10/08/2018/12:30CET
A broad chart look at our 21DEMA bear market strategy.
In a bull market, every idiot can make money. I am not calling you an idiot but it is the less experienced "dumb money" that creates the spikes of volatility that make markets explode.... and then crash.
"In a bull market, every idiot can make money" is quite apt. Buy and hold and that's it! Till it crashes and then run for the tiny exit and sell at a loss most likely. Go lick wounds in a dark corner, rinse and repeat.
This is the story of the dumb money.
We would like to consider ourselves smarter than this but it is easier to say you are than to really be smarter.
I am dumber that I thought because I held on. Now I am sitting on +70% losses on most of my portfolio from the peak.
I am not licking wounds though because this is now my 5th year in the market and I remember btc in triple digits.
But I would be "pig in shit" happy if I had the good sense to sell out when btc was still north of 15,000!
To trade effectively, one thing to learn to do is detach from your emotions. Trading with emotion will usually lead to tears.
So this is why I have vowed to figure out a simple, easy to follow strategy for bear markets. And a strategy that automatically dovetails into a nice buy in position for the bull market runs.
The details of the strategs can be found in these 2 posts. (post 1 and post 2)
What I want to show you is a chart view of what this strategy would hav looked like over the last 6 months.
So the result...
Basically I have shown the buy, hold, then sell periods in this chart.
Green ones are when we sold with a profit, the red is when we sell with a loss.
There would have been 7 of these periods when the strategy would have had us holding BTC
3 of them would have been losing trades, and 4 of them would have been winning.
If we add up the losses we would be at -16.3%
But if we add up the wins, we would have had a profit of +29%
The largest loss is the first trade after the bull run. The percentages are the important number to look at. But also it is interesting to see how often we were on the sidelines with cash positions waiting during the last 6 mths.
So how do we know when to trade?
For a strategy to work, it has to be simple, and has to not require us to sit in front of a computer all day and watch the market action.
The easier strategy,
the easier it is to remove emotion and execute the strategy
the easier it is to remove emotion and execute the strategy
We place a warning or alert to tell us when btc crosses the 21dema. Lets say it is crossing on the downside, then that evening, if price is looking to close below the 21dema, we trade at around the market rate at the end of the day.
i.e. our sell trade trigger after a run above the 21dema is a close below the 21dema. Simple! (And the same applies in the opposite direction)
The beauty here is the strategy does not change in a bull market either. We are simply holding BTC for longer stretches.
That's it for this post. I think it is enough now in explaining the strategy. The work now begins to execute on it.
If you want to do this, my suggestion is to study the historic charts as I have and apply this rule to see if you get the same results as I did. Confirm my assumptions. Challenge my work. Poke holes in my calculations. Share your findings. Together we get stronger and smarter. And ultimately we trade better for more profits.