Quote from: Chris! on November 28, 2016, 09:58:02 PM

Quote from: leeloo on November 28, 2016, 09:29:39 PM

Quote from: Zadicar on November 27, 2016, 02:27:22 PM

Bitcoin trading is really risky because of volatile price.

Not this again. Volatility DOES NOT equal risk. It's like saying "high temperatures are bad"; well, try to cook a meal in cold water...

Literally every single piece of financial literature on the planet contradicts your statement. Why? Maybe because of the very definition of Volatility which is:

"Volatility is a statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security." http://www.investopedia.com/terms/v/volatility.asp

In other words bitcoin going up and down 10% is somewhat volatile whereas bitcoin rising 1300% in 2013-2014 is very volatile. Trading altcoins in very very volatile. Make sense?

No, it does not make sense. CHF had very low volatility. THB had very low volatility. Please explain to me how they were not risky.

Appeal to authority does NOT prove anything. Investopedia says awesome things about Fibonacci magic as well. I rest my case.

Volatility can't be "measured" unless your distribution is normal (but you won't find that in finance): the sample mean and volatility are useless to estimate population mean and volatility in the presence of fat tails, because you can only see the tip of the iceberg, and you have no way to guess how big is what's unseen. That is, from the sample mean and variance; you can still use MLE to get a guesstimate on the tail exponent, but the margin of error is monstrous, so you can only see that you need to be cautious, not how cautious you need to be.

Basically, standard deviation is a cute concept, but it has no significance to finance, because it applies to more restricted probability distributions than what financial returns follow. You can't even mathematically define the concept of volatility for some parameter ranges of those distributions!

Return distributions aren't stationary, either. Volatility tends to cluster (the volatility of volatility is higher than the volatility), so you're even worse off: if something big happens, chances are something huge (that your clever standard deviation said can't happen in a trillion years!) is about to be happening soon. But I'm not sure why there is still an argument about it after stuff like LTCM and the flash crash and the likes of them.

As for investing. There are some hedge funds with several decades of solid track records that pack so much volatility that you'd run out screaming. Yet they are still around, with awesome compound returns, while those low volatility funds routinely blow up after a couple years. (Yes, LTCM is again a prime example; did I mention it was led by some of the most prominent members of the financial literature you were talking about?) If volatility equals risk, this should be the other way around, correct?

Case closed.