Quote from: njcarlos on January 02, 2017, 06:01:35 PM

Quote from: Chainsaw on January 02, 2017, 05:56:09 PM

Now, the depth of corrections varies in a rally based on how overextended it is.
So I played around with a "heat index " that let the amount that you sold at price targets increase as you deviate farther from moving averages. This lets you sell more when you believe you are overextended, but again there are no guarantees.

It's a little cryptic to use with no explanation, and it did not have a ton of interest back in the day. I can find a link to the thread that describes it if anyone is interested now.

Regardless, it is an important topic, and one that is good to have a good plan for, before prices go crazy and emotions can take over. Also crucial is the tax considerations of your buys and sells, long versus short term capital gains, but I am neither a lawyer nor an accountant so that stuff and all formal recommendations are each individual's responsibility.

In that vein, what do you speculate is the max depth of any coming correction to this rally?

Not to be cryptic, but that depends on the height of the rally.
The greater the drift from the long term moving averages, the more overbought we are, and the greater potential for depth-of-correction.

If you look at the 2013 rally, we had a highest price over $1000, and a lowest price nearly a year later on one exchange of $100 (and $166 across all).
So even conservatively, we had a $1000 --> $166 = 6x depreciation of the highest prices.

But remember, in a phased sell, you sold coins at 500, 600, 720, etc along the way. So let's say you had your rebuy set at 50% for the 2013 rally.
Any sells you made at 166*2 = $332 would get rebought.
The sells you made below $332 would never be repurchased.

So following the sheet patiently over the 3 year correction would have allowed for a very large profit.
If we instead had stayed flatter, or the bottom held at $500, then the ability for rebuy would have been too 'greedy' in this case, and would have done better with a rebuy at 75% of original value.
Conversely, if we had corrected down to $10 instead of $100, then a rebuy of 25% of original value would have been greater.

There's no way to know the future, so I set those variables based on game theory principles - at what values will I be okay, agnostic of the path Bitcoin takes?

There was a case study of mis-gauging this burning an individual from our most recent rally. IIRC, masterluc got burned during the rally to $500 in 2015. In short, it got 'overextended' too much so he sold ABOVE the planned amount. As soon as you do that, your choices go away. If price keeps going up, you cannot benefit. So we had already been a few standard deviations above expected maximum price...and kept going.

For me, that's the biggest benefit to the spreadsheet. I can be greedy by deferring some sales to later price points, but I never sell more than the limits set BY those price points.

...my best speculation is that in the long term, this rally peaks at $8,888, and corrects back to between $500 and $1000.