Bitcoin trading Q/A: indicators, trade secrets and trading style.
Hi, I've been following you for a while now. I'm a huge fan of your calls. I started trading a year ago, when I started college. I bought in when Bitcoin was at ~$1000 (yeah). Basically lost most of my money .....
I'm impressed by how accurate your calls are. Though I don't follow your exit, I usually follow your entry.
Your last two trades for instance, the long from 220+ to 240, I exited at 239 based on momentum indicators and MACD. Basically, I would follow your entries, but exit early. So I'm curious, because your calls are spot on but you just don't seem to exit at the right time.
I know traders don't like revealing their secrets. I'm hoping you can help a rookie out. My question is this: Which indicators do you use? How do you gauge market sentiment? And for your latest position, why are you short now? (Price just rose to 232, fluctuating between that and 229) I would expect some sort of pull back.
I've got a few mails like the ones above in my inbox on reddit. I don't really have any "trading secrets", My trades and ideas are transparent on this site so feel free to ask if you don't understand something. I don't consider myself some kind of "guru" like many have proclaimed themselves in stock trading land. Also, I have a lot of other trading articles for bitcoin and my past at the bitcoin trading guide.
What type of indicators do you use trading?
I don't use any indicators for signals. I've studied about 20 different indicators, but ultimately I personally didn't find them helpful. Most indicators are derived from price, therefore looking at the raw price data is better. I do refer to the 5-20-200 day simple moving average to determine short-intermediate-long term trends. I use Average True Range to measure volatility.
How do I gauge market sentiment?
Markets around the world are correlated. Since Chinese markets dominate volume in bitcoin trading. I generally check the Shanghai Exchange Index that opens at 7PST/2UTC. Performance of the stock market will have an effect on bitcoin price. I check bitfinex USD and BTC swaps for general trends of traders. I check OKcoin futures sentiment and open contracts for short term direction. I can usually get a good idea from reddit, twitter and chat about the day's sentiment.
Your calls were spot on but your exits were wrong. Why?
I am a trend follower. When I enter a position, it is usually in the direction of the prevailing trend. I rarely counter-trend trade. Therefore, it is likely that my entry could be profitable for a while before pulling back. This is what you guys meant by "your calls are spot on." Additional movement from my entry is likely and probable. After all, what are the chances that I will buy at the exact peak? Chances are someone will buy after me.
I do not usually exit a small winning trade because I am looking for the big winners, not the small ones. If my trade is profitable, I usually put a soft stop around breakeven. If you look at my trading performance track record, you will often see I have few small win/losses followed by a big winner. Those winners are not outliers; they are part of my trend following strategy. I like to use fishing as an analogy to trading. I am putting on big baits and long lines to catch the 200lb tuna. My trading style is hugely inspired by Jesse Livermore and the Turtle traders. If you have not studied them, please due diligence.
I hope that cleared up some of your questions, leave a comment if you have other itching questions unanswered. I will probably make a part 2 of this or amend on to what I have later on. If you like the work that I do, feel free to create a new bitfinex or okcoin account under me. Helps pay for servers.