Another day of fresh air as the market is starting to showing signs of strength especially with some of the more blue chip coins. Bot ETh' and BCH' are showing good momentum from their lows as well as Bitcoin' itself. NEO' is trading up 35% off its recent low as well as many others.
I originally planned on being overweight Bitcoin' (and I am) as my thinking was that bitcoin' recovered prior to the alt coins in the last market correction. But this time it appears the market is moving as a whole. This may simply be due to that fact that it is no longer just bitcoin' new investors are interested in, they are starting to see the potential of other coins and are simply diversifying accordingly. However we are still sitting on a good cash position and as I mentioned last Friday I was looking to start adding this week. Quite simply after large corrections things are choppy for a few days or weeks, and we want to see signs of a recovery before being aggressive.
How do I add in positions Now lets say right now that we are working with a 100k portfolio and you have 30k in cash just to make it simple. Should be more than 30% at this point as the market has pulled back significantly and though we added a few small positions during the correction, we are still cash heavy.
A full positional trade should never be more than 2-5% of your portfolio. I like numbers where I can quickly determine my profit, so in this example I would be looking at $2500 as a full trade. If I want to add bitcoin in increments my trade positions would be $500-$800 each. So a full position is not more than 10% of my trading portfolio or 5% of my total portfolio. THIS IS SIMPLE RISK MANAGEMENT! Large positions cause Large problems when the market goes against you. In addition this provides opportunity to add at lower prices, as you have managed your cash position wisely. So if you have 10k in the market, a trade should not be 3k, it should be no more than $500. PERIOD! Now before I get the "that's peanuts" comments, go ahead an risk more and see how that works for you in the long term. If your new do not look to score home runs! Base hits are the name of the game. You may be the best market timer in the world, but if you do not have good money management skills, you will under perform those that do.
As far as bitcoin' goes this was a solid two days of movement on the back of a positive SEC and CFTC hearing. I want to add at least one more time as a longer term play, but I'm not adding here. We may get one more pullback to the 7500 level off the upper channel or the 8398 level where I would be a buyer. I am also looking at other coins to add to as well, as most are recovering off extreme lows. I will post as I add, but patience and small positions are still critical at this time. We are not out of the woods yet but there may be a clearing up ahead.
Komentar
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I see several comments on position size. My portfolio size determines the size of an overall trade, not my cash position. I do want to take into context my cash position size as well but it is not the determining factor. I am sorry that I worded this wrong.
In a 100k portfolio (overall) if I was to max out a trade at 5% or $5000, and I was to take a 20% hit on that trade. I limited my loss to 1% of my overall portfolio. That is the key point.
Now if I have a 100k portfolio and 30k of that makes up my trading portion, then I wouldn't want to personally trade 5k on one trade as that is more than 10% of my trading account. That limits my trades to 6. As I own more than 6 coins I want to be able to scoop up deals when they come without closing a trade. So that is why I would limit it to 10%. but that is me. There are times I'm over 10% of my trading portion, but never over 5% of my overall portfolio.
Mr. Goldbug: Thank you for pointing out that money management is one of the most important parts of trading. More important than trade selection. Ed Seykota proved mathematically that the optimal bet size is 25% of entire stake for a 50/50 win/loss ratio (fair coin) with both wins and losses returning 100% of bet size (Heads I win the bet amount, Tails I lose the bet amount). So 5 coins at 5 % of trading stake each would be one example of optimal bet sizing based on 50/50 probablity of winning. trendfollowing.com/whitepaper/DETERMI.PDFA. As long as losers are sold before they do much damage to the portfolio and winners are held until the bullish trend changes in a reasonable time frame, a trader is doing about as well as can be expected. Still looking for an upside breakout of the down trend since early Jan.
goldbug1
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@pskirball, Wonderfully stated Phil! We did trade one breakout successfully but not the second ;(. So we are at a 75% win ratio ;(
kardia
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Are you expecting price to go back down to test support at 6k?
goldbug1
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@rev214us, Not sure we retest 6k but 7500 the more likely area. We could retest 6k so we can not dismiss it.
scandler37
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Lower highs and lower lows don't comfort me. And now, after 2 days of bullish, the MACD just crossed over to bearish on the 2hr chart. The last few times that happened:
*MACD just crossed over to bearish on the 2hr chart *Jan 28: Price dropped from 11,500 to 9,500 (Jan 30) (20% decline)
*MACD just crossed over to bearish on the 2hr chart *Feb 1: Price dropped from 9,500 to 7,500 (Feb 2) (27% decline)
*MACD just crossed over to bearish on the 2hr chart *Feb 4: Price dropped from 8,700 to 5,800 (Feb 2) (50% decline)
Seat belt officially fastened. Storm windows in place.