How I learned to stop hating and love the Crypto

Ask… and ye shall receive.

Let’s talk about Cryptos. I know for a fact most of you hate these bastard offspring. And I used to as well… until I learned to stop hating and love crypto.

I was biased against them because I was sick of hearing about idiots making millions who don’t actually know how to trade.

But I’m sure you couldn’t possibly understand 😉

Systems for crypto’s have some unique challenges.

In no particular order

  • The exchanges all have different data
  • There isn’t enough data for a statistically significant backtest
  • Some of the exchanges are crooked as a 3 dollar bill
  • The “stable” coin Tether is an obvious multi-billion dollar ponzi scheme
  • For things with half a trillion dollar market cap, the markets are THIN. Read this
  • You have to decide whether to do your charting against BTC/ETH or USD
  • The crypto-idiots have fetishised “HODL”ing (an intentional misspelling of holding). Apparently ignoring stop losses and holding through 90% retracements is smart now.
  • Correlations are insane. Most days 90% of coins are up OR 90% of coins are down. This makes developing systems difficult.
  • Because you can’t trust the exchanges, you can’t usually use stops (eek)

Now despite those inherent problems it’s highly likely that you and I will never see a bull market as strong as this one.  I’ve been crushing it (even with the recent 75% across the board drop) and I’ve figured out a whole lot of stuff along the way.

So, let’s put our System Building caps on and start figuring out workarounds for these problems.

For the next few days I’ll be fleshing out the mechanics of the System Building Process as it applies to crypto.

Firstly. If the crypto bubble is popped/over… then every last one of these shitcoins is going to zero. And bitcoin will be back under $1000.

The implications of this are obvious. You can’t put more than 5 or 10% of net wealth in these things, since they are all the same basic trade. No way around it.

You must bank regular profits. Trailing stops give too much profit back on markets this volatile.

Secondly. The all on/all off nature of crypto means that you want to run for cover at the first sign of rain.

Thirdly. Because we haven’t got enough data to really make a backtest mean anything, discretionary systems are probably an obvious choice here.

Anyway… discuss amongst yourselves and I’ll flesh all this out over the coming days.

Right now, we have NQ breaking out while ES is still lagging. That sets us up for the LAST CHANCE for the bears when ES tests the old highs.

Make no mistake… if the ES and YM break to the upside, there are a lot of shorts who will have to cover.

The EURUSD really has my spidey sense tingling. Bucky has been catching a beatdown and we are at the kind of extreme which indicates the tide might turn here.

 Anyway… that’s all for today. Catch you again tomorrow.

Scott Phillips


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