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Posts Tagged ‘$BTCUSD’

2021, the Year of the Monkey. $SPX #markets #trendfollowing #trading #investing #funds #heikinashi #WealthManagement

January 3, 2022 Comments off

Each year, around this time, everybody has an opinion about where the markets will end next December. Very few are right, with the Lady Luck on their side. As everybody knows and as few admit, forecasting the markets is pure entertainment.

In his book A Random Walk Down Wall Street, Burton G. Malkiel describes a dart throwing stock selection method as “Taken to its logical extreme, it means that a blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by the experts.”

Five years ago, I recreated this simple random stock selection to generate a series of funds and compare their performance with a benchmark, in this case S&P-500. At the of each year, I was running it, with similar results: the Monkey beat the Market and most of the fund managers.

Input

  • The S&P-500 stocks universe.
  • The stocks selection is 100% random.
  • 100 funds are generated.
  • Each fund has 30 stocks (an optimal value for risk diversification).
  • Buy (at close on the last day in December) and Hold (until the last day of the next December).

This is how one set of randomly generated 100 funds performed in 2021: 73 were better and 27 worse that the benchmark S&P-500. The lowest performance was +13.18% and the highest, +47.81%. (Note: one can generate any number of sets. The results show the same positive tendency as above).

How many professional fund managers beat the lowest performance of 13.18 in 2021?

And here is an animation of the process, with S&P-500 in yellow:

Why should we care?

  • If a rudimentary random selection of stocks generates such a good performance, why do we need to pay maintenance and performance fees to human fund managers?
  • If a rudimentary random selection of stocks generates such a good performance, why do we need to pay maintenance and performance fees to Artificial Intelligence/Machine Learning-driven funds?
  • Despite its simplicity and performance in good and bad times, no fund manager will sell funds based on dart throwing. They and their clients won’t accept the fact that a simple random stock selection performs better that most of the highly-paid human or automated fund managers.

Next step?

  • Let’s follow in 2022 a randomly generated fund. It’s fund #50 in 2021, with a performance of +31.26%.
  • Its components are TRMB GOOG CMI IEX FLT CVS UNH HWM ABMD VFC FE AAPL WELL WYNN WFC BMY LH QCOM CHTR NXPI WMB ABBV CVX HRL TRV VZ CMCSA K MMM SYY.
  • At the end of each month I will publish the buy-and-hold performance since the start of 2022. Better or worse that the benchmark? Time and the Monkey will tell the story.

Disclaimer: This is not a recommendation to buy or sell financial instruments of any nature. It is just a reenactment of a dart throwing stock selection method based on the book A Random Walk Down Wall Street by Burton G. Malkiel.

A long-term view for $SPX #heikinashi #markets #trendfollowing #trading #investing

January 2, 2022 Comments off

The most important question in trading/investing is “How much are you *ready to lose?”

With an honest and firm answer – a good stop-loss makes the difference – trading and investing become more rewarding and everything starts falling into the right places.

SP-500  ($SPX) – quarterly

  • (+) Uptrend with a stop @3,848
  • (!) A slowdown (haDelta).

SP-500  ($SPX)yearly

  • (+) Uptrend with a stop @3,854
  • (+) haDelta is overextended.

$BTCUSD is still bullish #heikinashi #markets #trendfollowing #trading #investing #cryptos #Bitcoin

November 14, 2021 Comments off

The most important question in trading/investing is “How much are you *ready to lose?”

With an honest and firm answer – a good stop-loss makes the difference – trading and investing become more rewarding and everything starts falling into the right places.

Bitcoin  ($BTCUSD) – daily

  • (+) Higher highs, higher lows.
  • (+) Stop is @58,126.
  • (!) We don’t know what haDelta will do. Patience until this is resolved.

Bitcoin  ($BTCUSD) weekly

  • (+) Positive.
  • (+) haDelta offers a bullish signal.

Bitcoin  ($BTCUSD)monthly

  • (+) haDelta triggered a buy signal several months ago.

Measure before cutting: Using CVaR and VaR for cryptocurrencies $BTC.X $ETH.X

October 10, 2018 Comments off

There are many ways to estimate the level of risk one may encounter during trading and investing events.

This short article describes two risk measures that can be easily calculated using historical data and a statistical software (R, Excel):

  1. VaR (Value-at-Risk): The lowest amount of the capital (%) one can lose with a certain level of confidence, in a single event during the period.
  2. CVaR (Conditional Value-at-Risk or Expected Shortfall): The average (%) of all losses greater or equal than VaR for the same confidence level.

CVarR is greater than VaR and is considered more relevant than VaR.

Below, we calculate and discuss these values for three distinct periods in the life of BTCUSD and ETHUSD.

Case #1: September 8 – October 10, 2018 (A very quiet period for cryptocurrencies)

Number of days: 32

VaR95% (BTHUSD) = -1.936% means that every 1.6 days i.e. (1-0.95)*32 days we can lose at least 1.936% of the capital.

CVaR95% (BTHUSD) = -3.005% means that on the day we lose at least 1.936% of the capital, we can expect to lose 3.005% of the capital.

Since CVaR is more relevant than VaR, we calibrate the risk (for a 95% confidence level) for at least 3.005% capital loss on one single event during this period. The same logic applies to each value in the table below, with focus on CVaR.

Case #2: January 1 – October 10, 2018 (Since the start of 2018)

Number of days: 282

VaR99% (ETHUSD) = -14.933% means that every 2.8 days i.e. (1-0.99)*282 days we can lose at least 14.933% of the capital.

CVaR99% (ETHUSD) = -17.26% means that on the day we lose at least 14.933% of the capital, we can expect to lose 17.26% of the capital.

Since CVaR is more relevant than VaR, we calibrate the risk (for a 99% confidence level) for at least 17.26% capital loss on one single event during this period. The same logic applies to each value in the table below, with focus on CVaR.

Case #3: July 10 – December 16, 2017 (A very bullish period)

Number of days: 159

VaR99% (BTCUSD) = -9.651% means that every 1.6 days i.e. (1-0.99)*159 days we can lose at least 9.651% of the capital.

CVaR99% (BTCUSD) = -13.534% means that on the day we lose at least 9.651% of the capital, we can expect to lose 13.534% of the capital.

Since CVaR is more relevant than VaR, we calibrate the risk (for a 99% confidence level) for at least 17.26% capital loss on one single event during this period. The same logic applies to each value in the table below, with focus on CVaR.

To remember

  • Based on historical data, we can calculate expected levels of losses for confidence intervals of our choice (95%, 99%). Value-at-Risk (VaR) and CVaR (Conditional Value-at-Risk or Expected Shortfall) are two measures that can help calibrate the risk.
  • CVaR is higher than VaR for the same confidence level, therefore more representative and its use is recommended.
  • ETHUSD is prone to higher losses than BTCUSD.
  • During trends (Cases #2 and #3), traders may incur higher losses than during quiet periods (Case #1)
  • Focus on losses instead of gains.
  • Same logic can be used for currencies, equities, other cryptocurrencies, other financial instruments.
  • Calculated VaR and CVaR values are not a warranty against future losses. Far more serious losses may occur due to unexpected events.

(Results were generated from GDAX exchange data using the PerformanceAnalytics R package)

 

 

 

#bitcoin, trends, filters, and stop-loss $BTC.X $ETH.X $LTC.X

March 11, 2018 Comments off

Bitcoin/USD ($BTC.X) daily

  • Downtrend highlighted by a bandpass filter (pane #3).
  • The filter adds trend confidence when haDelta offers whipsaws.
  • haDelta points to a reversal that needs to be confirmed by the bandpass filter (BP).

 

Bitcoin/USD ($BTC.X) weekly

  • Here, the bandpass filter (pane #3) has a positive slope, but…
  • haDelta points to a reversal at zero.
  • Best is to wait for haDelta action.

 

Bitcoin/USD ($BTC.X) monthly

  • A downtrend highlighted both by haDelta and the bandpass filter (panes #2 and #3).
  • The month is not over yet (technical indications may change).

 

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