Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Show HN: Bitcoin investing using Dollar Cost Averaging strategy

github.com

Post reply on HN
Print view View original

71–80 of 125 posts

Re: Show HN: Bitcoin investing using Dollar Cost Averaging strategy

#71

Post by matt4077 »

AndrewBissell wrote: post #53
Poiesis wrote: post #45

Earlier quoted context omitted.

Am I reading this right? It seems to be advocating “Buy high, sell low”.

Since most markets trend for long periods of time, this winds up being a better strategy than you might imagine. "Buy high, sell low" also isn't quite an accurate description, because moving average crosses in strongly trending markets happen at the beginning of the move, rather than the end. No one regrets buying AAPL high in 2010, or selling LEH low in early 2008.

I just tried that momentum theory on the bitcoin closing data someone posted in a sibling comment.

I get 715 days of a trend continuing (down->down or up->up), and 739 days of the "trend" reversing: down->up OR up->down.

That pretty much points at a random walk. "Momentum", and any other patterns people see, are imagined.

Re: Show HN: Bitcoin investing using Dollar Cost Averaging strategy

#72

Post by AgentME »

snark42 wrote: post #66
AgentME wrote: post #58

Earlier quoted context omitted.

Aren't taxes only applicable to the profits? I assume the only issue with taxes is it'd be a little more paperwork to document all the trades done with the bot than just a single buy-then-sell.

> Aren't taxes only applicable to the profits? If you hold for less than a year it's income, if you hold for more than a year it's capital gains. So buy and hold would possibly be advantageous in the US at least (35% vs 15% tax rates.)

>If you hold for less than a year it's income

But it's the profits specifically that are taxed as income, not the whole sale value, right? If I buy and sell one Bitcoin a hundred times in a day and make $1 of profit in total, is the tax is a percentage of $1 or a percentage of 100 times the bitcoin price?

Re: Show HN: Bitcoin investing using Dollar Cost Averaging strategy

#73

Post by nodesocket »

icelancer wrote: post #67
gtrubetskoy wrote: post #35

The re-balancing system (of which dollar averaging is a variant) is described in the Fortune's Formula book [1] as something that Claude Shannon [2] would demonstrate in his lectures at MIT as a mathematically proven guaranteed winning strategy. At the end of the talk there was a Q and A, and the first question always was "do you yourself use this system", to which he replied "Naw, the commissions alone would kill yo…

Back then that was certainly true. Today it's easy and free to do using ETFs that are free to trade under certain brokers. Since I'm a boring fuddie duddie, I just rebalance my ETFs and index funds in Vanguard every so often at no cost, but I believe eTrade and some other platforms have a subset of "no commission" ETFs, Interactive Brokers has very low commissions, and if you like startups in the space, Robinhood is…

Robinhood is good for quick smaller trades, but their order fill is horrible. Every time I am shocked at the prices my orders fill at. I'm fairly positive they are making money front-running or from kickbacks from exchanges.

Re: Show HN: Bitcoin investing using Dollar Cost Averaging strategy

#74

Post by benmowa »

nodesocket wrote: post #73
icelancer wrote: post #67

Earlier quoted context omitted.

Back then that was certainly true. Today it's easy and free to do using ETFs that are free to trade under certain brokers. Since I'm a boring fuddie duddie, I just rebalance my ETFs and index funds in Vanguard every so often at no cost, but I believe eTrade and some other platforms have a subset of "no commission" ETFs, Interactive Brokers has very low commissions, and if you like startups in the space, Robinhood is…

Robinhood is good for quick smaller trades, but their order fill is horrible. Every time I am shocked at the prices my orders fill at. I'm fairly positive they are making money front-running or from kickbacks from exchanges.

After reading Flash Boys: A Wall Street Revolt, I think it would be silly of me to not believe everyone is doing some variation of front running.

Re: Show HN: Bitcoin investing using Dollar Cost Averaging strategy

#75

Post by ccleve »

ericb wrote: post #65
ucaetano wrote: post #63

There is plenty of empirical evidence showing that DCA doesn't work, and only provide a psychological value. Why are people still using it? And for Bitcoin?

Sources?

https://www.google.com/search?q=dollar+cost+averaging+empiri...

Dollar cost averaging doesn't work because it makes an assumption that doesn't hold in the real world. It assumes that stocks trade in a range, and revert to a "true" price over time. If there were a true price, then you would in fact buy more when the price was low and less when it was high and DCA would work.

But stock prices look more like a random walk, and they display no tendency to revert to a mean.

Here's an article I just found: http://www.crossingwallstreet.com/archives/2010/11/dollar-co...

Re: Show HN: Bitcoin investing using Dollar Cost Averaging strategy

#76

Post by ringaroundthetx »

pdog wrote: post #28

A better approach with an extremely volatile asset like Bitcoin is a simple tactical asset allocation strategy. For example, the following system significantly outperforms both buy-and-hold and dollar-cost averaging strategies. 1. Buy when the monthly price of Bitcoin is greater than its 10-month simple moving average (SMA). 2. Sell (and move to cash) when the monthly price is less than its 10-month SMA. That's it. M…

And now imagine it with the ability to write covered puts. The juicy premiums are going to be HUGE when you don't get exercised because everyone thinks bitcoin is going to be volatile, and then the one times when your options get exercised you get a lower cost basis!

I want this so bad.

Bitcoin spot market is going to get SPAN margining instead of Reg-T, so the options leverage is going to be amazing, way better than the ridiculous margin requirements for equity options, it is almost unfathomable.

With the CFTC loving it, CBOE and CME Group gearing up for futures and options, and the Winklevoss Twins pushing them hard because they want that ETF, thats how I know bitcoin is just getting started.

This is one of my bullish cases. The entire "but muh volatility" argument goes completely out of the window, after they reinvent hedging.

Re: Show HN: Bitcoin investing using Dollar Cost Averaging strategy

#77

Post by matt4077 »

thanatropism wrote: post #70
ucaetano wrote: post #63

There is plenty of empirical evidence showing that DCA doesn't work, and only provide a psychological value. Why are people still using it? And for Bitcoin?

It says "Claude Shannon" on the tin. The amount of Claude Shannon worship in YC is astounding. Shannon basically lied (possibly to himself too) about AI for about 15 years from 1950 on.

Even after reading through Shannon's Wikipedia article, and searching it for "artificial intelligence" and "1950" I have no idea what you're talking about.

It appears as if Shannon created a maze-solving robot mouse with memory, and also published the basic idea for computer chess around that time. Both ideas seem fundamentally sound.

And even if he had somehow been wrong on something at that stage in his life, he had basically created the science of communication single-handedly long before. Plus some minor work in cryptography.

Re: Show HN: Bitcoin investing using Dollar Cost Averaging strategy

#78

Post by byproxy »

empath75 wrote: post #54
bkolobara wrote: post #2

> The investor purchases more shares when prices are low and fewer shares when prices are high. If you never sell you never lose.

If you didn't sell on mtgox you lost everything.

I bought 4 BTC on Mt.Gox when they were ~$25 each. Naturally, after I bought it crashed to the ~$1 territory. Thought to myself "Figures..." and decided might as well hold. Cut to a year (or two?) later and the prices hit the ~$30 territory. I decide to sell and reap a nice little ~$20 profit. Lucky me, eh?

Re: Show HN: Bitcoin investing using Dollar Cost Averaging strategy

#79

Post by trophycase »

fiatjaf wrote: post #31

Some years ago everybody involved with the cryptocurrency universe had a relatively good understanding of economics, markets, agent incentives, game theory and so on -- even if these people didn't mention any of these terms, they seem to have a natural, logical, grasp of everything that was needed (not much). Now it seems that people come to cryptocurrencies without knowing a thing, misunderstanding the way people ac…

What's wrong with Tezos?

Re: Show HN: Bitcoin investing using Dollar Cost Averaging strategy

#80

Post by danmaz74 »

thanatropism wrote: post #69

It requires some maths (and some faith in the Black-Scholes model, but it works okay in historical simulations), but you can do this instead. To lock in a price for some stock or foreign currency for a given delivery date: - Buy an European call and write an European put at this value. This neutralizes your exposure to fluctuations in price; OR - Helpfully calculate that the "delta" for delta-hedging this portfolio i…

Ok, but where are you going to trade those derivatives?
Post reply on HN