Crypto Currencies Volatility, a Profitable Rollercoaster

This article was originally published in Daryl Guppin’s book, Guidelines for Applied Technical Analysis, but was not voted on by 1 magazine in Australia by Shares magazine; It was voted 4 times worldwide by the U.S. Stock and Commodity Magazine and reprinted here with Darylin’s permission.

In addition to developing sound technical analysis skills, a strong trading psychology, along with well-thought-out money and risk management, is one of the key secrets to success when trading or investing in the market.

John Atkinson, who learned very hard from real life experience and portfolio management lessons, first developed three Money and Risk Management tables to help his business. With the help of programmers Stephen Parsons and Peter Tamsett, he recently added several user-friendly macros and now offers them to traders and investors as simple and very affordable tools to use to enable them to plan and manage their portfolios.

They are designed to help you plan and develop profitable portfolio growth by putting structured money and risk management controls in place and as a means of keeping simple and accurate records.

Many investors and traders spend less time planning grocery purchases than they do in planning their overall portfolio to create individual trading risk and wealth. Many do not plan, monitor, or review their progress at all.

Some people think that spreading or ‘diversifying’ their portfolios into several large positions on ‘reliable’ blue chips is a way to deal with money and risk management. They are unaware that overloading in many positions or in a very large situation can seriously risk their portfolio.

Without proper planning, an impending disaster can result in a portfolio. We know. We were there and we wouldn’t want you to spend sleepless nights and break the fear, material and spiritual loss in your gut, and as a result live a few traders we know.

The main reason we lost our home on the Sydney coast in 2000 and beyond is because we didn’t develop or follow risk and money management rules – that’s why our series of three portfolio tools was created from our own very hard hitting experience. literally hundreds of thousands of dollars in financial value and a huge emotional cost.

Then we started looking for the information we were looking for or recommended in advance. These tools are based on the principles and strategies of this bulletin, Daryl Guppy’s books, and various ‘best practices from around the world’ taught by other commercial authors such as Alan Hull, Louise Bedford, Dr. Alexander Elder and Dr. Van Tharp.

These include:

o Atkinson Portfolio Planner © – to plan your stock options and overall sector and portfolio risk in advance

o Atkinson Trading Optimizer © – What stocks will you buy when you have several to choose from and only one fund?

o Atkinson Portfolio Manager © – Stop losses, targets, individual stocks and combined portfolio capital curves, closed trading periods and more

We will discuss each of these tools in detail in the coming weeks.

We start this week with Atkinson Portfolio Planner ©.

This tool is designed to help you plan your portfolio properly so you can sleep through the night knowing that you have a balanced portfolio and are not too exposed to any trade, volatility group or sector.

You also plan the right number and size of open positions to ensure that your overall portfolio risk does not exceed certain criteria.

This easy-to-use tool allows you to check your planned distribution:

A mixture of high, medium and low variability shares

A mixture of shares between sectors

Individual risk of each position as a% of your portfolio

Maximum% of your portfolio in any position

The overall risk of your combined portfolio

Once you have entered your requirements, Atkinson Portfolio Planner © will calculate the above key factors and even mark red alerts if one of your planned or open positions exceeds your personal risk profile.

This allows the user to ensure that the hard-earned capital in the planning stages is properly distributed according to the risk levels chosen by your Trading Plan.

It is the user’s responsibility to research and select the criteria to be applied to the Trading Plan and as the main entry into the Portfolio Planner ©; for example, variability and sector distribution, stop damage levels and% risk factors; and for the final selection of which shares (s) to be acquired and the position dimensions to be applied.

Put all or most of your available funds into one part or sector; Risking a large portion of your portfolio in any position, or having too many open positions with an unacceptable total% risk, are recipes for a potential disaster.

The experience of other traders shows that it is also wise to diversify your capital to a select ratio between high, medium and low volatility stocks to maximize the annual growth of your portfolio.

Experienced traders and investors have different rules for money and risk management.

Some typical examples from the following literature:

1. Daryl Guppy chooses 1/7 (14.3%) in books and in this bulletin with high variability (e.g. ‘Speculators’); 2/7 (28.6%) at medium variability (e.g. ‘medium caps’) and 4/7 (57.1%) at low waves (e.g. ‘blue chips’). Others can choose a maximum of 10% at high fluctuations. The final choice is the responsibility of the user

2. For small portfolios, Daryl Guppy, in his book Share Trading #, presented a building example with high volatility starting at $ 2k (i.e. 1/3) and $ 4k (i.e. 2/3) between $ 6k – $ 21k. in low ripple reserves; then divide it into 1/7 parts; 2/7 and 4/7 when his portfolio grew to $ 14 million.

3. Maximum position size as% of total portfolio: usually absolute maximum 20-25%; some are reduced by 15% or less for large portfolios or speculative stocks.

4. Maximum capital risk: It should not exceed 2% of the portfolio to be risked in any trade – some choose this 1% or 0.5% reduction for larger portfolios or higher volatile positions.

5. In my book ’10 Ways to Not Lose Your Home on the Stock Exchange’ (2005), we did not even realize that instead of spreading our risk, we increased our risk. Stop losing 2% portfolio risk, let’s say a trader has ten positions. That is, if there is a sudden dive in the market and if all the stops work, there is a risk of losing 20% ​​of the value of the whole portfolio. Expand it to twenty positions 20 x 2% = 40% of the portfolio is at risk. This can happen – that’s what happened. can be ….

Dr. Elder refers to the 2% risk rule as protection against shark attacks and extends the concept to the 6% rule to protect against piranha attacks, ie to close the entire portfolio if it drops to 6% last month.

Taking this to a logical extension, Dr. Elder explained how he used this strategy to limit traders to three positions (at 2% risk) to start before making a profit before opening some positions. “

(Readers may want to refer to the Money & Risk Management Home Course module based on Daryl Guppy’s Share Trading & Better Trading books, which includes my portfolio tools and is available on our website. See also Louise Bedford’s books (for example, Trade Secrets) and Dr. Alexander. Elder (for example, come to the Chamber of Commerce) for more explanation.)

In the next article, I will discuss how we use the Atkinson Portfolio Planner to ensure that it meets the following planned risk and money management criteria.

1. The maximum total value spent on each variability grouping

2. The maximum total cost spent in any sector

3. Maximum position size as% of total portfolio

4. Capital risk for each position

5. Exposure to combined total portfolio risk

One of the most important aspects to consider when testing or re-testing input signals on a CTA is that they have a different “edge” of the technique they use, for the time they are trading (short-term, swing, long-term, etc.).

Positive price action is when the market moves in the direction of trade. In other words, it is good when the market rises when you buy and bad when the market falls. It is good when the market goes down when you sell short, and it is bad when the market moves up against you. You also need to consider these situations, which are detrimental to trading when you buy and the price falls first, then reverse and move above your entry price and move higher.

In trade, a move in a bad direction is called a “maximum negative excursion” and a move in a good direction is called a “maximum favorable excursion” (MFE). You can use these 2 components to directly measure the “edge” of an input signal.

If a certain input signal produces a move that is higher than the average – maximum good move, medium – maximum bad move, it indicates that there is a positive edge. Conversely, if the maximum good action is higher than the maximum good action, it indicates a negative edge. This is not necessarily a bad thing, because you can use this “negative edge” input signal to conduct “reverse” trading – (Average Return Strategies).

Random access would be when MAE and MFE are approximately the same. For example, if you toss a coin, you would expect that the heads representing buyers and sellers would equal MAE to MFE after using this type of input method.

It takes a few more steps to turn this into a rigid measurement method for input signals. First, you need to have a way to identify price movements in different markets, and second, you need a way to determine the time period when you want to measure average – MFE and average MAE.

To organize MFEs and MAEs in different markets, CTAs should be able to compare averages and equalize them using the Average True Range or ATR. It is useful to compare the price behavior of a particular entry signal using different time frames to isolate the market activity of inputs in different markets. Use the following formula:

1. Calculate MFE and MAE for a specified period.

2. Divide each (MFE and MAE) by the Average Real Range (ATR) to adjust according to the variability at the time of entry.

3. Summarize each of these values ​​separately and then divide by “total signals” to obtain “medium-wave-regulated MFE and MAE”.

4. The ratio is the division of the MFE regulated by the average volatility into the MAE regulated by the average volatility.

To determine the time frame used, use the #day you used in the ratio description, and indicate the number of days the MFE and MAE component were calculated. For example, R10 – ratio size, calculates MFE and MAE for 10 days, including the day of entry, R50 uses 50 days, and so on.

This ratio is used by the CTA to measure whether the input signal has a reliable edge. For example, if they did a random (coin-flip entry) test, they would probably look at the following results; R5- ratio 1.01, R10- ratio 1.005 and R50- ratio 0.997. These numbers are very close to 1.0, and if we tested more, the numbers would be closer to 1.0. This is because after entering a trade based on random access, the price will be in the same direction as it was.

Give an example of this using the Donchian Trend System. The entry rules for this system should only be “bought” when the price exceeds the highest level of the previous 20 days, and sold as soon as the price is below the lowest level of the previous 20 days. The results are as follows. For this example, the R5-ratio was 0.99 and the R10-ratio was 1.0. You think the R ratio should be greater with a positive edge in your input signal. This is true, but what you need to keep in mind is that the Donchian breaking system is the next medium and long-term trend system, so its entry should be an edge in the time frame, not a short one. For entry, the R70 ratio is 1.20, which means that buying and selling in the direction of a 20-day break means an average of 20 percent deviation from the opposite direction when looking at the price movement at 70. days after the input signal. This ratio definitely changes on different days, and this is one of the reasons why trade violations are psychologically difficult.

If you follow or own your own login method, you should take the time needed to research what “extraneous” your login system is in the markets during the period you are trading based on the above. If you do, I think you will be amazed at some of the results you can find. If you need help calculating or researching different login strategies that might be right for you, send me an email or don’t hesitate to call me directly.

What is mania? It is defined as a mental illness characterized by great excitement, euphoria, hallucinations and overactivity. In investing, it turns into investment decisions driven by fear and greed without being balanced by analysis, cause or effect of risk and reward. Mania generally works in parallel with the product’s business development, but timing can sometimes work again.

The tech boom of the late ’90s and today’s cryptocurrency boom are just two examples of how a mania works in real time. These two events will be highlighted at each stage in this article.

Thought Stage

The first stage of mania begins with a big idea. The idea is not yet known to many people, but the potential for profit is huge. This is usually translated as unlimited profit, because “there has never been such a thing before.” The Internet was one such case. Those who use the paper systems of the time ask, “How can the Internet replace such a familiar and entrenched system?” The spine of thought begins to build. Modems, servers, software, and websites have been used to turn this idea into something tangible. Investments in the thought phase start out unusual and are made by people who “know”. In this case, it could be visionaries and people working on the project.

In the world of crypto-currency, the same question is asked: how can a crypto code replace our monetary system, contract system and payment systems?

Opportunities

The first websites were rude, limited, slow and irritating. Doubters, as visionaries call out, “Can this really be so useful?” He looked at the words “information superhighway.” The forgotten element here is that thoughts start at the worst stage and turn into something better and better. This is sometimes due to better technology, larger scale and cheaper funding, better applications for the product in question, or greater familiarity with the product combined with great marketing. On the investment side, early apprentices come in, but there is still no euphoria and no astronomical income. In some cases, the investment has brought in a decent return, but not enough to push the masses to jump. This is similar to the slow internet connections of the 1990s, the collapse of websites, or the inaccuracy of information in search engines. In the world of cryptocurrency, high mining costs for coins, slow transaction times, and account theft or theft are witnessed.

Acceleration

Word goes that this is a hot thing on the internet and “.com”. Products and materials are made, but because of the scale involved, the cost and time spent before everyone will use them will be huge. As markets reduce a business potential by an investment price, the investment direction of the equation begins to overtake business development. Euphoria begins to materialize, but only among early adopters. This is happening with the explosion of new “altcoins” in the cryptocurrency world and the large media outlets that have gained ground.

Euphoria

At this stage, the parabolic revenues and potential offered by the internet dominate. Not much attention is paid to the program or problems, because “the gains are high and I do not want to miss.” The words “crazy” and “mania” are becoming more common because people buy them out of greed. Negative risks and negatives are generally not taken into account. Symptoms of mania include: any company with adında.com blushing, the analysis is thrown out of the window in favor of optics, investment knowledge is becoming less visible among new entrants, expectations for a return of 10 or 100 baggers are common and few people know how the product actually works or not. he knows. This has had an impact on the cryptocurrency world with stellar earnings in late 2017 and a 100 percent increase in the number of shares of the company using a “blockchain”. There are also “reverse purchase offers” in which the names of listed but dormant shell companies are changed to something related to the blockchain and the shares are suddenly actively bought and sold.

Accident and Burn

The business scene is changing for a new product, but not so quickly as the investment scene changes. Finally, a change in mindset occurs and a huge sales excitement begins. The volatility is huge and many “weak hands” have been removed from the market. Suddenly, re-analyzes are used to justify that these companies have no value or are “overestimated.” Fear is spreading and prices are accelerating downwards. Companies that do not make a profit and survive with rumors and future prospects are blown up. Increased fraud and deception to exploit greed is exposed, leading to more fear and the sale of securities. Businesses with money are quietly investing in a new product, but unless the profit is convincing, the progress rate slows down because the new product is an “ugly word.” In the cryptocurrency world, this is beginning to happen with the folding of lending schemes using cryptocurrencies and the theft of more coins. Some marginal coins lose value due to their speculative properties.

Survivors

At this stage, the investment landscape is mixed with stories of losses and bad experiences. In the meantime, a great idea comes in handy, and it’s a boom for businesses that use it. It is being applied in activities day by day. The product is starting to become standard, and visionaries are being told that the “information superhighway” is real. The average user sees an improvement in the product and begins mass acceptance. Businesses with a real profit strategy hit a blow in the crash and burn phase, but if they have the money to survive, they reach the next wave. This has not yet happened in the cryptocurrency world. The expected survivors are those with financial status and corporate support, but it remains to be seen which companies and coins they will have.

The Next Wave – Work Reaches Hype

At this stage, the new product is standard and the profit is obvious. The business case is now based on profit and scale rather than thought. The second wave of salvation extends from these survivors to another early stage mania. The next stage was characterized by social media companies, search engines and online shopping, which are derivatives of the original product – the Internet.

The result

Manias works on a model that plays in a similar way over time. After recognizing each of the stages and thought processes, it becomes easier to understand what is happening and investment decisions become clearer.

What is Bitcoin Black?

Bitcoin Black is the cryptocurrency of the people, mainly for people. A peer-to-peer 2 peer-to-peer payment system will be adopted for use.

If we talk about Bitcoin, Bitcoin has failed in this way, the real value comes from the real use of the ecosystem and empowering people. Bitcoin transactions are slow and expensive, and Bitcoin is somewhat centralized. Bitcoin is gaining strength thanks to periods when people’s power is heavily controlled and participants are generally deterred from cryptocurrency.

People buy bitcoin to get rich, not to participate in the ecosystem. One percent of the elite take advantage of bitcoin to create discouragement, strategically raise prices, and attract income for the dream of wealth and throw their money in their favor. For fear of adoption. Bitcoin is managed, pumped and managed at will for many different reasons.

Bitcoin Black focuses on solving these problems, as the coin is a fairly distributed cryptocurrency with 1 million wallets down to the IEO, and all funds will go to community groups that the community has voted to focus the project on for fair distribution and publicity. adoption, use, education, ease of access, simplicity and society.

The goal is to make it a truly centralized autonomous network that restores power to the people. It does not belong to one group, but to many branches of society.

Distribution of coins

Bitcoin Black initially aims to turn at least 1 million wallets into a truly decentralized cryptocurrency, provided that it does not exceed 0.5% of the supply owned by 1 founding member.

The project has a pre-sale of about 900 million coins, accounting for 2.5% of total supplies.

If we look at the IEO, 7.2 billion IEO coins will be allocated to several community funds that will help the community move the project forward in the future.

Opposite party funds for manipulation (about 5%). The part used for the stability control fund to eliminate the possibility of early manipulation in small amounts and to maintain currency stability.

Finally, the rewards for introducing the application will be 14.4 billion coins.

Presentation of 30 million members with an increase in the proportion of new users. How to bring the coin to every school yard / university / workplace and community.

General Supply

The maximum offer is 36 billion coins.

Awards

3.6 billion coins will be required by members who help share Airdrop.

A simple social sharing platform with one click. Share a social message familiar with the encrypted video and an application download link that allows your friends to download it. The platform is currently active and working well.

Innovation

The best innovation is free transactions. Bitcoin black can be sent for free to anyone. Transactions are instant and you can easily send money until you send a message.

Wallets are easily accessible and very simple to use.

The result

Bitcoin has a fairly widely distributed currency with widespread supply that black will create less volatility by synchronized pumps and castings and lead to a more stable price. Bitcoin black will be the next bitcoin. You can register for airdrop by clicking here. I wish someone included me in the Bitcoin airdrop in 2008. Bitcoin Black will change lives, and we want to explain it to as many people as possible.

Stock markets around the world maintain different “indices” for the stocks that make up each market. Each Index represents a specific industry segment or market as a whole. In many cases, these indices are tools that can be traded, and this feature is called “Index Trading.” The index is an aggregate view of the companies that make up the Index (also known as the “components” of the Index).

For example, the S&P 500 Index is the largest market index in the United States. The components of this Index are the 500 largest companies by market capitalization in the United States (also known as the Big Cover). The S&P 500 Index is also a tool that can be traded in the Futures & Options market and trades under the SPX symbols in the Options market and under the Futures / ES symbol. Along with enterprise investors, individual investors and traders also have the ability to trade with SPX and / ES. SPX is only traded during normal market trading hours, but / ES Futures markets are sold almost 24 hours a day.

There are several reasons why index trading is so popular. Since SPX or / ES represents a single microcosm of all S&P 500 companies, an investor is immediately exposed to a basket of all shares representing the Index when it purchases SPX 1 Option or Future Contract and / ES contracts. respectively. This means instantaneous diversification designed for the convenience of one security for the largest companies in the United States. Investors are constantly trying to diversify their portfolios to avoid volatility in the shares of only a few companies. Getting an index contract offers an easy way to achieve this diversity.

The second reason for the popularity of index trading is due to the design style of the index itself. Each company in the index has a certain relationship with the Index when it comes to price movements. For example, as the index rises or falls, we can often see that most of the component stocks rise or fall in a very similar way. For similar actions in the index, certain stocks may fall more than the Index and certain stocks may fall more than the Index. This relationship between a stock certificate and its parent index is the “Beta” of the stock. Looking at the past price relationship between a Fund and the Index, Beta is calculated for each share and is available on all trading platforms. This then allows an investor to protect a portfolio against losses by buying or selling a certain number of contracts on SPX or / ES instruments. Trading platforms have become sophisticated enough to “pull” your portfolio into SPX and / ES immediately. This is a big advantage when a large market collapse is approaching or has already begun.

The third advantage of index trading is that it allows investors to have a “macro view” of the markets in their trading and investment approaches. Individual companies in the S&P 500 Index will no longer have to worry about how they perform. Even if a very large company faces difficulties in its operations, its impact on the company’s broad market index is diminished by the ability of other companies to perform well. This is exactly the effect of diversification. Investors can adapt their approaches based on broad market factors rather than individual nuances of the company, which can be very difficult to follow.

The downside of index trading is that earnings from broad markets are generally averages (average 6-8%) to medium to high figures, and investors can earn higher returns from individual stocks if they want to face them. the volatility that goes along with owning individual stocks.

The press began its annual warnings and predicted that October was a dangerous month for e-commerce. As a positive proof of the impending doom, they reduce the October 1987 market crash. Yes, the drums of material destruction and economic catastrophe are struck by an impressive pattern based on this devastating week of October 1987. Are these warnings, in fact, or are examples of “news creation” with questionable accuracy? To evaluate October’s performance in the years since 1987, let’s look at the history and link it to potential issues in e-commerce, especially day trading and e-mini scalping.

From the outset, I must say that I believe that past tragedies have not been a drastic change in e-commerce strategy. On the other hand, rejecting any risk altogether in October will be reckless and counterproductive in my e-mini trading strategy. Benoit Mandelbrot’s discussion of “market misbehavior” and “long tail” events is proof that any changing horoscope can create unexpected trading action; Hundreds of variables in market price discovery are difficult to analyze and generally persist, surprising and confusing both economists and traders with their randomness and coverage, which are not identified (or correctly interpreted) as market crashes. Commodity and Futures Exchange from NYSE since it tends to create higher variability, this refers to a much higher degree of impact. , CME and other futures exchanges, you would expect price volatility to be expressed more deeply in the price action.

Let’s take a look at the annual results in the Dow Index to determine if October is a risky month for trading, as my personal preferences are on the table. The results can be found in the in-depth “Alpha Search” blog and Dow Jones data:

· In the last five years, the Dow has advanced four years without falling

· In the last decade, the Dow has advanced six years without falling behind

· The Dow has advanced eleven years without falling behind in the last fifteen years

· Over the past 15 years, the Dow has advanced an average of 1.76% in October.

Source: Search the Dow Jones and Alpha blog

In the past, there was only one year (2008) that saw a significant decline in price levels. He experienced a 14.06% decline in the Dow that year; I would characterize this figure as the result of a banking / credit crisis, and I would not particularly refer to October, as previous data showed that October was not an extremely dangerous month for e-commerce. The data confirms that in the last fifteen years, October has not been a dangerous month, not even a statistically significant month for dangerous trading conditions.

In summary, I don’t think October is a difficult month to trade compared to other months of the year; In fact, data suggests that October could be a good month for e-commerce. However, the October 1987 incident remains a psychological barrier for traders and, as it turns out, is far from being forgotten. As always, good luck with your business …