Author Topic: Investment Selling Algorithm? (BTC applicable too)  (Read 1588 times)

Offline Greekman

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Investment Selling Algorithm? (BTC applicable too)
« on: December 15, 2017, 12:45:13 PM »
I have been having this question for many years now, back to the Greek stock exchange boom.
Time to find the answer...

Assuming that you have made a good investment that is skyrocketing.
i.e. bought 10 bitcoins at $400.
Is there a selling algorithm that will maximize AND guarantee profits while the investment is skyrocketin?
i.e.
sell 1/4 at the +100% mark
sell 1/4 at the +500% mark
sell 1/4 at the +1000% mark
sell 1/4 at the +10000% mark
such a method would guarantee your capital with early selling, then a good profit, then a GOOD reaping of profit to not regret selling the first 1/4th early, then a lavish profit to quit your job, divorce the wife and move to a yacht with models.

I know that someone -even from way back to the stock exchange prime days and the .com boom- MUST have made such an algorithm.

Offline Smurf Hunter

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Re: Investment Selling Algorithm? (BTC applicable too)
« Reply #1 on: December 15, 2017, 02:49:47 PM »
This is impossible to answer without a stated goal.

You can always sell enough to cover your initial investment.

When I own stocks that I feel stuck with for a long time, I will do something similar, but with MUCH lower % gains.
e.g. For every 5% increase I'll sell 10% of my holdings.

I would ask what you want to do with the money.
If you have a personal need, like buying a house, sell when you have to.
If you want to invest in something better, you could argue time is money, and taking a small loss today is better than missing gains tomorrow.

Don't be stubborn and make an emotional choice.  If you believe your money could be more productive doing something else, sell it.


Offline Mr. Bill

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Re: Investment Selling Algorithm? (BTC applicable too)
« Reply #2 on: December 15, 2017, 03:16:46 PM »
My favorite investment advice comes from the late Harry Browne.  I think he would say that you can't invent a good trading algorithm for one investment alone.  Instead you should consider your entire net wealth first, and see how that one investment fits into the picture.

Browne suggested dividing your assets into two categories (or "portfolios"):
  • PERMANENT PORTFOLIO:  The goal here is to not lose any money.  If you're lucky, you might see small gains (after inflation and taxes), but the main purpose is to accumulate savings without losing value.  Browne recommended putting equal amounts into physical gold, volatile stocks, long-term government bonds, and cash, because these investments tend to move in opposite directions from each other.
  • VARIABLE PORTFOLIO:  This is the money you use to try to beat the market and (with luck) make huge gains.  You must be prepared to lose 100% of this money.  Anything that you can't afford to lose should be in the Permanent Portfolio, not here.

So your first step is to figure out how much money you, personally, are willing to risk in the Variable Portfolio, vs how much you want to keep safe in the Permanent Portfolio.  There isn't any universal answer to this -- it depends on your personal finances, your age, your health, how many dependents you have, etc.  You can figure the split as a percentage, or as a fixed amount, or as a combination of both -- for example:
  • Permanent Portfolio = 80% of total assets, but not less than $250,000
  • Variable Portfolio = everything else

Within the Variable Portfolio, ask yourself "If I were buying Investment X today, how much of it would I buy?"  Make it a fixed percentage of your total Variable Portfolio.  Buy or sell until you have that amount.

Periodically, add up all your investments and rebalance them according to the percentages you've set for yourself (and don't change those percentages unless you have new information or a big change in your personal circumstances).

How often is "periodically"?  That depends on how volatile your investments are, whether you have recently earned or spent a lot of money, and how much time you're willing to spend.  I don't have any Bitcoin myself, but if I did, I would probably be rebalancing my investments every week.

That's as close as I can come to an algorithm.

Offline David in MN

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Re: Investment Selling Algorithm? (BTC applicable too)
« Reply #3 on: December 15, 2017, 04:29:01 PM »
I sell half of anything that doubles unless it's a dividend position I have been in for a long time and I want to keep the appreciating dividend.

More than once I've taken a massive loss afterword but I'm playing with the house's money.

To be blunt, you are not likely to see many investments double. If you are capable of picking those, you should quit your day job. You're the best investor on earth. I think I only had one double this year.