A regret that I have was not cashing out my LBC from Odysee several months ago when the LBC that I had was worth somewhere between $150 and $200 (compared to the $10 it is worth now). This regret is not all that big since I didn't invest in LBC using money rather I accumulated it through the use of a service that I once enjoyed* so even just ten bucks is ten bucks more than I put into that.
But of course I recognize that similar things happen to people that actually have put money into one system or another and do loose that money when they miss an opportunity like I did. Recently I've been enjoying listening to Joel Salatin's podcast, Beyond Labels, and at least once he's shared the story of his father who went into the stock market when trading first made easier for the general public who one afternoon received the call from his stock guy who said that he had sold his stuff that morning he would have made a $10,000 profit but by that afternoon things had changed and at that point he had lost $15,000. From that point on the Salatins didn't invest money into anything they didn't understand which is probably wise for most people.
But what if there was a way to profit form investing in cryptocurrencies or stocks without the level of risk normally associated with it? The other day I came up with an investment strategy that had the goal of not missing an opportunity for profit, then curious about how it would work I designed a simulation that would put my strategy to the test.
A strategy where the goal is to not miss out on an opportunity for profit is one that must take advantage of all opportunities for profit so my strategy does exactly that. The most simple way to describe it would be to say that an investor using this strategy would sell off excess shares each time his investment's worth became larger than its original worth. For example, if the initial investment was $100 and its value rose to $101 then the investor would sell off the extra $1 worth of his investment leaving the original, but now smaller, $100 worth left, if the value of the investment dropped then the investor would simply wait for the value to grow again and withdraw later.
We'll see how this strategy does.
Of course to test this I could have written a program to monitor the price of something then thrown some money at it so it could play with it but I don't have that kind of money or patience and it also turns out that letting a computer make a bunch of trades involves jumping through a few hoops, so instead I reminded myself how to use pandas then spent an hour writing a program that would simulate investing using that strategy on historical data.
The data I used was bitcoin prices from around March 2020 through March 2021. Why bitcoin? That's what I felt like using. Why March 2020 thru March 2021? I wanted a year of recent data and March 2021 was when the dataset I used ended (for those of you reading this in the future after that dataset is updated again I used version 7). Why can't I say the exact dates I tested? I didn't care enough to convert Unix time to human time.
The dataset recorded the price of bitcoin every minute, so my simulation analyzes the price at each minute and will simulate selling small amounts of bitcoin each minute that the price is right. The simulation started out with $100 worth of bitcoin (however much that happened to be at the chosen start time) and determines what kind of profit would be seen if the strategy were carried out, it also reports what the profit would have been had the investor simply let the money sit then withdrew it at the time that the simulation ended. I ran two main tests, one where the strategy was tested over multiple short intervals of time (1 month) and another where it tracks how well it would do over longer periods of time (1 month to 1 year).
If I were publishing this somewhere important then I would have put it all into a nice easy to read table, but this is my website and I can put as much effort as I want into things here.
Each of the months in these results represents an individual month where the strategy was carried out independent of each other. "BTC sold for" represents the amount of money that the simulated investor sold the bitcoin they sold for. "Sold BTC value" is the value that the bitcoin the investor sold is worth at the end of the simulated period. "Initial investment value" represents what the $100 worth of bitcoin from the beginning of the simulation is worth at the end of the simulation, while "Value left invested" represents the value of bitcoin left unsold at the end of the simulated period. "Profit from new method" represents the profit that the simulated investor made from the investment strategy I came up with while "Profit from traditional method" represents the profit the investor would have had had he simply left the investment alone then withdrew everything at the end of the simulated period.
Month: 1 BTC sold for: 37.98721718916727 Sold BTC value: 45.425186754638716 Initial investment value: 144.00482345434227 Value left invested: 98.57963669970357 Profit from new method: 36.56685388887084 Profit from traditional method: 44.00482345434227 Month: 2 BTC sold for: 9.01548750727767 Sold BTC value: 8.93853361211983 Initial investment value: 103.79850663644362 Value left invested: 94.85997302432378 Profit from new method: 3.8754605316014494 Profit from traditional method: 3.7985066364436193 Month: 3 BTC sold for: 8.29508548430672 Sold BTC value: 7.625726111935131 Initial investment value: 96.03813792143225 Value left invested: 88.41241180949712 Profit from new method: -3.2925027061961654 Profit from traditional method: -3.961862078567748 Month: 4 BTC sold for: 21.790338143822396 Sold BTC value: 23.308359808822843 Initial investment value: 119.23003910136681 Value left invested: 95.92167929254397 Profit from new method: 17.712017436366366 Profit from traditional method: 19.230039101366813 Month: 5 BTC sold for: 12.90410695795586 Sold BTC value: 12.711266039654458 Initial investment value: 105.07681075912022 Value left invested: 92.36554471946576 Profit from new method: 5.269651677421619 Profit from traditional method: 5.076810759120221 Month: 6 BTC sold for: 4.603423481386756 Sold BTC value: 4.1890184177637755 Initial investment value: 93.17512038788452 Value left invested: 88.98610197012074 Profit from new method: -6.410474548492502 Profit from traditional method: -6.824879612115481 Month: 7 BTC sold for: 25.59591843117756 Sold BTC value: 28.49505668664876 Initial investment value: 126.33392515822024 Value left invested: 97.83886847157147 Profit from new method: 23.434786902749032 Profit from traditional method: 26.33392515822024 Month: 8 BTC sold for: 36.19002415191908 Sold BTC value: 39.81537326578445 Initial investment value: 131.21014044156766 Value left invested: 91.3947671757832 Profit from new method: 27.584791327702284 Profit from traditional method: 31.21014044156766 Month: 9 BTC sold for: 46.56438824571592 Sold BTC value: 54.87548191831499 Initial investment value: 147.55424463529096 Value left invested: 92.67876271697598 Profit from new method: 39.2431509626919 Profit from traditional method: 47.55424463529096 Month: 10 BTC sold for: 46.82763424917074 Sold BTC value: 48.368037922809634 Initial investment value: 129.48376323000375 Value left invested: 81.11572530719413 Profit from new method: 27.943359556364868 Profit from traditional method: 29.483763230003746 Month: 11 BTC sold for: 53.87042860835356 Sold BTC value: 54.28020053812685 Initial investment value: 130.55396819665773 Value left invested: 76.2737676585309 Profit from new method: 30.144196266884464 Profit from traditional method: 30.553968196657735 Month: 12 BTC sold for: 32.8145495636088 Sold BTC value: 36.93712486717243 Initial investment value: 132.15015016145873 Value left invested: 95.2130252942863 Profit from new method: 28.027574857895097 Profit from traditional method: 32.150150161458726
As we see in the above results, my strategy isn't terrible over short periods of time like these. The traditional way of investing is still almost always better but the results are still comparable so it isn't too bad. Interestingly the two months where there was a loss rather than a gain my method would have saved you more money than the traditional one would have.
In these results each month builds after the last, ultimately it is one test simulated over a one year period that we pause to analyze each month.
Months: 1 BTC sold for: 37.98721718916727 Sold BTC value: 45.425186754638716 Initial investment value: 144.00482345434227 Value left invested: 98.57963669970357 Profit from new method: 36.56685388887084 Profit from traditional method: 44.00482345434227 Months: 2 BTC sold for: 45.86027460845095 Sold BTC value: 55.047209179082756 Initial investment value: 149.90718220340653 Value left invested: 94.85997302432378 Profit from new method: 40.72024763277473 Profit from traditional method: 49.907182203406535 Months: 3 BTC sold for: 48.894345984209224 Sold BTC value: 55.59935172933067 Initial investment value: 144.01176353882778 Value left invested: 88.41241180949712 Profit from new method: 37.30675779370634 Profit from traditional method: 44.01176353882778 Months: 4 BTC sold for: 58.337246262510185 Sold BTC value: 75.76211503100713 Initial investment value: 171.6837943235511 Value leftinvested: 95.92167929254397 Profit from new method: 54.258925555054155 Profit from traditional method: 71.6837943235511 Months: 5 BTC sold for: 67.27672050183787 Sold BTC value: 88.3970506870604 Initial investment value: 180.76259540652615 Value left invested: 92.36554471946576 Profit from new method: 59.64226522130363 Profit from traditional method: 80.76259540652615 Months: 6 BTC sold for: 67.27672050183787 Sold BTC value: 82.42932075041864 Initial investment value: 168.5592204788772 Value left invested: 86.12989972845855 Profit from new method: 53.406620230296426 Profit from traditional method: 68.5592204788772 Months: 7 BTC sold for: 77.94880971390543 Sold BTC value: 115.16941417169298 Initial investment value: 213.00828264326447 Value left invested: 97.83886847157147 Profit from new method: 75.7876781854769 Profit from traditional method: 113.00828264326447 Months: 8 BTC sold for: 112.05902619277926 Sold BTC value: 188.39157638624752 Initial investment value: 279.7863435620307 Value left invested: 91.3947671757832 Profit from new method: 103.45379336856246 Profit from traditional method: 179.7863435620307 Months: 9 BTC sold for: 149.58067401692585 Sold BTC value: 319.99829463182624 Initial investment value: 412.67705734880224 Value left invested: 92.67876271697598 Profit from new method: 142.25943673390185 Profit from traditional method: 312.67705734880224 Months: 10 BTC sold for: 188.85262099328983 Sold BTC value: 453.5170447950248 Initial investment value: 534.632770102219 Value left invested: 81.11572530719413 Profit from new method: 169.96834630048397 Profit from traditional method: 434.63277010221896 Months: 11 BTC sold for: 221.870149498807 Sold BTC value: 622.757425786167 Initial investment value: 699.0311934446979 Value left invested: 76.2737676585309 Profit from new method: 198.1439171573379 Profit from traditional method: 599.0311934446979 Months: 12 BTC sold for: 227.5043404393114 Sold BTC value: 827.9175468039003 Initial investment value: 923.1305720981866 Value left invested: 95.2130252942863 Profit from new method: 222.7173657335977 Profit from traditional method: 823.1305720981866
In this test we see that my strategy is terrible for investing long-term. Yes the investor did still profit using my method, but by the end of the year that profit was around a quarter of what it could have been using a traditional investment method and using my method would clearly be a mistake.
So the question to ask now is what is my strategy good for? The short and simple answer is nothing, and that shouldn't surprise anyone, I have no experience in investing, no education in finance and spent very little time thinking this through so the odds of me coming up with something that would beat what the people who have made their living off of this do are microscopic.
But there is one scenario where my strategy has an advantage and it is exactly the scenario it was designed for since it is what happened to me with LBC. Look back up at month twelve of the last simulation, imagine you're the investor (using a traditional method) looking at your $100 investment that has turned into over $900, you'd be pretty happy with that but you'd also think to yourself that if it has gotten that high surely it will get higher so you decide to leave your money in a little longer and plan to take it out once it hits $1,000. What if that day never comes? What if the value of your investment drops to virtually zero? You would have lost your $800 profit as well as your $100 investment. Had you used the strategy I came up with instead you'd still have $200 to show for it all after the price drop, it won't make you rich, but it will protect you from losing out due to your own greed.
You could say that my strategy would be great for people who are afraid of sudden price drops like that but really those people shouldn't be investing at all. Single stock (or in this case coin) investments are virtually gambling, in fact your money would be safer spent at a casino since there you are at least guaranteed to get some sort of a return. Why would any sane person invest in something they expect to lose value?
If you want to gamble then go all in with a full understanding of what you may loose. If you want a more stable investment then diversify your assets, do what the wealthy do to stay wealthy, there is no need to reinvent the wheel.
* I no longer endorse Odysee/LBRY for the same reason that Bryan Lunduke condemned them back in August.