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David Holt

@IDrawCharts

24 Dec

Merry Christmas, here's some genuine free alpha that you can use

Funding Rate vs Realized Drift

automation not required

most of y'all think of the funding rate like RSI; negative = oversold, positive = overbought

but you're wrong, it's way more specific

the funding rate on most exchanges is determined by taking the average difference between the perp price and spot asset price over [n] as a %, multiplied by n/24, where n is the number of hours per funding period. Sometimes + a default rate.

What this means is that over 24 hours, longs or shorts have to pay their counterparties the cost of the average premium or discount of the contract. This ensures that the contract stays roughly aligned w spot price.

but what this ALSO means...

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David Holt

@IDrawCharts

24 Dec

I think the biggest misconception I had about "doing quant stuff" when I first started it was thinking that I needed to automate or code everything

code is helpful, but spreadsheets, tradingview indicators and maybe some really basic CLI/terminal tools will get you v far

the second-biggest misconception was that I needed a super-secret complex strategy to compete

in reality most of the mechanical/quant guys I've talked to (incl myself) just kinda found some basic inefficiencies or cheap risk to make money from regularly

it's not usually v fancy

like, my MM strategy basically boils down to placing ltf "stink bids" and hope somebody fat-fingers a market order so I can buy cheap, then sell at fair price for a small profit

rinse and repeat

Read 4 tweets

David Holt

@IDrawCharts

23 Dec

a lot of you hope to make enough money to trade full-time

lemme give you a thought:

if you can't reasonably expect to make 10%/y with 95%+ confidence, you aren't ready.

regardless how big your balance is

it's not as much about how much money you've accumulated

it's more about your expectation of return, and your variance on those returns.

Hitting one (or even a couple!) big winner(s) does not mean you're ready to trade for income unless you also have a proven record

the only exception is if you manage to win big enough that you can properly retire completely with a massive margin of error

realistically, this looks like 8 figures

and if that's the case, I'd recommend that you to consider not trading it, simply retire and pursue hobbies.

Read 4 tweets

David Holt

@IDrawCharts

22 Dec

https://twitter.com/anondeguerre/status/1473574292843597826

I've not heard of watsi before, but they look about as transparent and cost-effective as it gets for charities

will be adding them to my donation list

https://twitter.com/anondeguerre/status/1473574292843597826

also as a side note, imo the coolest thing about making money is the leverage that it offers on the world around you

idc what that happens to be for you, could be charity, funding new startups, research, sponsoring an open-source dev, literally anything

but I'd encourage those of you with spare $ to try and use it to make stuff happen, whatever that stuff happens to be

turn the numbers on the screen into tangible impact somewhere, especially if you've hit the point where making money for money's sake has gotten boring

Read 4 tweets

David Holt

@IDrawCharts

18 Nov

mini-thread on managing leverage

I regularly run accounts at 3-8x leverage, not to over-size but to reduce the amount I have to keep on exchanges

but this means a bit of extra management. While trades might be sized properly, it's important to consider liquidation risk

while these accounts are usually hedged to some degree (either capturing basis/funding or doing some form of pair/beta trading), even if I'm sized to lose small on a loss, the total margin is also at risk if the trade goes sideways, which means there's a risk of losing bigger

if you're operating efficiently, you're likely using non-USD collateral for trades

it's important to consider the range of potential drawdown from a particular trade IN TANDEM WITH the range of drawdown potential on your actual collateral

Read 8 tweets

David Holt

@IDrawCharts

9 Nov

in a thread-writing mood (aka I'm bored and definitely not doing drugs)

So let's talk about volatility:

-what it is
-how it's calculated
-how it might be useful to point & click traders

What it is: in plain terms, volatility is a measure of how much a trading pair's price bounces around the benchmark value, which is usually set to the average closing price.

A trading pair that spikes and drops by a lot around its average price is considered volatile.

To calculate volatility we'll start with a price average. For this example we'll use a 3D average price (calculated from closing price) of BTC perps.

From October 6 through November 8, the average closing price was $64,189.

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