Topic: Goomboo's Journal - page 27. (Read 281459 times)

I would argue that it makes sense to continue trading under the following criteria:
- You have rigorously tested your edge
- You have risk control in place to trade less size during periods of drawdown
- Your method makes intuitive sense

I also would argue that it is simply due to randomness.  In my personal trading, I frequently will lose 7-8 trades in a row, but that's because I target a 1:5-20 risk/reward ratio.  My win percentage is 30-40% so it is perfectly normal for me to experience consecutive losers.

You're absolutely right: probability isn't fixed in trading - to the frustration of many participants.  All you really have is an educated guess based on history.

It would have assured you a price of around $50-60, while the actual price could have simply crashed to the ground.
You can also see that he enjoyed a nice gain from the previous months.

The frequency of trading is irrelevant for this example.  It's a comparison of two traders with the above-mentioned performance metrics after 100 trades.

The X-Axis has nothing to do with date - it's number of trades.  It's a random simulation in which the outcome of any given trade is random but the traders have structured their payouts as mentioned above.  It shows that there's a difference between being right and making money.

And BTW, here you have the last three months with daily candles and 10 and 21 EMAs as per Goombo's strategy:



Pretty useless, isn't it?

Goombo said in the OP he uses hourly charts, I guess he changed his strategy - obviously there's no point in using hourly candles to find out if the daily EMA are crossing.

EDIT: here you have the OP

In that way is quite difficult to catch the hourly EMAs intersecting, there are times when they intersect more times per day, and the spreads are quite small. A bot would be infinitely more effective to follow Goombo's strategy - also because bots have no emotions whatsoever, and hence they always stick to your predefined strategy (which is a must if you want to profit in the long term).

Daily bar always closes at the same time. Before that, a crossover isn't confirmed. With hourly bars, it would be different of course.

Well he trades once a day he said. So whenever he wakes up, he decides whether or not to do a trade.

How do you trade manually when Bitcoin markets are 24h?

He's mentioned before that he trades manually, which I'm sure is the safer route, especially when you consider the amount of tweaking and tuning a trading system requires to remain relevant to the changing market.

Goomboo: do you use a bot? Could you share your config and explain it?

Sorry if these questions have been answered before, I couldn't find them.

Is it discipline to continue trading after 14 consecutive losing trades or is it a lack of self-awareness? Is the losing due to "randomness" or due to changing market conditions that erode system edge? Trading isn't like poker or gambling where the probability is fixed (for example: knowing that there are 52 cards, 13 of each suit, therefore you have X in the deck to make a flush, etc). The game can change the next day.

If you lose a coin flip by calling tails 100 times after 100 attempts, you're probably a sucker if you still think it's a fair coin.

Just something to think about. No right answers...

The date range and point values aren't really necessary for his example, he's just exemplifying the circumstance of higher losses than gains, despite a higher gain frequency.

Switching to a longer cycle (daily vs. hourly, as an example) will give the proposed EMA cross-over system here more data to form opinion on trends, which would give you a safer number of wins. You wont catch tiny breakouts as often, but your system wont be fooled by nearly as many fake cross-overs either.

But as has been the tone of the thread: finding a risk level you're comfortable with as compared to a win frequency you're happy with.

In this thread, we’ve covered a variety of different topics.  Each of these topics combines into a simple, central truth of trading.  The job of a trader is very straightforward: make the value of your account increase through time.  All of the activities which a trader participates in - strategies, techniques, risk management, psychological discipline – are all about making the line go from bottom left to top right.

This is the sole objective of the trader: profit.  A good trader is not concerned about being “right” in his market call.  A good trader does not care about selling the top or buying the bottom.   The great trader gets rid of his ego and focuses on what works: trading with an edge.

So what is an “edge”?  An edge is quite simple really: trading with a positive expectancy.  Rather than boring you with math and statistics, I’ll present two hypothetical traders.  Which trader do you think has an edge?  Which trader would you let manage your hard-earned money?

Trader A
-   Wins 70% of his trades
-   The average winning trade earns $100
-   The average losing trade results in a $500 loss

Trader B
-   Wins 30% of his trades
-   The average winning trade earns $1,000
-   The average losing trade results in a $100 loss

At first glance, you may think “Trader A rocks – he’s right 70% of the time!”  Wrong.  The truly successful trader is one who is able to structure his trading in such a way that even if he loses the majority of the time, his winners are of such a size that they more than compensate for strings of losses.  The chart below powerfully demonstrates this concept.  This chart is just a simple random simulation of the two traders above.  It shows the amount of money each trader has in his account after 100 trades.



So I ask you again: which trader would you trust with your money?  Can’t you see that trading really isn’t about being right?  It’s about making money.  Check your ego at the door and stop trying to be right in calling market direction.  After all, Trader A is right about market direction 70% of the time.  He's the guy who sold at the top and bought at the bottom - the market guru!  But at the end of the day, he's dwindling away his money because he doesn't understand the simple truths of trading.

Would you rather look smart or make money?

Oh and by the way, Trader B lost 14 trades in a row at one point.  Do you have the discipline to continue trading your system even in the face of 14 consecutive losing trades?  Most don't - but then again, the majority of people lose money in the markets.

I'm attracted to the volatility and profit potential of BTC trading.

$0.079 to $32 is good enough

Except he began trading Bitcoin way before $266.

I guess an asset which price was $0.079 on May 2010 and $266 on April 2013 has quite an appeal for traders

Goomboo, what has driven you towards Bitcoin?

Was it some kind of upward trend? Price volatility?