Transcript By: Bryan Bishop
Florian Maier (Marsmensch)
Tone Vays (ToneVays)
Matthew Mezinskis (crypto_voices)
MM: As Trace Mayer says, it’s chasing the rabbit. Why not introduce ourselves?
TV: My name is Tone Vays. I come from the traditional Wall Street trading environment. I joined the crypto space in 2013. I spoke at my first conference and wrote my first article in Q1 2014. I was doing some trading. With the popularity of the youtube channel and going to conferences, I went back to trading options in traditional markets. I’ll get back to trading crypto soon, but I have plenty of experience.
Whalepanda: I entered bitcoin around start of 2014. I call myself a monetary bitcoin maximalist. The idea is that I trade shitcoins and shit tokens just to make more bitcoin. I’m also 25% of the crypto friends podcast. It’s monero, Charlie Lee from Litecoin, and Samson Mow from Blockstream.
FM: I’ve been in crypto since 2013. I was originally from the linux and open-source field and I have been an IT field person. I trade a bunch of shit coins. Many people know me as Marsmensch on twitter. I’m similar to Whalepanda, we always want more bitcoin.
MM: Thanks guys. I just wanted to ask you guys a question about trading vs hodling. We’re in a bear market right now. Exactly a year ago we were at $4k. Anyone who got in before a year ago, is up. So it’s a very simple question, who should trade and who should hodl?
Whalepanda: Nobody should trade. ((applause))
Whalepanda: A lot of people ask me about how to get started with trading. I always tell them, don’t. You’re going to lose money. 90% of people lose money. 5% stays at around the same amount, and only 5% make money. Do you have the real statistics?
TV: I generally agree with you. Trading is like gambling. My general advice is the same thing. You have to be careful if you’re trading. You have to learn. It’s not that easy. This is why again I travel the world and I teach workshops trying to educate people on how to trade. Very often… I don’t even charge that much, I paid 20x more for when I learned the stay stuff. When people ask me for a discount because it’s expensive, you should not be traidng at all. It’s like gambling. You have to be really careful.
Whalepanda: In a bull market, everyone is a genius. If you start in a boom market, of course you’re making money. The bear market is the real test for traders.
TV: I think the majority of people are delusional. I called bear market around January 10 or 11th. I realized we were heading into a bear market that might last all year. I still have people think we’re not in a bear market at all, that we’re imminently going back to 50k.
FM: I completely agree with you guys. You have to put in an insane amount of time and you will lose a lot of money. That’s the best case. The worst case is that you’re going to make a lot of money and then you buy Ripple at $3 or something. It happened to me, I lost a lot of money in the beginning. No matter what your approach is, FA, TA, or some combination, it’s always a lot of work and you have ot continuously improve and it takes a lot of time and I personally think day trading is really stressful and I would absolutely recommend against doing it.
MM: Interesting, but nonetheless we’re going to plow forward with trading questions. What is your strategy? What exchanges do you use? Before we get into coins.
FM: Okay. Perosnally I don’t trade that much. I did in the past and it worked pretty well for me. I’m from Germany, so the German tax law basically incentives hodling. If I buy a coin for whatever reason and I hold it for at least 12 months, I basically pay almost no taxes on those gains. I’m really incentivized to do a lot of research into coins and drifted in this direction. I’m using TA to improve my entries. That’s basically the– I’m probably trading not as much as many people expect. I do a couple of trades per month, but that’s it.
Whalepanda: When I started trading, I was mostly doing it on okcoin futures and margin trading. That worked out for a while. Then it didn’t work out, so I started with shitcoins. I just make long positions. I put my buys at certain levels and I wait for the price to come there. I’m not going to FOMO in. I put my sales in at the same time. Everyone has a different strategy. It’s important to develop one strategy and stick with it. As to what exactly I use, it’s a combination of TA and FA. For exchanges, for altcoins, I use poloniex still. Bitrex, I try to avoid Binance. Sometimes Bitfinex. For bitcoin, I use bitstamp. In Europe, Bitstamp is the easiest one to use.
TV: My trading experience is from traditional stuff like equities using TA, and trading options with lots of options trading strategies. I moved to trading futures, I was a day trader trading S&P futures, gold, silver, which are all really leveraged like between 25x and 200x in the futures market. If you’re a good options trader, you can get even more leverage than that. I was looking forward to bitmax. I was a beta customers back in 2014. The winner was going to get 1 bitcoin. I came in 6th or 4th back in that, in a one month trading competition with testnet coins. Then I was trading on bitmex because I liked the futures market. I always want to avoid the mtgox situation. I don’t like giving up my private keys. My liquidation point where I get automatically liquidated, I transfer whatever I’m going to trade. At one point one BTC was $300, so I would put 1 or 2 BTC on a trade and my liquidation was my stop loss and I would time it that way based on leverage because I don’t want to use any coins on any exchange. It’s too risky. I have 15 years of trading experience. Eventually, you’re going to tred water, you might make some money, but ultimately you want to trade the least possible. The more you trade, it’s more risky. I make about 4-8 trades per year. You want to be patient. It’s like playing poker. Just play the top 4-5 hands that you know you’re going to win. I think last year I had maybe one losing trade out of 8 and this year I had one bad trade, 3 good trades so far, and I have half-year to go or a little less.
MM: Regarding coins, and altcoins, shitcoins as you might term them, is there a way you guys try to group them up based on market cap, liquidity, transaction volume, any methodology there?
Whalepnada: I mostly look at volume, and at the exchange volume where I’m trading. I avoid illiquid shitcoins because I got screwed over in the past when I started trading. Anything that I can’t enter or exit properly, then I’m avoiding it. I know a lot of people make money with trading smaller caps but I can’t do that. That’s part of my strategy. I try to stick to the top 20 or top 30 coins and try to trade those, because I know they are more liquid.
FM: I definitely put some trades into micro caps. Last year it was a good idea, to spread a little bit of my portfolio and again the risk wasn’t high and it was a tiny amount of my complete portfolio, into a lot of different coins, and I tried to cluster them into privacy stuff which I’m interested in from a technical point of view. I know how to read code bases and I can estimate how capable the developers are and stuff like that. I basically, at one point, it turned into a nightmare and I had 160 different coins on different exchanges and also local wallets… The people that know me, know that I was told, if you don’t have the private keys then they aren’t your coins. It was an insane nightmare of paper wallets and hardware wallets. In the end, it was exhausting, but also rewarding. You really have to be patient and you have to only assign a small part of your portfolio to it. If you can afford to wait 1 or 2 years, basically it doesn’t matter, the only thing that could happen is maybe you lose $100 bucks in some coins, turned into thousands of dollars– just make sure you don’t have to exit for some weird reason like paying your college loans.
TV: All the successful traders I know are traders that come up with their own strategies and make their ow ndecisions. If you’re trading by following someone else, if you’re reliant on others for your trading and you have not lost all your money yet, please get out of there. You will lose all your money. If you want to be a succesful long-term trader, you have to learn. If you’re going to be a directiona ltrader with TA, you have to learn technical analysis on youtube. You don’t have to pay anyone. You have to get out of the trap of following other people. It’s not sustainable. Some of the better traders come up with strategies that nobody else has. That’s what I do in the options market. I don’t believe in mechanical trading or bot trading. Every couple of years, every system needs to be adjusted. Find some edge that nobody else has identified, then tune everyone else out.
MM: What about AI trading? This is currently a topic, like machine learning applied to market data. Some people call it the next iteration.
TV: I don’t believe in that either. AI is just a computer algorithm and it’s competing against other computer algorithms. They will be trading against each other. People have a big misunderstanding about high-freqnecy trading. It’s not a strategy, it’s skimming pennies in front of other people’s positions. As a small pie directioanl trader, this shouldn’t effect you. If you’re holding on to your positionsfor more than 5 seconds, then high frequency trading shouldn’t matter you. If you’re outsourcing your life savings to a computer algorithm, others are fcompeting with you… you better write it yourself. I have my strategies which are proprietary, and I’m not good enough to code these in, and if I higher a developer then man my strategy is up there and what if he codes something else on the side. These are the things. How easy is it for one person to code their AI? But now you have a team of people that know the idea, and they might go steal the idea and write a competitor. These things don’t generally work.
Whalepanda: You shouldn’t trade with your life savings.
TV: I was trading with my retirement account.
Whalepanda: This is not investment advice. Let’s make that clear.
MM: What about bots?
FM: I agree, ultimately. If you have a strategy of holding coins then maybe activating the additional AI mode or something or running a bot or having that feature that some exchanges are working on where you have automatic switching for pairs when there’s some specific triggers in TA or something. If you’re a long-term trader and don’t care about short-term losses and it’s a long-term strategy, then why not.
TV: Somebody always knows, even with my unique options spreads, I’m just on a small level. If it does continue to work and I raise that level, someone is going to notice. The exchange will notice, the market makers will notice. It’s very hard to keep your trading strategy proprietary whether at a fund or working on your own. The privacy in this space doesn’t exist. The less you tell people, the better. The exchanges know, the market makers know, your brokers know. In the traditional space, it’s illegal for them to do anything with it. But what if some employee is watching your trades because they have that access? What’s stoping him from learning your strategy and potentially finding a way to improve it because he has more insider knowledge than you on exchanges and liquidity and then going off and doing his own strategy. Bot trading always fails.
Whalepanda: I agree. I tried bots in the past, maybe it was a problem on my end, maybe I’m not smart enough. I stick with my own strategies now and that’s it.
TV: Someone was able to do a 5 year backtest that was 90% accurate, but in the wild it was 50%. It just doesn’t work. If one does work, it works for a short amount of time. The only bots trading that works are the bots that you don’t even know exist, and they only work for a small amount of time and then they need to change.
MM: What about exchanges and regulatory pressures? Do you think that’s something you’re planning to use in the future? Is that the best way to trade?
TV: I spent 15 years trading on professional brokers in the traditiona lmarkets iwth Interactive Brokers, Trade Station, Options Express. I am going to wait for one of those brokers to give me a bitcoin trading option better than GBTC. I will either wait for a real ETF stable based on the price of bitcoin or maybe I’ll wait for Bakkt which will have a bitcoin warehouse and allow brokers like Interactive Brokers and Trade Station to access that pool of liquidity and you trade with fiat but BTC on the back. I’m going to wait for professional platforms to give me trading access to bitcoin which is stable based on the underlying price of bitcoin. That’s not going to happen until the regulators have a handle on the crypto exchanges.
Whalepanda: I see a few new exchanges coming online which will be focused on institutional traders. There’s a few being built that I know of. I think we will see some of the more professional ones. I think it will be start of 2019 we will see some more professional exchanges which are fully licensed and allowed to trade anything like options and futures licensed by the SEC.
FM: I’m looking forward to better tools and analytics data and some better historical data that is actually verifiable or maybe more reliable index for more than only BTC but also that’s hard to do. I’m looking forward to more data, more analytics, more professional tools.