I’m not sure I fully understand you here. I can’t see how a trader’s beliefs could affect how their trades turn out, but if you meant their beliefs make them more cautious, then yea, that would help. But the main point was exactly this: the short side requires a much more careful approach than the long side, which implies its effect can also be only that big.
This implies shorting can actually move the market, which is exactly what I’m arguing against.
Shorting is by far not the equivalent of the long side: it starts out from a disadvantaged position, with a limited upside and an unlimited downside. A bad long position shrinks, a bad short position balloons. You can’t squeeze a long holder out of a position either, but the only question about the next short squeeze is how much longer until it’s here.
You can’t start a fight from such a bad position. Short sellers are not the enemy, scheming against the bulls: they can merely use the opportunities that arise naturally. Those who try to play tough won’t last long enough to make a difference.
Did I miss it or do you only talk about leveraged shorts and forget the longs? Leverage isn’t for shorts only, those pumps can only be really forceful because of highly leveraged buyers. If anything, leveraging increases volatility in both directions. Consequently, you can margin call long positions. That’s how these huge price moves (in btc, e.g.) happen.
A winning short doesn’t shrink in a bear market, it grows. If the trend is down then shorts will do better over time.
My point was that a bear can be quite reckless if he believes the market is headed down.
The fact that a market can only down by 100%, but can go up by more is not really relevant to day traders imo. It is very rare to get swings either way of really decent %s and over the time frame that margin traders usually trade I don’t think that’s relevant. In the short term traders are looking at something going up or down by a range of % over a given time period - minutes for scalpers, under 24 hours for day-traders (hence the name), and longer for other investment or trading positions. The fact that it could go up 300% but only down 100% isn’t really relevant to me if I’m scalping or day trading to try to catch 5% either way. It’s these guys who use margins more than investors - and they use leverage because they are usually shooting at smaller %s.
I don’t see how this can be true. When people started shorting Eth down from 0.03 they went hell for leather. I saw shorts of hundreds of BTC borrowed in chunks, day after day for weeks. As long as a market is big enough and you believe the trend is going down you can short the hell out of it. The only limit relates to liquidity i.e. if it is very low volume your shorts might move the price on your own and limit how much you can short it.
It sounds to me like you are looking more at the macro picture as an investor by talking about limited potential for short compared to long, which is not what I would expect from you. For an investor rather than a trader I’d agree that shorting is less interesting and has less potential for his aim of making money passively.
I disagree. In fact, I see shorts move markets every day, so I kinda know I’m right here. You can just watch the loan book in polo for a few days if you doubt it. You will see markets getting shot to pieces with borrowed money on a regular basis. When BTC booms most of the Alts selling is not from holders, it comes from shorters who think the price should now be lower to arb its fiat value. They take it down and trading continues as normal with the short able to take profit from the trading going on at the new lows.
I can’t make peace with this either I’m afraid. You are talking about these trades as if they have the capacity to get any amount of profit and loss and that just isn;t the case. People have targets they will take profits at in trading, so the upside is limited, so too do they have stop losses, and liquidation limits when they short. The upside and downside is limited by the target, not the range of possibility (that is certainly investor territory, not trading) and on any given day that can be a higher % down than up if the situation is correct.
I have been squeezed out of a few margin long positions. When BTC is booming you see how many people get squeezed out of their long positions in Alts, for fear of liquidation if BTC just keeps on going, even if you’re still bullish on the asset you hold.
Now you’re really confusing me lol. I thought I was the one saying shorters aren’t the enemy. They help the market find its price. They are not scheming against anyone, they are quite rightly taking action to take profit where they think the market is making a mistake. They can’t do that if there’s no margin trading though because they can only go long. The bad guys are futures and derivatives and HFT traders, not margins shorting with the real asset (rather than paper manipulation).
Well, there are two conversations here, margins and leverage. I think its mad to argue that margin trading doesn’t improve the market. I can’t see any rational argument to reject that idea. I think leverage makes a lot of sense, up to a point. Obviously it can also be used to manipulate a market, but generally speaking I don’t think that’s what happens. Nor do I think it causes more volatility. A long can leverage as much as any short depending on what they think will happe. The more money and the more players involved the better, smoother and more quickly the prices will resolve themselves [quote=“rand_om, post:1190, topic:9923”]
That’s how these huge price moves (in btc, e.g.) happen.
Perhaps in the very early days. I don’t think is at all true now for bitcoin or for any market that has reasonable volume relative to the kind of leverage traders can use… It’s not leverage causing volatility, it’s just a thin and therefore elastic market.
Anyway, I’m no expert. That’s my 2 cents. I’ve derailed enough away from talking about MAID. It would be easy enough to have this conversation over a pint, but it’s a bit exhausting typing it
I have to disagree. Let’s consider these two situations, where the price does exactly the same, just in the opposite direction, and you’re $100 invested on the happy side of the market:
long side: 10% up, you make $10, another 10% up, now you make $11. Total: $22.
short side: 10% drop, you make about $9.09; another 10% drop, now you make $8.26. Total: about $17.36.
What’s really funny though is when you consider that if the market goes against you, then a long loses only $17.36, the short $22.
Sorry, I posted it too early by accident; I may add some more stuff here during the next 5-10 minutes.
Yea, and they will be the ones with first hand experience about natural selection I still don’t see how beliefs can change whether they will blow up or not. I agree that, more often than not, it won’t happen. But
I’m not against shorting, it’s very useful for diversifying, and allows you trade when everybody else is sitting on the sidelines. I just don’t see it as the driving force behind what’s happening. And yes, it’s partially because short positions are naturally more fragile, as I demonstrated it above: they can win less and lose more for the same sized market move.
I can’t see how it is shorters taking the value down then. When BTC booms, so it’s natural that the price of all the penny coins would go the opposite direction. Short sellers were idiots not going after the low hanging fruit.
I don’t believe targets are part of all strategies. In fact, I would not consider a strategy that have targets. The one I’m testing does work with out-of-money targets for the rare event of an unusual spike, but otherwise it just goes with the flow as long as it can.
Oh, I think you misunderstood me. I have nothing against shorting, quite the contrary: it’s very useful, exactly as you’re saying. I just don’t think short sellers can move the market much because they are starting from a clear disadvantage, so they need to tread soft. Again, please refer to the simple math from above.
As for margin trading, it’s a useful tool, I just don’t think that margin trading can stabilize a market anymore than a few more cylinders can make a car more secure to drive.
Absolutely true, but once again you’re talking about compounding gains on an investment. I’m talking about single target trades of 1-5% that the vast majority of short-term margin trades are based on.
I agree with the sense you’re talking, just not the context. I don’t think that applies with margin activity as that is mostly scalpers, day traders etc.
Anyway, it’s all good bro. As I say, I certainly don’t ‘know’, I’m just limited to what I think ;). I might not be able to respond in full as I have a lot on tomorrow, but I appreciate your points. You may have something that I’ve missed, but I feel like I’m still missing it really. I’m a investor pretty much now. I hardly trade at all and I certainly never made a fortune trading, so what do I know really. I just have a big mouth and an opinion about everything
EDIT: This is just response to the first bit of yours. I’ll get to the rest another day
EDIT EDIT: Sod it, still not quite tired enough for bed yet
Beliefs are all that speculator markets are really based on? If I believe gold will downtrend for the next 2 decades then I’m bearish and can short aggressively whenever it is booming well over the trend I believe I have identified. Eth and BTC are where they are because people believe in them, when their faith/belief is shaken by things like ‘china banning bitcoin’ or Mike Hearn etc the value plummets.
Me neither, but it is a vital tool without which things can certainly get more volatile. Like I said, the bears need a voice to temper the enthusiasm of the bulls. If they can’t short then the bubble must be bigger, no?
But in practice you are talking about traders making plays for minutes or hours, so I’m not sure how that makes margin trading an undesirable or irrelevant thing? If you’re trying to persuade me that it is more profitable to go long on something than short then that depends on the situation and currencies you get paid in. If you short an alt in a btc boom then your gains increase because you are winning in BTC when you short, which is rising and that’s what is pushing the alt down. So the maths is not always as simple as your example above.
Basically, if I think gold will fall tomorrow and I want to make some money I still short gold tomorrow. Shorting is all good, and when I short it I help it find it’s true value faster.
Ok, I’m frazzled enough for bed now - not even sure if that made sense. Let’s get back to talking about maid specifically lol
I don’t think you stand a chance if that’s what we’re competing in
We quite agree on the basics then
Though I would always approach shorting (and anything else market related) as the means extract some more value for my greedy self, first
You may be quite right about it. That curve is close to flat in the beginning. It’s just that one have to babysit a short position much closer than a long one. The difference is like that of being in the bowl or on the bowl: things accelerate in the right v.s. the wrong direction.
I get what you mean. We may have a disadvantaged basic situation by virtue of being short, but it may be alleviated by what made that short possible to start with.
However, exactly because those two processes are so strongly correlated, they don’t help with the risk: if they change, they will change at the same time. If I don’t size my positions expecting that, I’m screwed when it happens.
Correlation between different instruments is always high in bear markets in general, but it’s even more so for crypto, where BTC drives everything. Basically, I may have 17 short positions, but I’m hardly more diversified than if I just had one.
That’s a tough one. Maid is awesome; there’s no question about that. Maidsafecoin is cool, and it’s fun to have it out there: most importantly, it helped fund development. Now it’s useful for publicity and speculation (you can call it “investing,” idc )
As for its current price and value, I’m fully convinced it has zero relationship to the product: it’s defined purely by speculation, manipulation, and random processes.
The first opportunity for that to change is when the first test network with coins is released, and people outside this circle of enthusiasts get a chance to see that the concept’s working in practice. I expect a huuuuge bubble at that point. Depending on how long before the live network from that point, how many setbacks, how marketing (e.g. by this community) works out, that bubble may burst or it may hold through the live start; that’s impossible to tell just yet.
From a practical point of view: you can’t short without margin. Margin trading with no additional leverage makes no difference for longs, but it makes shorting possible.
(sorry, i forgot to answer this one) I think we’re looking at this from very different angles. You seem to approach it from the direction of “how a trader can act” and of course it’s determined by their beliefs about the market. (It’s more complex, but more about that in a bit.)
I’m more focused on what actually happens, and how it affects the trader. That most certainly does not depend on what the trader believed, only in the sense that if he acted on the wrong beliefs without limiting his risk for the contingency, then that trader joins the rest of the 97% who lose money on the long run.
Back to why I said it’s more complex. Many robust strategies take a losing position 60-70% of the time. Basically, the trader is more often wrong about the market than he is right, and he goes into each and every trade being fully aware of that. When they go short, they are fairly confident that position will turn against them and they’ll have to exit with a loss. But it’s fine, because they also know that the times it wins will make up for those losses.
I’m testing a really silly strategy that does aggressive mean-reversion* during uptrends. It has a win rate only around 40% but it still makes a little more than it loses.
* errm… i’m not sure that’s technically correct, or else the return distribution would look different
True, I think everyone should hold a little gold and silver. I stand by the statement though. SAFEcoin would be waaaay more useful than gold or silver.
I’ve not heard of an NEMP going off very often, but people need to store and serve data every day.
As far as utility goes I’d have to say that a functioning SAFEcoin would thrash the pants off gold (and btc etc). Gold does have some unique advantages, but it isn’t as useful as SAFEcoin would/will be imo.
I still hold a bit of gold and silver ofc. Financial security is about diversifying and spreading risks. I agree that it’s silly not to hold some PMs too if you’re trying to prepare for a future full of unknowns.
SAFEcoin utility is a whole other scale to crypto in general though imo. And I hold some gold, but I have never ‘used’ it for anything.
It’s not at all important really, the market cap of BTC is still tiny next to gold. But the press write rubbish about rubbish half the time, they’re just content machines, not interesting information sources ;). In the short-term though it means that until the SEC refuse the ETF on 11th March we might see more BTC press and optimism.
I’d expect profit taking traders to start dumping it before the decision, probably 7th/8th March is when I’d sell my BTC if I was gambling on it. Who knows though really. I’m not sure enough to punt directly. I’m just watching like a hawk in case I can react to something.