Topic: The grue/qo method (Read 2786 times)

qo. I invite you to sit down and work out the math and probabilites, but  I promise you that laddering the way you described does not change your expectation value of your profit one bit.   The expectation value of your profit remains zero. Complicated laddering strategies do not, by themselves, change that.


What changes the expected profit, on the other hand, is having a opinion on the direction of the market, and being more right than wrong.  

Yes, but a 90% chance of winning 1$ and a 10% chance of losing 9$ amounts to nothing in the end, right?


Your strategy 'folds over' all its losses into the rare loser - that's why I linked you to Martingale strategies - a perfect illustration of the folly of that concept.  Now, I know that loser hasn't happened for you yet - and glad it hasn't.

   

Another difference with Martingale is that Bitcoin has a real value to it.

Martingale makes more sense for pure random gambling (to the extent that it makes any sense!), but Bitcoin is not random.

Nobody has any idea of what that value actually is.  But you can estimate it based on the size of the Bitcoin economy, mainstream media coverage, Google search trends, level of scandals/hacks, value of the software, number of conferences and other networking value-creating things, the total hashes in the network, and other factors.

My guess the best system for guessing Bitcoin price moves would be based on a combination of value and trend analysis.

But, laddering down lowers one's average price.  So, I just don't see or understand the math that says I've created a 10% chance of losing 9X by laddering down. unless the whole shebang collapses to zero when I'm "all in" (which would be, by definition, oversold territory, given this strategy).  But, I've not read the Wiki link you provided, and am too tired at the moment to do so with a busy/full day tomorrow (hyperthyroid and radioactive -- U-161 -- cat to deal with), but promise to once things calm down on my end.  I sincerely appreciate your taking the time with this/me Deego.

If there's a 10% chance of losing a trade, doesn't that translate into a 90% chance of winning a trade?  I'm confused (which isn't unusual, so please be patient with me).  I'm guessing this has to do with some negative aspect of laddering down against a trend.  And, I can relate to that (was clobbered for about $20K laddering down with e.g. Copper Mountain, Talarian, etc, during the dotcom bust in Aug-Sep 2000, which was subsequently more than made up for with physical gold/silver in 2001). 

But, here, I think bitcoin is somewhat different since it's the only thing being traded.  If it tanks like the dotcoms, then pretty much everyone playing this game is hosed except those on the short side because the whole game is shit-canned.  Then again, those on the short side have taken some right-powerful punches over the last couple months.

I have about $5K in this.  Starting with $500, and piling on (laddering down) from wherever it was (can't remember, but 12ish to 18ish, or thereabouts) many months ago.  I'm now about $213 on the plus side after putting much more than I'd originally wanted to into this game :-) out of the same stubbornness that got me into trouble back in 2001.  So, yeah, I'm not saying this "strategy" is perfect, or even good.  Rather, simply that it's been OK for me thus far over this time frame with this particular commodity.

you are indeed correct  ... the old brain must not be working today 

Sorry to troll, but that's a spelling mistake.

let me rephrase: first let me fix my own grammar mistake ('loose' --> 'lose'), and secondly, I meant that more than 90 percent of people that trade the market end up never making a profit and a big portion of that percentage end up losing everything that they put into the market in the first place since they start going 'all in' on the riskiest of bets that rarely pay off.

sorry for the confusion,
-waveaddict

@ deego and waveaddict

Points taken, but...there's always that but...

waveaddict: "...90% loose everything..."

This depends on whether one bets everything.  If one plays with money they are comfortable with losing, the 10% loss one might take (assuming you are correct) is negligible.  Of course, to paraphrase anonymous, the less ventured, the less gained.  I'm not in bitcoin to get rich.  Rather, it's just a hobby.  I should have mentioned that as a caveat.

I actually used this system for a bit, just with different constants, and of course symmetrically for both buying and selling. I guess a few bots run on similar mechanics, too.

In theory, it should yield profits if done right, just because Bitcoin is so volatile. But it leaves you quite passive, and I found it hard to keep track of its balance while doing analysis-based trades simultaneously. It's also vulnerable to large trends, which do happen in Bitcoin, leaving you totally one-sided at times.

On the long run, it is appealing: it's a rational, objective method that just dampens swings. Methods like the one Goomboo uses are defeated by such a system, since it cuts trends hard at random, not with an offset at the turnaround points.

Generally, I like this approach. Beauty of simplicity, should yield profits, and not to forget, greatly stabilizes Bitcoin against crashes by leaving funds ready at the very low and very high prices. If many trade like this, the "below 1 USD" doomsday scenarios are borderline impossible, and similarly, the June bubble would have been capped by additional sales if the system is used both ways.

Bitcoin has only one shot at the security, once the trust is breached, there is no going back. Would you put more money into a system where they can disappear any minute leaving you dry? This is kinda scary, given sufficiently non trivial system, there always be bugs creeping and possible security holes. Even in 10 years when Bitcoin is well established on the trust side, small change to the protocol could introduce a bug triggering doomsday scenario. Banks can screw all they want, because they have the money to reimburse you in such event.

but what if one day its like "omg crazy exploit, run this file and you can make 100BTC a minute"

the next day bitcoin is worth 0.00001$

the day after that its like "ok we fixed it... all the bitcoins created this way are now distorted, everything is back to normal"

the next day bitcoin is worth 5$ again

 Maybe! 

There is always risk.

-If BTC goes down to 0$, it is likely due to something catastrophic.  If something catastrophic happens to BTC, it will likely never recover, meaning that you will be forced to

-In addition to market risk, there are other risks.   A critical flaw could be found in the private key cryptography BTC uses, allowing everyone to spend everyone else's money.  If this happens, you would not be able to get back your investment.

-If you ONLY trade when there is "no risk" (you can  buy all BTC), then it is likely that your orders will never be executed (since BTC isn't likey to drop to 0.01$ in normal circumstances).  The only way your orders would be executed is if something catastrophic happened, and if something catastrophic happens then you likely just bought something that is worthless.

the difference with martingale is that with martingale you can lose everything, but with that system, there is a floor: 1BTC = 0.01$ , if you have enough money to go down to 0$, then there is no risk, am I wrong?

"Fooled by randomness" N.N. Taleb.

If you have read that you should know for sure that he (NNT) is not right, neither are you, and neither am I.

Once you understand this, only then can you trade.

(but of course you don't trade...)

I am long term accumulate and hold, so if BTC is destroyed I lose anyway. I am ready for that.

If we assume I am ready to accept catastrophic failure then I can build a ladder big enough that it takes the collapse of BTC market to really screw things up. (my ladder goes down to around 0.14 cents a coin at which point I stop buying and have several thousand BTC) If I subsequently get zhoutonged on my bitcoinica holding then I lose 50% of my dollar investment. The other coins will just sit in my wallet perhaps they become virtually worthless the lottery ticket buyer in me will probably keep accumulating though!

This is my worst case scenario, I only focus on that because thats what is important to take care of. Profits can sort themselves out.

My ladder is tall and pretty fine grained. The recent (relative) stability if swings between 4 and 7 don't make much difference to me, I'm not here to day trade. My average price is about $3.63/BTC and 63% of that is real coins (i.e. not on bitcoinica) and my current bitcoinica zhoutong price is negative $9.59!!! so we have a way to go before I can even get zhoutonged. I also have more dollars 'written off' to bring that down. Those dollars are also ready to be lost if it so be.

So I am pretty comfortable with my risk, I am happy that if BTC collapses I lose everything. That's ok the money is already spent and I don't miss it anymore.

What's interesting is if BTC really takes off, what I could buy with my BTC and not how many USD's I could trade it for.

THIS!
EDIT Big players! Do not say in this forum your book orders (or order book-vice versa)! Sometimes it's too easy to win against you!

 I was saying stuff like this before I even starting the service. I hate seeing people throwing around these 'obvious' strategies that have been tried so many times in the past by every trader in every market; it always 'always' ends in tears. I would actually say my last two posts here were pretty non-biased plain old good advice which anybody that has actually traded for a living will tell you.

And surely you have no vested interest in recommending this, right?

so, in addition to my previous post, to make money in any market including bitcoin, you must either put the 'time' in to learn how to technically trade the market, or you put the 'money' in to pay someone who did put the 'time' in to guide you. Don't be stupid and bet your money in the market like you would in a casino. As in a casino, the house always wins.