Everything to know before Investing with me!
What is investing?
Investing is the act of sinking cash or any cash alternatives into a given asset with the hopes/aims of gaining a greater return of cash in a future date. Below you can find a video explaining this concept in a brief and easy to digest manner.
Ways to invest:
Just as there is more than one way to skin a cat, there is also more than one way to profitably approach the markets. Investing can be broken into two main categories; passive and active investing. This can be further categorised into more groups, such as short-term, long term as well investing via a private investment firm.
With so many options to invest in, How can we identify which option is best for you?
The easiest means of this is through understanding your risk tolerance; This is usually matched with your individual personality type. We can deduct that there are two different types of investors, the speculators, and the value investors. The speculators themselves have different subcategories and these depend deeply on their personality type. Investing is a fickle thing that requires consistency and self honesty, thus two different people who learn from the same place will have similar but different approaches.
Your strategy should now be a form of resembling your personality.The main areas of your personality you should be assessing is, how risk-averse are you? Are you impulsive or regimented? How patient are you? You should rate each of these on a scale of 0–10. From here you can then assess based on the grid below how you should begin constructing the foundations of your
strategy which is; What kind of trader are you going to be?
From the results you got, you should be able to classify yourself into any one of the categories in the table, now these are not the end, but it is what has been deducted through not just my own but other investors’ experience which makes this a reasonable guideline.
Impulsivity should not be used when you have a strategy that involves high trading volume as not having any active positions in the markets (not trading that day) is also a position. If you are impulsive and see a massive market fluctuation then you are very likely to experience FOMO, (fear of missing out) and jump into a trade that does not fit into your strategy.
Being risk-averse is something to be aware of, as this can play or mess with your psychological state. The trader that cannot deal with mass losses, will then either hesitate to execute the strategy at hand or may overcompensate, so it is advised to stick to the grid above until your mentality evolves, and it will with time and experience. This will allow you to venture into different styles of investing as you will now possess the capacity to execute your plans well.
The last one is patience; patience is a major one as this can take some time to develop, can and is a limiting factor for several people not just in investing but also in life! The patience can pay off massively when you implement compounding on your side as Warren Buffet himself had done from a young age. The issue with being impatient yet being a value investor is that you can find yourself exiting a trade prematurely when you have seen the company that is undervalued continue to perform at subpar levels than over the next few months you may see a bull rally on the very same stock leaving you with nothing but regret! With time, however, experience will allow you to recognize how long roughly the movements you want will take to happen. Though both Forex and cryptocurrency are currencies, both differ in volatility. The expertise will aid with all three but from past experiences you will pinpoint a strong area, so until you are more balanced as an individual, I recommend adhering to your strong suits until you see character improvements via your journaling!
Types of assets:
In Investing we have several assets that we will be going over in the video shown below…
Understanding my strategy to the markets.
First, we must Break down the way in which I observe the markets; I see the market as a complex mechanical machine. This means that each market movement can be calculated. When one person is losing money, another is gaining. There are multiple variables that can be observed in tandem that I will use to enable me to execute the right trades at the correct times. This however varies with the different approaches that I will be breaking down:
The first few are simple but effective approaches that enable me to profitably operate within the markets. This however is just a temporary means till I am able to build more complex systems that would require a team for assembly.
Mean reversion:
Mean reversion is a mathematical concept that can be easily summarised with this short analogy. If you are walking down the street, and you see a person that is 7ft tall, the probability of the next person’s height being 7ft or taller will significantly reduce, as the height will naturally regress to the mean. Yet if you encounter another person that is 7ft, then we either have a statistical anomaly that can be accounted for and expected after a set amount of repetitions, or you have an incorrect model.
With my advanced mean reversion strategy, I see the market prices as waves that move in the path of least resistance. Through this lense we see the points with low probability are areas to moniter position sizes, ensuring a careful unloading as the algo is highly sensitive; Monitering various points of data continously as it works cohesively with another algo strategy that aims to pick off the large fluctuations of price that this strategy tends to ride but not maximize on.
Liquidation Sniper:
This strategy tends not to be traded as often, as mean reversion aims to be taking small percentages per day with high volumes; The liquidation sniper takes advantage of any large liquidations within the market using VWAP. (Volume weighted average price). With this, the algo can see the large liquidations and place appropriate orders to ensure a maximization of profits.
The bot will make money not when the large liquidation has been placed as shorting crypto seems excessively risky and unscalable. But to aggressively buy-in at the dip, allowing for the appreciation of the asset to be the profit once a suitable price has been found on the buying side of the order book.
Advanced Market maker:
The Advanced market maker is a means of mitigating risk, as it whole means of making money does not come from the calculation of price direction. It makes money directly from the exchange as you are a liquidity provider. There are really 2ways the advanced market maker makes its money.
- Fees: You will typically pay or receive rebate fees, this varies from each exchange. Bitmex and Bybit pay a rebate fee of 0.025% for limit orders. While exchanges like Binance and FTX charge 0.02% for limit orders.
If we use an order size of 0.001 BTC (minimum order size for USDT contracts) which would cost us 0.1$ in the margin, we would receive 0.0023$ in rebate fee from Bitmex and Bybit. However, we would be paying 0.0019$ to Binance and FXT in order to execute the same trade. As a result, it would come to a net difference of 0.0042$
Even though the fees look extremely small, market makers will execute around 350–700 trades per day which can add up extremely fast and increase the cost of trading.
2. This is more straightforward and less dependent on the exchange of your choice. Market makers aim for small margins anywhere from 0.1% to 0.5%. They maintain a limit take profit x% above their entry-level.
The final strategy that will be discussed here is a basic grid trading strategy which has shown itself to be rather profitable. This is method purely profits for the prediction of the price movement.
Grid Trading master:
Grid trading is a system used in the forex system traditionally. The idea behind this is that placing orders below and above the current market price, ultimately forming a grid of limit orders around the price. Hence, you open and close a very high amount of trade within a day. Each order is seen as a single trade rather than building up a position and managing it. The trader enters a position at each grid level and exits from that position on the next grid level.
How we make money through grid trading:
As you are trading each grid level, you are making a small profit. Your profit depends on a few factors. How much trading fees you pay as well as how far are your grid orders from each other. It is widely accepted that the shorter the distance, the higher the frequency of trades thus, more profit. However, it all boils down to how much capital you have and what kind of risk profile you are comfortable trading.
Grid trading essentially is profiting from the volatility rather than taking a major directional trade.
Below are some charts from Binance that show how effective my algorithms in the market.
Bringing everything into conclusion, my approach to the market is in a way appeasing to all investors as I aim to maximize returns with key risk factors being closely monitored. As many of the trades I execute are never really manual, there are no emotions in my participation in the markets. My algorithm has a set of parameters that must be in place before a trade is executed; fail-safes are in place that allows for swift exits in the event of flash crashes (a luxury of speed regular traders do not have). For any long-term investors, they can request to have profits poured into the diamond fund (there is a minimum amount to be requested to be held) which can enable for a long term holding, with minimal activity or they can reinvest into the medium to high-frequency firms at a request.