Here is a bit of info many of you will already know. If you don’t, it is simply because you have not needed it or have not given your mind the time to find it. I think thinking and planning, beyond the next move, is too often neglected by traders. This is a simple way to stay in control while scaling into a trend, considering an if-then action, etc.
If you know this rule, indulge me, and give yourself some time to read it anyways. My name is Rule72 because I like the clarity that rules provide and especially the rules that offer a shortcut to clarity.
Speed is measured in Kilometres (or Miles) per Hour, (you will remember this from physics at school) pressure is force per area and you could think of more such equations. Per tells you “divide by”. So, speed is Kilometres divided by Hours, Pressure is force divided by area. You only need to know 2 of the parameters in the equation to get the other one. A shorthand to these types of rules is to draw a triangle to tell you what to do to what to get what you are looking for. Sounds a bit confusing, but just have a look how simple it is for scaling in once you have the “Trading Triangle”, Money Man is modelling, to look at.
In the triangle, Money Man is holding:
$ is total amount of your money
B (the Bitcoin “B”) is for Bitcoin
P is for price as on the chart
Trading costs come into everything below, but you will be able to work that out if you are that precise or are spending lots on it. I keep an eye on it.
If you know how much total money you have spent thus far ($) on Bitcoin and can see how much Bitcoin you have in total (B) – you will be able to calculate your average buy price (where you are at breakeven) (P). If you look at the triangle, you will see $ is over B, if you are looking for the answer to P (the average price you have spent your money on Bitcoin) you need to divide $ by B.
You want to know the amount of money you need to spend ($) and know (B) and (P) – you times B by P as they are next to each other. Want to know amount of Bitcoin to buy or sell – then divide ($) by (P).
So, shorthand via the “Trading Triangle”:
P = $/B
$ = BXP (some people would type it: $=B*P)
B = $/P
Do not simply rely on this as gospel, but rather play with it before you use it in the “real world”. I might have made an error.
Scaling into positions (and dollar cost averaging), which are going your way, brings down the risk but also brings down the amount of reward (you profit). If you up your risk, then you up your possible rewards. Big lesson I have learned: this risk to reward relationship is a rule (like e=mc2) if you find a way around it, let me know because I want in on it! Many believe that probabilities derived form past performance gives you an edge to skew results via adjusting target and stop loss levels. So that your profits “outperform” your losses.
The risk to reward relationship is also everywhere, not only in trading but in life. Trading skills give you an advantage in life. My philosophy is that trading does not only make the world a better place because of its result of bringing price closer to actual value but also train you as a trader to look at the confusing world in a more coherent way. Stay in it for long enough and learn the lessons it offers. Unfortunately, most people seem to have to go through a mind-altering initiation of major losses before they make it to class. My advice: keep your risks low for longevity and this makes the “Trading Triangle” a good tool.
Most importantly: Give this a like, please. A comment would be appreciated (please not about something else beyond trading as I know I opened the door) and consider following me, if you think this is going somewhere.
If you know this rule, indulge me, and give yourself some time to read it anyways. My name is Rule72 because I like the clarity that rules provide and especially the rules that offer a shortcut to clarity.
Speed is measured in Kilometres (or Miles) per Hour, (you will remember this from physics at school) pressure is force per area and you could think of more such equations. Per tells you “divide by”. So, speed is Kilometres divided by Hours, Pressure is force divided by area. You only need to know 2 of the parameters in the equation to get the other one. A shorthand to these types of rules is to draw a triangle to tell you what to do to what to get what you are looking for. Sounds a bit confusing, but just have a look how simple it is for scaling in once you have the “Trading Triangle”, Money Man is modelling, to look at.
In the triangle, Money Man is holding:
$ is total amount of your money
B (the Bitcoin “B”) is for Bitcoin
P is for price as on the chart
Trading costs come into everything below, but you will be able to work that out if you are that precise or are spending lots on it. I keep an eye on it.
If you know how much total money you have spent thus far ($) on Bitcoin and can see how much Bitcoin you have in total (B) – you will be able to calculate your average buy price (where you are at breakeven) (P). If you look at the triangle, you will see $ is over B, if you are looking for the answer to P (the average price you have spent your money on Bitcoin) you need to divide $ by B.
You want to know the amount of money you need to spend ($) and know (B) and (P) – you times B by P as they are next to each other. Want to know amount of Bitcoin to buy or sell – then divide ($) by (P).
So, shorthand via the “Trading Triangle”:
P = $/B
$ = BXP (some people would type it: $=B*P)
B = $/P
Do not simply rely on this as gospel, but rather play with it before you use it in the “real world”. I might have made an error.
Scaling into positions (and dollar cost averaging), which are going your way, brings down the risk but also brings down the amount of reward (you profit). If you up your risk, then you up your possible rewards. Big lesson I have learned: this risk to reward relationship is a rule (like e=mc2) if you find a way around it, let me know because I want in on it! Many believe that probabilities derived form past performance gives you an edge to skew results via adjusting target and stop loss levels. So that your profits “outperform” your losses.
The risk to reward relationship is also everywhere, not only in trading but in life. Trading skills give you an advantage in life. My philosophy is that trading does not only make the world a better place because of its result of bringing price closer to actual value but also train you as a trader to look at the confusing world in a more coherent way. Stay in it for long enough and learn the lessons it offers. Unfortunately, most people seem to have to go through a mind-altering initiation of major losses before they make it to class. My advice: keep your risks low for longevity and this makes the “Trading Triangle” a good tool.
Most importantly: Give this a like, please. A comment would be appreciated (please not about something else beyond trading as I know I opened the door) and consider following me, if you think this is going somewhere.
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My next contribution
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My next ed idea.
