I want to do a little recap over the last two months or so; in terms of learning, making money, etc.
Did I Make Money or Not?
Maybe first question answered: did I make money or not? Overall yes, but not in the way I intended.
To give a very brief rundown I've been spending a couple of days implementing, and testing many different trading strategies in
freqtrade. This was because I finished a bunch of books too, and I wanted to test some of those new ideas first hand. Main "improvement", if you'd like to call it that, was realizing that a portfolio, i.e. a collection of different coins, would return, on average, a higher percentage, than putting all eggs in one basket. First of all, this does work a whole lot better than other approaches. If you trade manually, I assume most of you are, adding a little bit of discretion for when "BTC bullish, buy all shitcoins" really improves returns. The question is quantifying "when is Bitcoin bullish?" I'm using a very simple approach. In pseudo code:
if BTC_close > EMA(100) && EMA(100)[1) < EMA(100) then long_everything
Sunken Cost Fallacy
Another thing that changed is that I've pretty much given up on technical analysis. Not that TA isn't useful, but the amount of evidence that basically proves TA isn't working is too much to ignore. TA does have its place, but it doesn't offer enough "edge" by itself to be profitable. The gist, for me, is basically this: we invest so much time and effort learning the skill of TA that the time we sunk into learning it skews our perception of what TA is and can do. Essentially we think drawing a bunch of lines on the chart, and throwing a bunch of indicators on the chart makes us profitable, because it was so complicated to learn all this stuff. And that's just not how it works.
The frustrating part is that even after years of learning this skill I just can't make it work consistently and realiably enough to count on it. We do have to realize that, if you look at your overall win rate, that most of us will have a win rate of around 50% in the long run. So it's a literal coin toss. If having a profitable trade is a coin toss, then why would learn all of this TA? In the end a lot boils down to learning how you make yourself hold on to the winners longer, and kill the losers quicker.
When you look at the world of investing as a whole, however, there are a lot more people profitable. So the question is what is the easier, more profitable, way to do all of this? Hence why I'm now looking at portfolios, or single strategies, more than hoping one strategy's outperformance of the market.
Wasted Time? Things That Work?
A few things actually work, but it's not related to patterns, generally. And these things don't require a whole lot of indicators, if any. Basically "long after pullback" works. Requirement in terms of "indicators" actually zero, but in reality some sort of "band" or "channels" indicator suffices. I like Keltner channels, or Donchian channel, you might prefer Bollinger bands, or maybe something more exotic you found on TradingView. Doesn't matter.
Humans have an advantage on higher timeframes. So anything below the daily is often too low already.
Because of the reason above, making buck takes time. If you never traded a paper account before, you never experienced how long it'll actually take. Sometimes I'm holding a trade for weeks, before it moves again. Now I have to admit, that I'm trading a super simple trendfollowing strategy with two indicators. The Ichimoku, and SuperTrend.
Obviously there are other strategies that work work too, but this approach is a lot lot more simple than 8 different indicators causing more confusion (Analysis Paralysis) than they help. Analysis Paralysis is so lost in analyzing the markets, throwing more and more indicators on the chart, that eventually they just can't tell anymore whether they should long or short based on the signals. And so simple strategies work a lot better. Doesn't mean these strategies have to be bad. In particular I've done extensive backtests on this setup, and it generally checks out.
Different (Asymmetric) Strategies Win
So after realizing that betting directionally is almost certainly going to fail more often I turned to the strategies that actually always worked, without requiring too much effort.
The money I put into a cloud mining contract some years ago, returned me a lot more than I invested. So I decided to put more of my stale Binance money into mining again. I'm currently mining with Shamining, and chickenFast.
I also have a DCA (Dollar-cost average) account with Hedged Bitcoin, which is available from the Uphold platform. Hedged Bitcoin offers downside protection by putting your holdings into USD when Bitcoin crashes, and puts you back into BTC, when the trend upwards resumes. Generally loses out a bit, but overall makes money, because of the "protection". Obviously works better in uptrends, but overall a good addition to the toolbelt. DCA-ing also very painless because Uphold supports bank deposits, and recurring purchases.
Yield farming is something I don't want to mention in this post, because it's generally just working rather well. If you're not yield farming yet, you're really missing out. Just think about it, even if a platform "only" gives 50% APY, then your coin value can drop 50% in one year, and you're still breaking even. Add a little DCA magic, and it's almost certain to win. Your big friend here is time. Markets go sideways most of the time, and this just means you're making a profit in those times. Do certain cryptos pump 300% more or less every once in a while? Yes, they do, but attempting to find these things is almost certainly going to fail because of pure randomness. Which crypto breaks out, and continues to do so, and when does it stop? Nobody knows. It's no secret I've been farming yield with Cake DeFi. The recent pump in DFI (Cake's own token) gave me an overall return of around 60%.
In terms of portfolio trading, I'm using Stoic as of right now. It auto-balances the portfolio every once in a while, which is good enough for me. The research I found suggesting a similar-type strategy is too complicated for me to implement, and Stoic is dirt cheap for what it does. I highly recommend it. I do, however, derisk manually by putting more USDT onto the margin account (so Stoic has less money to work with on the next rebalance), when I feel we might get into pullback territory.
Given that we don't have to watch the charts all day long with a diversified strategies, using these platforms is a very good tradeoff. We can use the freed up time to code strategies (in
freqtrade) and hone our trading skills by reading more books, and trading in the simulator until we can make money consistently and reliably. So maybe this is you too.
What has made me the most money is putting a lot more money into "safe" bets, and keep only a small amount available for actual trading to try and catch a big 300-percenter.
Right now I'm DCA-ing via Uphold, which is downside-protected with Hedged Bitcoin. I cloud mine, which gives a steady return. I also have some money on DeFi, and last but not least I use Stoic to trade on Binance.
Overall this mixture of strategies and approaches return more than I would be able to through trading alone. The main reason here is correlation. In crypto everything flows together, and if that's the case, then betting randomly 1 of 100 random tokens pumps 1000% is less desirable than betting on a few, and being a lot more diligent with them. (Risk would have to be spread across 100 tokens, which lowers the 1000% return.) In crypto almost everything moves together, so it really doesn't make a whole lot of sense to "spread risk". I get it though. I'd love to get another 2017 bubble.