If you're looking to see what the average financial academic says about trading and investing, here's a place to start:

• Read A Random Walk Down Wall Street
• Learn the different forms of market efficiency
• Balance market efficiency with behavioral finance

Once you've read/studied the above, you'll have a pretty good grasp of where the typical academic stands.

I'd run some tests on stocks and currencies.  I have found them to trade similarly.

That's exactly what I'd do.  I use the 10/21 combination because I have found it to be effective across decades of data from other markets.  In other words, I can trust this combination to help me know when to trade most liquid asset classes.  It let's me profit from the average trend.


In my opinion, there isn't a "correct" way to do it.  I have heard reasoned arguments for both ways (indicators first followed by stop-loss or all at once).  In my opinion, all that matters at the end of the day is that you have a system that catches the average trend and a fail-safe exit to protect you from wipe-out.

Before answering your below questions, I feel the need to suggest that you may be curve-fitting.  If you are to a point where you are trying to find a system which catches precise market action, you are too far "in the weeds".  The market rarely repeats itself exactly so a system which is optimized around a certain market event will probably not perform well in the future.  Think general thoughts - a moving average crossover system is designed to catch an average trend and hold it through its life-cycle.  A system designed to catch a specific trend will probably not hold up in the future.



You are correct - if you do not trade the system exactly as tested, your returns will be materially different.  Incorporating "gut" into your strategy makes very little sense in that it essentially invalidates your backtest results.  I highly discourage gut decisions.



A stop-loss is a key component of trading.  It is dangerous to trade without a stop-loss.  Over the long run, you will probably encounter a trade which will completely destroy your account if you do not set stops.  I suggest you research this more and incorporate a stop-loss into your trading system.


Here's the gist of what I was saying - optimization only works up to a point.  If you continuously optimize your trading strategy, you will constantly be chasing different variables.  The markets are always changing and a system that is heavily reliant on a specific set of inputs probably won't be able to keep up.  10/21 might not be the best optimized solution, but I am confident that the indicators have longevity in that they catch the market action that I am after and have performed well in several markets for decades.

Thanks, glad you have learned from the thread.

1.  I trade less size and less frequently during periods of drawdown.  Assume you trade in such a way that if you are wrong, you will lose 1% of your account balance per trade.  As your account balance shrinks during drawdown, you will trade less in order to continue only losing 1% of your account balance.

2.  I do not pyramid (in or out).

Just observing human nature.  These guys seem to be using a quote from Warren Buffet to justify an action, but violate their own rule by what they say.  The human capacity for self-deception is amazing.

Which of the two would you rather be?

1.  I make decisions based on my untested, fickle emotions.
2.  I make decisions based upon research and facts.

I think most would either desire or claim to be number 2, but when money is on the line, we tend to revert to #1.

Thanks for the intel

Anyone aware of any BTC liquidity providers?

I'm not a financial advisor, so I am not qualified to give you direct advice for your situation, but here's my opinion on people looking to get into trading:




Even in the regulated markets, there are very few traders that you can trust.  Results shown are hypothetical or displayed in such a way as to mask the destructive habits of traders.  For example, I can make a strategy in 10 minutes that will produce a beautiful performance chart but is destined to fail.  For an off-the-cuff estimate, I'd say that 90% of traders offering their services fall into one of the following categories:

1) Scammers presenting false results with the intention of outright theft
2) Tricksters realizing that their system is the result of curve-fitting and martingale betting, hoping to make a quick buck from a few weeks of successful performance before the account is destroyed
3) Naive individuals who think that a few dozen successful trades equates to trading success


To speak directly to your question: it is difficult to find a successful, legitimate, and experienced trader in any market, let alone BTC, where the lack of regulation results in even greater dishonesty.  Finding good traders and money managers can be so difficult that there is a subset of the money management industry which tries to identify the best.  If I were tasked with hiring good traders, I would require the following:

1) Low winning percentage.  This is perhaps the biggest indicator of a troubled trader.  The outcome of any trade is essentially random.  Bad traders have a psychological need to win individual (random) trades, so they will quickly cut trades that go in their favor and hold losing trades until the market turns around.  This is a deadly flaw which will eventually result in account destruction.  Losing traders love to boast about how successful they are "I win 95% of my trades".  If you win $1 for 95 out of 100 trades but lose $1000 on the other 5%, you're a terrible trader in my book.

As one of the Market Wizards from Jack Schwager's book said:

"One common adage on this subject that is completely wrongheaded is: you can't go broke taking profits. That's precisely how many traders do go broke. While amateurs go broke by taking large losses, professionals go broke by taking small profits. The problem in a nutshell is that human nature does not operate to maximize gain but rather to maximize the chance of gain. The desire to maximize the number of winning trades (or minimize the number of losing trades) works against the trader. The success rate of trades is the least important performance statistic and may even be inversely related to performance."
- William Eckhardt

2) Average winning trade gain multiples larger than average losing trade loss.  A good trader understand that he's just playing a numbers game - he must cut his losing trades quickly and let his winning trades travel as far as the market provides.  For example, if a trader makes an average return of 5% on winning trades but only loses around 1% on his losing trades, he can be successful by winning 30% of all trades.

3) Willingness to display track record and provide account statements so that you can reproduce the track record yourself.

4) Humility.  You can't work in a field in which success means losing money on 70-80% of your decisions and make bombastic claims about calling the market direction.

There are several other criteria I could rattle off, but these will filter out most of the bad apples - assuming you can even get honest trading results in the first place.

The market data I am using is Bitstamp data from Bitcoincharts.com.  I get the data by looking at a daily chart for "all time" and clicking "load raw data" at the bottom of the chart.  There are 5 or so days which need to be cleaned up (price = infinity, etc.).  I set the market price on these days equal to the price from the prior day.  It's imperfect, but it gives the general idea.



If you're getting slightly different results backtesting, then I wouldn't be worried.  If I started backtesting a day earlier or later, my results could have potentially varied by several hundred percentage points.

In terms of what triggers me to actually enter/exit the market, I use a chart on ZeroBlock trading platform, so I don't use the BitcoinCharts feed.

The right way to do it is to create an account balance variable in your code and have EnterLong/Short signals enter a quantity such that you go "all in" when you trade.  This will show you the compounded return through time of the strategy.  If you are unfamiliar with code, I'm sure there are NinjaTrader strategies online with dynamic lot-sizing options, or just build it out in Excel.

A huge caveat here is that this assumes investing 100% with no stop-loss.  Suicidal in the real world.


Notice how my profit/loss chart shows the value of the account every single day but NinjaTrader only shows sharp, one-day adjustments to account balance?  That's because I'm showing mark-to-market PNL: value the account every day based on the closing market price of the day and calculate return.  This is what they do on the trade floor - your manager wants to know where you stand every day.


Yeah, I see that now - shorting would have resulted in devastating losses.  The way a hedge fund manager described it to me: "shorting a stock [BTC trades like a stock] is like playing Russian Roulette with 100 chambers - you'll make money 99% of the time, but the 1% will wipe you out".  This is why I rarely short BTC or any individual stock - why expose yourself to the potential of infinite losses?  The probability, no matter how remote, of total wipe-out mathematically removes your edge.


Definitely, glad you found it helpful.

A few things are happening here:

• My results are long only, your backtest includes short trades
• NinjaTrader does not compound returns unless specified.  In other words, DefaultQuantity will always purchase 1 BTC regardless of account size.  This skews overall account returns.
• NinjaTrader does not graph mark-to-market PNL charts, only changes in closed PNL.  This is why there are sudden surges upwards or downwards on your graphs
• There is probably an error in the price data used - your results imply that a short trade lost 100% (market rose 100% while short) - I cannot see this in market history

The 10/21 crossover occurred 2 days ago, providing a long signal.  Again, rather than blinding trusting a set of technical tools to direct our trading, we should scrutinize the strategy to ensure continued validity.





This journal was started on January 20th, 2012.  Here is a backtest of the 10/21 strategy from the inception of this thread until today.  Please note that this assumes that market participants have been able to shelter funds from ongoing counter-party risk in the BTC markets.

• Return of 9700% pre-commission; return of 9000% post-commission
• Assumes a 0.25% trading fee
• Assumes no slippage from the bid-ask spread
• Assumes no execution delays
• Results are long only

I'm not.  But I can't vouch for the other traders.

As I said two years ago:

If I read this correctly, you lost 21% (fiat) across 2 months while price dropped 34%.  Two comments on this:

1)  It sounds like you are choosing a very aggressive timeframe for analysis.  This is a trend following system - that means that it loses during periods of market inactivity.  Trading on such a short timeframe will expose you to a lot of choppy action.  I suggest re-running your studies on longer timeframes.  For example, I trade the daily crossover.  Over the last two months, there have been only a handful of trading signals.

2)  As to your comment about disappointment in trading vs. buy and hold, here is a post from last year:

No, I don't have a website.

Anyone aware of a hedge fund (filed with SEC) trading BTC for profit?  It seems that the handful of existing funds are acting as price exposure for investors.

The system calls for buying and selling at the crossover.  The .25% you are referencing is the commission for trading that is charged in that example above.

Greetings and welcome to the thread,

- On average, I win 32% of all trades
- My average losing trade results in a .79% loss of account equity
- I do not set profit targets, but my best winners have historically been 5-20 times what I'm willing to risk on the trade
- In general I target 1-3 trades per week and I'll hold positions as long as the trend remains.  Losing trades are cut within a few hours and winning trades last days, weeks, or months

- I don't know anything about the bots, sorry :/
- I primarily trade the currency markets

My advice to someone wanting to get into this business but not willing to put in the work necessary to beat the competition - don't.  The S&P 500 historically returns around 11.96% per year - in the long run, the casual participant is significantly better off by buying an index ETF (US: SPY is good) and focusing on the day job.  66% of currency traders consistently lose money in every single quarter.  The odds don't favor speculative traders.

This is my personal opinion - I'm not a registered financial advisor.  Best of luck.