Re: Wall Observer BTC/USD - Bitcoin price movement tracking & discussion

If you assume price = constant + superimposed sinusoidal curve, with the amplitude of the curve big enough to trigger buying and selling, then by your method, you repeatedly buy low, sell high, over and over again. Which means you make money, assuming the spread and transaction costs are less than what you earn from buying low and selling high.

Any curve can be represented as a sum of sinusoidal curves, i.e. a Fourier series. Therefore, it becomes mathematically provable that your method, if properly implemented, will cause you to benefit from volatility.

I'd like to see that proof

A couple of problems I see with it:
1) you are talking about piecewise sinusoids (right? reset at each sudden price change?). That complicates any kind of frequency domain analysis. Lots of noise.
2) After a price change, how do you determine what phase (and amplitude) to start the next piece at?

If you really did mean fourier analysis of the whole price data, then you would see low frequency cycles with a bit of luck (but too many people already found those, so they're tiny). The sudden price moves add way too much noise to be able to detect anything sinusoidal at day trader frequencies.

I think that I understand that your criticism may encapsulate that humans are way too inconsistent in order to make such a system work mathematically as profitable - however, couldn't you program a bot to take out some of the human error and instead of having it set at really close intervals (like they probably do in china with no fees), they set them at intervals like $10 - or maybe more accurately to use percentage moves, like a .5 or 1% move in one direction triggers a sell, and then every equal increment. Then buy backs would be 1% or more below the sales price. Of course, there are variations about what increments to use and what quantities.

Percentages would definitely be the way to go, and the optimal percentages would depend on how wide you expect the price fluctuations to be. For example: if you expect LOTS and LOTS of +/- 10% fluctuations, then you're better off buying at the -10% and selling at the +10%. Suppose you model lots of +/- 3% fluctuations with very infrequent +/- 50% fluctuations ... in that case your idealized bot would probably have a pretty complex behavior. Deriving what exactly the ideal bot should do would be a very interesting exercise.

Since in the real world, I would not have any kind of real clue about how to program a bot (without having to engage in a lot of learning), therefore, I tend to set pretty small increments in terms of dollars (these days $10 or $15 increments. I was doing other variations in the past - almost every variation down to a couple of dollars when there were lower fee options available to me, and price moves were a larger percentage of the overall change in value), and I do that because it is a bit easier to keep track..

Also, probably in recent weeks I have been trading way too much (even though I increased some of my intervals to like $15), so it is occupying more of my time than fruitful to be having to reset buys after sells have executed, so possibly in the future, I will trade on much larger swings in order that it is not as time consuming (which a bot would likely solve a lot of those kinds of issues - if the bot doesn't get programed in such a way that would fuck everything up because of unforeseen scenarios, for example or some other programing error).

Also, you have to take into account:
- risk of exchange getting hacked
- tax implications of selling
- exchange fees and spread

I bet someday someone is going to build a bot using ethereum (or some such tool) that will do this automatically using peer to peer exchanges. Of course that can't happen until:
- p2p exchanges gain more traction
- we can move fiat around on the blockchain (like Tether-USD, but with a more established backer and a larger market cap)

Yep... combination of bot and other attempts at arbitrage and the extent that the events are taxable or result in unanticipated losses. I did have some losses - still unclear from Bitfinex and also I had some losses through some of my direct trades that I attempt to fold into my overall cost of doing business. My average cost per BTC accounts for these events, to the best of my ability to figure it out, but yeah varying kinds of bots are going to evolve in the future and exchanges, scams and other risks are going to continue to change, too - and probably more and more of a target the higher the price of BTCs.