|
|
Result
|
3.072
|
2.432
|
1.925
|
1.524
|
1.206
|
|
This is the result of the calculations in the above row. 1 is the original betting stake.
|
|
Profit/10
|
207.2%
|
143.2%
|
92.5%
|
52.4%
|
20.6%
|
|
The original betting stake of 1 is subtracted from the results in the row above,
and that number is multiplied by 100% to find the rate of profit over 10 trades.
|
|
Profit/1
|
11.88%
|
9.29%
|
6.77%
|
4.30%
|
1.21%
|
The profit over 1 trade is found by raising the result two rows above to the power
of 0.1. 1 is subracted from this number, and the remainder is multiplied by 100%.
|
If you are absolutely strict about selling at 20% up and 5% down, these are the averages
you will get over a large number of trades. You can have 7/10 wrong, and still make decent
money. If you fail in a precise and controlled way, you can actually succeed.
Generally over time you will get better at picking them and your success rate
will go up. As you can see, if you can bump your success rate up just 10%,
the profits multiply.
Q. "What do you mean by a large number of trades?"
A. "The Law of Large Numbers" is such that the bigger the sample, the closer it
will get to what the probabilities indicate might happen. At the lowest level a sample
of around 30 can produce meaningfully indicative, however inaccurate results. In this example
we have the good fortune of each item sampled is only one of two things.
Those are a winning or losing trade.
is at a sample size of around 100, and the ones commonly used in political polls
and marketing surveys are 1,024 and up.
If you are constantly averaging from 1% to 11% on each trade using this system,
what do you care if something is going to the moon? Your money is, for sure.
Always ask, "Is my money going up or down?"
|
20% Up / 5% Down Crypto Trading Scenario
Part 1: Buying the Cryptos.
In this example the trader wants to start with 10 different coins or tokens so as
to begin to get statistically meaningful information. If that is done 3 times,
some kind of sample has been collected. This is very similar to a horse racing
enthusiast at an off-track betting place. They can have several simultaneous bets
running out of a Book and Bank (see link below).
The trader wishes to find out
the probable success and failure rate during trading. Is it possible to make
a good profit doing this? At they very worst, they could
lose 5% of their money, like one horse at the track. Played right, the trader should
have enough opportunities to get a very good sample, especially if they abide by
the rules in Book and Bank.
The trader does not
think of these things as much more than bets. Therefore it is decided that
the traditional Book and Bank system as used at the racetrack will be employed.
The trader starts with $10,000 in the Bank, and will bet $500 on crypto (5%.) Each bet
is therefore $50.00.
The trader is able to see all cryptos bought and watch them move in realtime.
All the imaginary cryptos below are on the SOL network and are paired with USDT.
If the $10,000 Bank goes down to $9,750, then there is only
$487.50 for the next 10 trades, and therefore $48.75 for each one. If the trader loses
the whole 5% ($500) they can then say that crypto in general did not make the cut (as they
are down 5% according to the +20%/-5% formula),
and they went home with their $9,500 and a $500 lesson learned.
|
bank
|
crypto
|
symbol
|
buy
|
-bank
|
|
10,000
|
👴
|
$OLDGEEZER
|
-50
|
9,950
|
|
9,950
|
👩
|
$URAKAREN
|
-50
|
9,900
|
|
9,900
|
👮
|
$PULLOVER
|
-50
|
9,850
|
|
9,850
|
🕵
|
$PARVUMPI
|
-50
|
9,800
|
|
9,800
|
🤳
|
$NIHIL
|
-50
|
9,750
|
|
9,750
|
👈
|
$WRONGWAY
|
-50
|
9,700
|
|
9,700
|
💩
|
$URAPOOPY
|
-50
|
9,650
|
|
9,650
|
🤡
|
$URACLOWN
|
-50
|
9,600
|
|
9,600
|
🤮
|
$URANEATER
|
-50
|
9,550
|
|
9,550
|
🧊
|
$MYHEART
|
-50
|
9,500
|
|
On the first 3 trades our trader converted directly from SOL to the cryptos and lost
6% on each trade, through a process known as slippage.
Instead of selling at a 6% loss the trader booked the losses,
and set the +20%/-5% stops over and under the net price. SOL was converted into USDT and
continued trading using USDT with a much better fill of about a 1% loss. The trader
quickly enters the fills for the 10 cryptos into a spreadsheet which automatically
calculates the +20% stop and the -5% stop, and books the acquisition loss.
|
Part 2: Setting the +20%/-5% stops.
According to the data in the spreadsheet:
|
crypto
|
symbol
|
value
|
-5%
|
+20%
|
|
👴
|
$OLDGEEZER
|
46.95
|
44.61
|
56.34
|
|
👩
|
$URAKAREN
|
47.12
|
44.99
|
56.54
|
|
👮
|
$PULLOVER
|
46.98
|
44.63
|
56.37
|
|
🕵
|
$PARVUMPI
|
49.60
|
47.12
|
59.52
|
|
🤳
|
$NIHIL
|
49.44
|
46.97
|
59.33
|
|
👈
|
$WRONGWAY
|
49.52
|
47.05
|
59.42
|
|
💩
|
$URAPOOPY
|
49.22
|
46.76
|
59.06
|
|
🤡
|
$URACLOWN
|
49.71
|
47.22
|
59.65
|
|
🤮
|
$URANEATER
|
49.55
|
47.07
|
59.46
|
|
🧊
|
$MYHEART
|
49.43
|
46.96
|
59.32
|
|
Total:
|
487.52
|
P/L > >
|
-12.48
|
|
The trader has made and booked a $12.48 loss, and has that to add to the hill to climb. It is realized
that if all trades were made through USDT, the trading fees would be much less. Perhaps even less than
these. Thinking that it would normally be around $5, it would have a general effect of subtracting
1% from any profits or losses. That loss could be covered if a bet was liquidated at -3% instead of -5%,
and try to let it ride as much as possible to the upside. The price of the acquisition charges is more
ruthlessness with the losers. All in all though, $5 to get in for each 10 cryptos will not break a
$10,000 bank. So far it looks like the trader will be able to play for a long while. The trader waits
until all trades are cleared, no matter how long that takes. In the 1990s, this could take months.
In penny stocks and crypto, it can only take hours or even minutes.
|
Part 3: Reconciliation
This is the result of all of the liquidations:
|
crypto
|
symbol
|
Sold
|
P/L
|
bank
|
|
👴
|
$OLDGEEZER
|
45.04
|
-1.91
|
9,545.04
|
|
$OLDGEEZER started fading fast so the trader pulled the plug on him. The trader was still not happy at losing
$2 and vowed that would never happen again. After this resolve, the bad trades went faster than the good ones.
If you are stopping a bad trade faster, it will disappear first. Some old timers have a screen for 20 or 30,
buy them all, and then just sell the ones which are going down immediately. But you need to run a book for a while
to see how it goes up and down. If you are starting there is no alternative.
|
|
👩
|
$URAKAREN
|
52.20
|
5.08
|
9,598.04
|
|
$URAKAREN almost got to $55 when it started dropping fast. The trader said "I don't know anyone named Karen,
however I will take the $5.08." This bit of profit would have covered the trading fees the next time.
|
|
👮
|
$PULLOVER
|
45.95
|
-1.03
|
9,643.99
|
|
$PULLOVER went down and the trader wrote up a $1.03 loss which was much more satisfactory. With a $10,000 pile
the trader could play like this almost forever.
|
|
🕵
|
$PARVUMPI
|
62.30
|
12.70
|
9,706.29
|
|
$PARVUMPI produced a MAGNUM return of $12.70 which was able to show the bank at a $6.29 profit.
|
|
🤳
|
$NIHIL
|
48.90
|
-0.54
|
9,755.19
|
|
$NIHIL did nothing. It went down a bit. Then it went close to 100%. Then it turned down again and the
trader decided that there was no benefit to having nothing.
|
|
👈
|
$WRONGWAY
|
48.22
|
-1.30
|
9,803.41
|
|
$WRONGWAY went the wrong way for a little bit and the trader decided to turn in the right direction.
|
|
💩
|
$URAPOOPY
|
57.30
|
7.78
|
9,860.71
|
|
The trader wanted to get $URAPOOPY out of the house, but it kept going up. Along with $URAKAREN, the inital
acqusition losses were covered for this session. The trader was desperate to break even.
|
|
🤡
|
$URACLOWN
|
48.29
|
-1.23
|
9,909.00
|
|
$URACLOWN seemed to be a useless distraction and he was sent back to the circus.
|
|
🤮
|
$URANEATER
|
62.66
|
13.11
|
9,971.66
|
|
The trader did not get sick of the best trade of the day, a whopping 26% over the original $50.
The bank is now up $21.66 mainly because of $URANEATER and $PARVUMPI, with $URAKAREN and
$URAPOOPY bringing up the rear.
|
|
🧊
|
$MYHEART
|
47.85
|
-1.58
|
10,019.51
|
|
The trader concluded they will never get a dime out of cold, icy $MYHEART.
Not even a red cent. If you are on the street $MYHEART will likely give you a burrito, but the trader has $10,000.
However the loss was minimal, and a $1.58 lesson learned.
|
The trader took a logical approach and made a small profit of $19.51 over the whole session. How lucrative that
is depends on how long it takes to do each series of 10 trades. On the $500, the profit is 0.3902%. On the $10,000,
it is 0.01951%. The trader is new at crypto, and went in with much more fear than greed. The process made the trader
better, getting out faster on bad trades, and raising the stops on good ones. Unless you are doing Two Piles trading
where you may be trying to build up two different items, the principle is the same. The bigger the bank is in relation
to what is being traded, the less risk there is for the trader. All in all,
There were 6 bad trades out of 10, but two of the good ones were small, so it was more like 7 bad trades out of 10.
The trader figured an average at least 4/10 good ones to get ahead. Even 3/10 really good ones would do it.
This was worth finding out what 30 trades would do, and then 100. The amount available for bets rose from $500 to
$500.97, with each bet being $50.097. This is how compounding works. The trader made a goal of 1% in profit on the
5% of the bank from each session, and got there after practice and listening to their instincts.
Does this seem hard? The world is divided into people who know this and people who don't. The world is also divided
into people who have patience and those who don't. What do you want to be?
|
|
