There is a formula (Klein criterion-see wiki) which describes the % of portfolio one should dedicate to a bet.
The problem is-it involves assigning a probability to a trade success, which is almost always an impossible task.
Example: on a trade with 60% success one should invest 20% of the portfolio; trade with 70% success, 40% of portfolio, etc, etc.
Mind you, these %% are "real" numbers, not imaginary ones.
Also, NO MARGIN.
EDIT:
Formula...Fraction of portfolio to invest (in decimals)=[2X(chance of trade success in decimals)]-1
Therefore, 0% to invest when 50:50 (or lower) and 100% to invest when 100% chance of success.
Everything else-in between.
Actually, at 50:50 Klein says "invest nothing", right - but if the odds are under 50-50, the Klein criterion suggest the opposite bet should be taken, with an amount again determined by the formula you quoted (it will come out as a negative fraction).
Example: on a bet with 40:60 odds (that's less than 0.5), the criterion suggests 2 * (0.40) - 1 = 0.8 - 1 = -0.2,
that is, invest 20% on the OPPOSITE bet (if anything like that exists).
I had not heard about these various Klein formula calculations, yet after your discussion of the formula, d_eddie, it causes me to believe that inadvertently I had been following some kinds of similar formula calculations, and yeah it is really difficult to place odds on expectations of events in terms of how far up and how much time that it might take to achieve certain ranges of upside possibilities.
Frequently, i suggest that in the short term I don't know about bitcoin's direction and it could be 50/50, for either direction, but surely I am not asserting to make short term BTC bets.
But in the long run, I gravitate towards the bet on bitcoin as an UP, meaning that in my thinking the odds for UP are more favorable than the odds for down, but still my assignment of probabilities are relatively whimpy and I am also still whimpy about the timeline, even though there have always been some discussions of the Garner Hype cycle that have been more organized into stock to flow models and four year fractals and s-curve adoptions that are largely just continuing to build on past models.
So, if any of us HODLers are suggesting that others (no coiners, and precoiners) consider getting off zero, and that they consider 1% to 10% in bitcoin to be relatively prudent allocations, they still would not be assigning high value to its likely long term success, but maybe gravitating towards 52% to 70% confidence when they are assigning within that kind of range. I am thinking that my investment into bitcoin in the early stages had gravitated towards 13.5% investment which would have been around a 77% confidence in the long term success of bitcoin?
I am not sure if this is making any sense, and so maybe I have said enough because, even if we frequently have a variety of models that provide us both confidence levels and numbers to shoot for, we are also frequently just ballparking our estimations anyhow based on a variety of longer term factors, to the extent that we are attempting to focus on longer rather than shorter term BTC investment horizons.
Furthermore, once my bitcoin portfolio became decently profitable, I no longer considered my motivations for my initial BTC investment because my views of the fundamentals did not really change, but I suppose going from an accumulation stage to a maintenance stage can also be factored into considerations of future BTC performance probabilities, too.... and odds for which whether a position will become unprofitable at some point in the timeline of possible cashing out.
And my assignment of future success probabilities did not really change either, except that I gained some additional confidence with the passage of time, Lindy effects and also just getting through certain attack vectors such as the late 2017 hardfork threats that ended up really not being much of any kind of meaningful threat to bitcoin, and of course, there continues to be FUD spreading and other allegations of competition from various other shit projects, such as ETH camps.
Calculations about the future do seem to change when in maintenance or even maybe going into liquidation phases and maybe there continue to be calculations of any risks that the value of my BTC holdings could go back into an unprofitable of less profitable range which could motivate some cashing out in the short term....