How did your interest in trading start?
It really started seven years ago when I was in Barcelona and I still didn’t have much idea of what an interest rate, mortgages or loans was… so I started reading. I started with the most basic, with a book by Josef Ajram called Stock investing for dummies. I remember that together with another friend we got hooked on the subject and started trading with 200 euros. I consulted with many mentors, but the truth is that I had two years of losses.
So in this there are no miracles …
You don’t get covered in a matter of months, that doesn’t exist. There is already enough prostitution in the world of social networks, which paint it as a world and a fantastic lifestyle. For example, I do not live only from trading, but I am combining it with my current profession. I give courses where I teach automated trading, which is how I have been able to achieve profitability.
Wow … So what did he do?
I decided to apply computer science and what I knew to the world of trading through algorithms. If you program based on rules, entrusting it to a computer system, you get rid of emotional stress. In the end, artificial intelligence chooses the best strategies for you.
When did you implement all of this?
Four years ago I started programming with the first robots, and a year and a half that I am applying the current methodology of generation of trading systems.
How does algorithmic trading work?
The computer buys and sells based on a short-term strategy. The best traders get between 30 and 40% annual profit on average. There are years that are more and years that less, because there are also random factors. There are programs that search day and night trading strategies, exploring the best combinations of indicators such as the average of the prices of the last 200 periods, the intraday price deviation, etc. To give you an example: my computer can generate a million strategies per hour from the parameters that I have previously indicated.
“70 or 75% of traders have never won more than one year in a row”
What can those parameters be?
Upward trends, price volatility, average variance during the same period … Of all those strategies found, only about 100 are really viable, of which I choose the 50 that I like the most to know, hour by hour how I would enter or exit a operation and measure the robustness of each system to increase the chances of success when trading my real money.
And from there to earn money?
That it has happened before does not assure you that it will happen again. After that comes the real work: what is called a robustness test of how those strategies chosen for an asset would behave in extreme situations. In the end it takes four days to pass all the phases, if you have a good computer. The issue is not in winning but in having as low a percentage of possible losses as possible, risking a maximum of 10% for example. You can earn between 20 and 30% of the annual average invested, that is to say that from an investment of 100,000 euros you can earn 25,000.
It is a hard and methodical work… Is there a lot of posturing?
If you do it very well and promote yourself as social trading, people will invest with you and you can take a percentage. I am in a group of traders who want to promote the reality behind this trading industry, that there is no such thing as “invest here and earn 100% in a month” forever and, therefore, it is not so easy to make money just as the ads paint it. They should all be on audited platforms, because what some show as achievements are nothing more than ‘screenshots’ that have no real value. Apart from being an algorithmic trader, I train in courses, programming and quantitative trading. I give the tools for each investor to learn to use them to obtain possible profits. I do not give the fish, but the fishing pole.
Why are many famous traders so keen to recruit new ‘students’ for their courses?
Perhaps because many want to earn money on the person who will take their course, to attract as many more the better to earn from each one, without caring much more. And many, therefore, that teach things that do not work even if it seems to the beginning people that they do. Look, between 70 and 75% of these traders, for not giving a higher percentage, have never won more than a year in a row with their strategies, that is, they do not have a stable profit. With their courses they sell you above all a lifestyle, to be able to work a few hours a day and the rest to do what you want, living very well from it.
I understand that the strategies are based on statistics, as if it were a casino?
Yes, it has similarity as long as you have a methodology to do it. Trading without a strategy or methodology is like going to the casino one night. However, if you study well the historical behavior of the price, you will identify patterns that are constantly repeating and endless ratios; you can get a strategy to guide you in your investments in the future.
Are cryptocurrencies safe?
As a project, the answer is yes. What the Blockchain does is decentralize, distribute the same information in millions of computers. This means that to hack a cryptocurrency project, such as Bitcoin, you must hack all the computers in the world that have the same information, it is practically impossible. Cryptocurrencies are kept in virtual wallets, better in cold wallets. Although in reality, you do not have the cryptocurrencies or in a virtual way …, you have a password on a device or on a computer so that they cannot be hacked, it is not convenient to have them on exchange sites or online exchanges, since they do suffer hacks. There are also some startups that ask you for cryptocurrencies in exchange for a 30% guaranteed monthly profit … it is impossible because zero risk does not exist.
Come on, there are also scams.
There are many pyramid scams in this regard. This is the case of some Spanish companies that, for example, are registered in unregulated countries such as Malta, where the police do not have jurisdiction. They are mostly what are called Ponzi schemes, where you can get hooked and lose all the money invested.
What are miners?
Cryptocurrencies come to solve problems of the economy in the sense of the transparency of money, in terms of sending payments as the first phase. Because for a transaction, for example, I need up to 15 blockchain computers to validate it for me. These validators have a reward for it. This is what is called mining. The computers connected to the blockchain that validate the operation are called miners. This is what is called Proof of Work. 80% of cryptocurrencies work like this. In the case of Bitcoin, it works in such a way that the validations automatically go to the computers that can solve a mathematical problem in the shortest possible time, which is why miners invest so much in graphics cards necessary to do so. In turn, that consumes a lot of energy that is not renewable. In fact, now Elon Musk has said that he does not accept bitcoins for that reason … it makes sense with the philosophy of his company Tesla.
“Cryptocurrencies come to solve problems of the economy in the sense of the transparency of money”
Is there no other way to mine cryptocurrencies?
Yes, for example the new version of Ethereum 2.0, the other great cryptocurrency, will use what is called Proof of Stake to confirm those same transactions. In other words, it does not go to the first free and powerful computer to solve it, but chooses it randomly, with the most likely being the computer that has the most Ether blocked, thereby reducing energy costs.
How many cryptocurrencies are there today?
Currently about 9,800 cryptocurrencies. You can create a new one in just one afternoon… it’s that easy. Tokens are the currency within the project that is a cryptocurrency. On Ethereum, for example, there are many projects that work with Tokens such as the purchase of plots through Smart contracts.
Is Bitcoin still the benchmark, or is it because it was the first?
Bitcoin, with about twelve years of existence, is the one with the longest life, which shows that it is a robust cryptocurrency. It has not yet received any hacks on its Blockchain, only on buying and selling platforms.
“Bitcoin, with about twelve years of existence, is the one that has the longest life, which shows that it is a robust cryptocurrency”
How much does it cost to buy a bitcoin?
Today more than 30,000 euros, although if you had asked me just a few days ago it was worth double. It fluctuates in the form of a parable over the months. Although it is true that it has reached highs recently, nothing goes up forever. In 2017 it already went up a lot and its value fell by up to 80%… What is clear is that in five years it will be worth more than today. There really isn’t much money invested in cryptocurrencies yet. That is, adding the money currently invested in them around the world, it is the same as what the shares of a single company such as Apple are worth. Of all that money, between 40 and 45% is in Bitcoins.
I have had it since 2017, precisely that is why I know what the adrenaline of seeing it go up and the uncertainty when it goes down means. Right now I have invested in twelve different ones. But it is very common for there to be investors with 80 or more different cryptocurrencies in their portfolio.
And you told me that they don’t even exist?
The cryptocurrency is like a ledger, it does not exist or virtually. What you have in that cold wallet that is on the blockchain is only the list of transactions you have made in the past, and the resulting balance is your cryptocurrencies that you have. The key to access your wallet on the Blockchain is given to you when you create it. If you lose it, you can reopen your wallet through twelve security words that are also given at the opening. I have them handwritten twice, and saved in different locations.
Are they really the future? When do you think it will be normal to pay anywhere with cryptocurrencies?
Its purpose is to replace current financial services such as payments, transfers, credits, and even the registration of objects for sale. Today, there are many companies, such as McDonalds, that already accept payment with them. Although I think that the most logical path that we will see will be the creation of virtual currencies by the central banks of all life. Visa, for example, already has ‘normal’ credit cards that pull from your cryptocurrency wallets. In Palma there are already two ATMs that allow you to withdraw cash from your bitcoins.
“Today there are already many companies, such as McDonalds, that already accept payment with cryptocurrencies”
Are investments in cryptocurrencies beyond the control of the Treasury?
They are always declared. Keep in mind that the wallets are not associated with a DNI, but can be opened using anonymous keys. Therefore, you can also make currency exchanges in which you do not need an identity document. Let’s say that at the moment it is an easily skippable rule. But we are obliged to declare all the transactions we make on any platform, whether you have an identification or not.
Where can we follow you?
As Hobbiecode I post videos every week periodically on YouTube, I am also active on Instagram and I do a live every Sunday from 10 pm on Twitch and YouTube. You can find more information at www.hobbiecode.com.
Eddie is an Australian news reporter with over 9 years in the industry and has published on Forbes and tech crunch.