Forwarded from Crypto Narratives
Stop losses are often considered as sub-optimal tools that negatively affects the EV of your trades but I don't agree.
I'm of the opinion that they are actually among the most important tools to make you profitable in crypto
The risk with SLs is "death by a thousand cuts" (ie repeatedly taking trades that get stopped out and accumulating too many losing trades in a row), but people in crypto don't really die by thousand cuts
They die because they oversize, and once their trades become losers, they are unable to close because of the usual loss aversion bias. Then they are either in a position where they take a massive drawdown that they will take a long time to offset, or in the worst case scenario they start martingaling and tilting, and their drawdown gets even more amplified. That's death in crypto, probably 95% of the time.
In crypto there are so many opportunities for meaningful upside that the most important thing by far is managing your downside. Using stop losses enables you to precisely know what your downside is, and to make sure that you respect your plan of cutting once the stop gets hit.
When you enter a trade, you shouldn't just "hope" it goes the right way without being crystal clear about what you'll do if it goes wrong. That's why setting a stop right at the beginning is so crucial. At the very least you should have a mental SL, but that's riskier because you'll find reasons not to respect it once you should.
I consider this one of the most crucial risk management rules in crypto trading.
I'm of the opinion that they are actually among the most important tools to make you profitable in crypto
The risk with SLs is "death by a thousand cuts" (ie repeatedly taking trades that get stopped out and accumulating too many losing trades in a row), but people in crypto don't really die by thousand cuts
They die because they oversize, and once their trades become losers, they are unable to close because of the usual loss aversion bias. Then they are either in a position where they take a massive drawdown that they will take a long time to offset, or in the worst case scenario they start martingaling and tilting, and their drawdown gets even more amplified. That's death in crypto, probably 95% of the time.
In crypto there are so many opportunities for meaningful upside that the most important thing by far is managing your downside. Using stop losses enables you to precisely know what your downside is, and to make sure that you respect your plan of cutting once the stop gets hit.
When you enter a trade, you shouldn't just "hope" it goes the right way without being crystal clear about what you'll do if it goes wrong. That's why setting a stop right at the beginning is so crucial. At the very least you should have a mental SL, but that's riskier because you'll find reasons not to respect it once you should.
I consider this one of the most crucial risk management rules in crypto trading.
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Suppose that once a week, ten men go out for beer and the bill for all ten comes to £100.
If they paid their bill the way we pay our taxes, it would go something like this:
The first four men (the poorest) would pay nothing.
The fifth would pay £1.
The sixth would pay £3.
The seventh would pay £7.
The eighth would pay £12.
The ninth would pay £18.
And the tenth man (the richest) would pay £59.
So, that’s what they decided to do.
The ten men drank in the bar every week and seemed quite happy with the arrangement until, one day, the owner caused them a little problem.
“Since you are all such good customers,” he said, “I’m going to reduce the cost of your weekly beer by £20.”
Drinks for the ten men would now cost just £80.
The group still wanted to pay their bill the way we pay our taxes.
So the first four men were unaffected.
They would still drink for free but what about the other six men?
The paying customers? How could they divide the £20 windfall so that everyone would get his fair share?
They realized that £20 divided by six is £3.33, but if they subtracted that from everybody’s share then not only would the first four men still be drinking for free but the fifth and sixth man would each end up being paid to drink his beer.
So, the bar owner suggested that it would be fairer to reduce each man’s bill by a higher percentage.
They decided to follow the principle of the tax system they had been using and he proceeded to work out the amounts he suggested that each should now pay.
And so, the fifth man, like the first four, now paid nothing (a 100% saving).
The sixth man now paid £2 instead of £3 (a 33% saving).
The seventh man now paid £5 instead of £7 (a 28% saving).
The eighth man now paid £9 instead of £12 (a 25% saving).
The ninth man now paid £14 instead of £18 (a 22% saving).
And the tenth man now paid £49 instead of £59 (a 16% saving).
Each of the last six was better off than before with the first four continuing to drink for free.
But, once outside the bar, the men began to compare their savings. “I only got £1 out of the £20 saving,” declared the sixth man. He pointed to the tenth man, “but he got £10!“
“Yeah, that’s right,” exclaimed the fifth man. “I only saved a £1 too. It’s unfair that he got ten times more benefit than me!”
“That’s true!” shouted the seventh man. “Why should he get £10 back, when I only got £2? The wealthy get all the breaks!”
“Wait a minute,” yelled the first four men in unison, “we didn’t get anything at all. This new tax system exploits the poor!”
The nine men surrounded the tenth and beat him up.
The next week the tenth man didn’t show up for drinks, so the nine sat down and had their beers without him.
But when it came time to pay the bill, they discovered something important – they didn’t have enough money between all of them to pay for even half of the bill!
And that’s how it works.
Tax them too much, attack them for being wealthy and they just might not show up anymore. In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier.
For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible.
If they paid their bill the way we pay our taxes, it would go something like this:
The first four men (the poorest) would pay nothing.
The fifth would pay £1.
The sixth would pay £3.
The seventh would pay £7.
The eighth would pay £12.
The ninth would pay £18.
And the tenth man (the richest) would pay £59.
So, that’s what they decided to do.
The ten men drank in the bar every week and seemed quite happy with the arrangement until, one day, the owner caused them a little problem.
“Since you are all such good customers,” he said, “I’m going to reduce the cost of your weekly beer by £20.”
Drinks for the ten men would now cost just £80.
The group still wanted to pay their bill the way we pay our taxes.
So the first four men were unaffected.
They would still drink for free but what about the other six men?
The paying customers? How could they divide the £20 windfall so that everyone would get his fair share?
They realized that £20 divided by six is £3.33, but if they subtracted that from everybody’s share then not only would the first four men still be drinking for free but the fifth and sixth man would each end up being paid to drink his beer.
So, the bar owner suggested that it would be fairer to reduce each man’s bill by a higher percentage.
They decided to follow the principle of the tax system they had been using and he proceeded to work out the amounts he suggested that each should now pay.
And so, the fifth man, like the first four, now paid nothing (a 100% saving).
The sixth man now paid £2 instead of £3 (a 33% saving).
The seventh man now paid £5 instead of £7 (a 28% saving).
The eighth man now paid £9 instead of £12 (a 25% saving).
The ninth man now paid £14 instead of £18 (a 22% saving).
And the tenth man now paid £49 instead of £59 (a 16% saving).
Each of the last six was better off than before with the first four continuing to drink for free.
But, once outside the bar, the men began to compare their savings. “I only got £1 out of the £20 saving,” declared the sixth man. He pointed to the tenth man, “but he got £10!“
“Yeah, that’s right,” exclaimed the fifth man. “I only saved a £1 too. It’s unfair that he got ten times more benefit than me!”
“That’s true!” shouted the seventh man. “Why should he get £10 back, when I only got £2? The wealthy get all the breaks!”
“Wait a minute,” yelled the first four men in unison, “we didn’t get anything at all. This new tax system exploits the poor!”
The nine men surrounded the tenth and beat him up.
The next week the tenth man didn’t show up for drinks, so the nine sat down and had their beers without him.
But when it came time to pay the bill, they discovered something important – they didn’t have enough money between all of them to pay for even half of the bill!
And that’s how it works.
Tax them too much, attack them for being wealthy and they just might not show up anymore. In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier.
For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible.
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Forwarded from whoiskevin radar
The standard ICO raise is very manipulated (as it has been for close to a decade now).
1. Say that you want to raise a "future to be disclosed amount" at X FDV (as an example), but allow oversubscriptions.
2. You talk to your whale friends, and they all agree to spam commit the raise. Let's say as an example: 20M.
3. But, don't forget, now that retail has seen that you have 20M committed, there's going to be a portion which retail FOMOs in with, let's call it 5M.
4. You have now raised, 25M. But, you find an excuse to return 20M across the raise. "We want to ensure a fair distribution." / "We don't want to take too much money from retail!". / "We're not greedy!". You now have 5M from retail.
5. Let's say you keep 3M to yourself, 2M for your whale friends. Your whale friends just made a 10% ROI on their money risk free, and also instantaneously. You just made 3M, congratulations.
Dog eat dog world.
1. Say that you want to raise a "future to be disclosed amount" at X FDV (as an example), but allow oversubscriptions.
2. You talk to your whale friends, and they all agree to spam commit the raise. Let's say as an example: 20M.
3. But, don't forget, now that retail has seen that you have 20M committed, there's going to be a portion which retail FOMOs in with, let's call it 5M.
4. You have now raised, 25M. But, you find an excuse to return 20M across the raise. "We want to ensure a fair distribution." / "We don't want to take too much money from retail!". / "We're not greedy!". You now have 5M from retail.
5. Let's say you keep 3M to yourself, 2M for your whale friends. Your whale friends just made a 10% ROI on their money risk free, and also instantaneously. You just made 3M, congratulations.
Dog eat dog world.
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Forwarded from Zoomer News
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