Peak inside a $50,000 trading portfolio and see near-real-time thoughts and actions as trades occur over time - 08/01/16

Starting balance: $50,274

Current balance: $50,274

Inspired by Peter Brandt’s book “Diary of a Professional Commodity Trader: Lessons from 21 weeks of Real Trading” (a great read for anyone who wants to learn about trading), I have decided to do something similar with a series of posts on steem. I have created a live trading account on gdax and funded it with an initial balance of $50,000. I will be posting performance updates along with commentary on my thoughts and actions as I trade in this account over time.

To begin, my allocations are as follows:  

Btc:       39.4          = 49% 

Eth:      500            = 11% 

Cash:    $20,109     = 40%

As evidenced by the following screenshots:

I am using gdax because they do not charge fees on limit orders and they are regulated in my home country of the United States. GDAX only supports bitcoin and ethereum, but I am not willing to store a lot of money on any other exchange that supports more coins. Although I do own coins from other projects, I have them stored locally or in cold storage for the most part. In other words, the first risk I am taking is keeping money on a centralized exchange… and with recent issues with replay attacks on ETC, that risk is looking more and more like it’s not worth taking.

My plan at this point in time is fairly simple: remain bullish on crypto until the following trend line breaks.

The above chart is a chart of all cryptocoin market capitalizations combined. I think this provides a more accurate depiction of growth in this space as it relates to native blockchain currency investment. In other words, stagnation in bitcoin may result in a spill over to other projects, such as steem or ethereum… or vice versa. This chart is forming a large, multi-year cup and handle formation in my opinion with the $15 billion mark being overhead resistance. The risk is that this pattern rolls over, breaks the trendline, and forms another wave down, in which case this portfolio will surely lose value and I will have to change strategies. Also, we could see a whipsaw break temporarily below the trendline before reversing to new highs, surely triggering stops.  I plan to stay mostly invested with some cash on the sidelines in case of dips. This is a linear trend line and I would prefer a logarithmic scale, but I will take what I can get. Also, a candlestick chart would be nice. Coinmarketcap provides some very useful tools and perhaps they could add these  features in the future. I would probably even pay for a premium subscription with access to certain advanced features.   

Another indicator is bitcoin’s 200dma/50dma crossover. A cross of the 50dma over the 200dma to the downside would be a bearish sign, or at least a sign of uncertainty in the market.  Ideally MACD would stay above the 0 line.  The trend channel is not great but the lower trendline fits fairly nicely with the 200dma.  A breach of the 200dma would be bearish.

The combined altcoin market capitalization chart (excluding bitcoin) looks bullish also IMO. A clear breakout to new highs above the $2 billion mark has occurred, with a subsequent retrace back to that $2 billion mark and strong bounce off of it, forming a nice channel. A break below the lower trendline of this channel would be bearish.

Bitcoin dominance appears to be fading in my opinion. A weak bounce off the 75% level seems to be fading with clearly lower lows and lower highs forming long term. The next move down could be big, if it happens. The seemingly never-ending blocksize debate has taken its toll. I believe the bitcoin community should have provided some on-chain breathing room long ago. Nevertheless, I still see bitcoin as superior to fiat, especially with secondary layer scaling solutions such as payment channels and sidechains in the pipeline. Therefore, I am still bullish as long as the charts remain technically bullish.

Eth is still in the doldrums for the most part, but its consolidation pattern is in line with the combined altcoin trend channel. If this channel breaks down, then the altcoin channel would most likely break down also, which would be bearish. The only caveat is ETC, which has definitely caused some disruption. ETC may have trouble remaining viable long term without developer support, but it has definitely surprised me. In my opinion the fork was necessary and acceptable because ethereum is in such an early stage of development that the consensus mechanism (Casper?) hasn’t been nailed down yet, let alone sharding of the network and state channels. Its way to early to say a hark fork can’t be done on this system, for any reason, especially a blatantly obvious theft. This will be a situation worth monitoring.

I will keep everyone updated on how this portfolio progresses, win or lose. Perhaps some aspiring traders can find some value in this. Stay tuned.

Disclaimer: This is not advice of any kind. I am merely posting a track record and commentary of my personal portfolio.