(Deprecated) Planning Bitcoin Withdrawals - Advanced (Public BitcoinTalk - make private copy!)
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Usage Instructions
Creator - Chainsaw (BitcoinTalk)https://bitcointalk.org/index.php?action=profile;u=89959;sa=showPosts
1.Setup Withdrawal Plan.Collectible Bitcoin Marketplace Thread:https://bitcointalk.org/index.php?topic=214589
2.With Withdrawal Plan finalized, setup Rebuy Plan.
3.Maintain your Rebuy Plan, allowing it to generate your next Sells and Rebuys.Donations appreciated1JSoqvzM2MwE8SggD3joWGT5gGD68JZegy
(Use at your own risk, no support/maintenance guaranteed, yadayadayada.)
New Spreadsheet Link: https://docs.google.com/spreadsheets/d/1JDYALoV4KR_pvX5vuQww99t4hwqqmuHuAI9CZWhFgt0/edit#gid=0
I think a lot of Bitcoin holders are suddenly finding themselves becoming Unsuspecting Traders. Some small investment suddenly has turned into something sizable, and that unfamiliar territory, that scale of money, is intimidating. And there aren't a ton of professional options (yet). So we do the best we can do. My hope with this tool is to, at the very least, let you see a few different withdrawal plans, and see what they feel like. Maybe help you discover what your long term goals and intentions are with your holdings, give you a starting point you can refine from. Maybe you'll find the tool useful enough you'll use it for daily trading. You can always start easy and add layers afterwards. And you can shoot me a PM at BitcoinTalk if you have any questions, I'd be happy to try to help out. If you have suggestions, please! Send them my way. I use this tool too, the improvements would be appreciated.
Setting up your Withdrawal Plan
In order to enter your own values, you'll need your own copy of this sheet. From File, choose Make a Copy. You can then ensure it is Private before entering in your details. Once you're the sheet owner, try to only change values in the green boxes, or the comboboxes to manage Rebuys. Changes to other fields can really mess up your numbers unless you know what you're doing.
1.First, the easy part - enter your tradable balance of Bitcoins, as well as the starting point you'd like to begin cashing them out.
2.Next, enter values for Percentage Gain and Percentage Removed. For example, values of 5% and 0.5% would mean that each time Bitcoin goes up 5% in value, you remove 0.5% of your remaining Bitcoins. See the Strategic Considerations section for a lengthier discussion on this.
3.The columns to the right display the results of this withdrawal strategy. To get started, increase or decrease % Removed per Increment while changing nothing else, and observe the effects to column D-K at a price point of your interest - I like to use one near $10000. The two key considerations should be - at this value per Bitcoin, how much will I have cashed out? And how many BTC will I have remaining for future growth? Adjust the % Removed per Increment up or down to find the balance that works for you. Adjust up or down the % Gain Increments to control how frequently/infrequently your withdrawals occur.
Setting up your Rebuy Plan
1.With your Withdrawal Plan finalized, the Sell Points and BTC Amounts will copy over from the Withdrawal Plan to the Rebuy Plan tab. Note - if you change your Withdrawal values, it will invalidate your Rebuy Values. The intended usage for this sheet is that once you've set up a Withdrawal Plan...and most especially once at least one of those sales has filled, that you do not adjust your Rebuy plan. Do so at your own risk!
2.Enter your brokerage fee, so that this can be factored into the rebuy cost.
3.Adjust your Rebuy % of Original up or down as you see fit. This is a critical choice, affecting how many of your rebuys will be hit, and for what gains. See the Strategic Considerations section for a lengthier discussion on this. As a quick example, if you sold 10 BTC at $1000, an 80% Rebuy would cause you to rebuy 12.5 BTC at $800, for a gain of 25%.
4.Adjust your Rally Aggression from 0 to 100 based on how stable or dynamic you'd like your rebuys to be. Use a value of 0 to be absolutely stable on Rebuys, never adjusting the Rebuy % of Original. For example, always buying at 80% of the sale price. Using a value of 100 is maximally aggressive, pushing down the rebuy price when 'rallies' occur. A rally would be when more than one Sell is filled without a Rebuy occurring. In practical terms, this helps you continue to cash out on the way up a bubble, while progressively setting your rebuy amounts lower and lower from the sale price as the bubble grows. Note - because this setting only takes place for Rebuys amidst a rally, you might need to lie about the Status of your Rebuy orders, setting a whole bunch to Placed, in order to see the effect of this Aggression value over the course of a long rally.
Maintaining your Rebuy Plan
1.This sheet will help manage, on an ongoing basis, the buys and sells you place on exchanges. Make sure you're comfortable with how it works before putting it to work. Here are a few guidelines:
-Make backup copies regularly.
-The buy and sell points will not change, they are fixed based on the values generated in the Withdrawal Plan. You'll have a large set of Sell/Rebuy rows.
-Each Sell/Rebuy row will either have no sale and no rebuy, a Placed Sell with a Waiting Rebuy, or a Filled Sell and a Placed Rebuy.
-Any given row will never have both a Placed Sell and also a Placed Rebuy. I like to think of it this way - once a row gets hit for the first time (via a new all time high), that row will be a tradable for from then on. At any given time, it will either have a Placed Sell, or a Placed Rebuy, depending on whether the price has continued upwards, or returned down below.
2.When a Sell occurs, update the Sell Status column to Filled. Update the Rebuy Status for the same row to Placed, placing the rebuy on your exchange(s). The BTC/2 columns are for convenience in case you use two exchanges.
3. When a Rebuy occurs, update the Rebuy Status column to Filled. Update the Sell Status column to Placed, place the Sell on your exchange(s). The BTC/2 columns are for convenience in case you use two exchanges. Rebuy Targets will automatically adjust when you make this change, as it is the signal that a rally has ended - so Rebuys will resume at your base Rebuy of Original % rate.
Strategic Considerations
There is no best withdrawal strategy. There is no best trading strategy. The best you can do is find a strategy that best aligns with your risk tolerances and long term goals. Off the top of my head, here are a few very different mindsets might be coming from: Are you willing to risk fully cashing out early in order to hope to gain more coins? Do you hope to provide a slow, long-term revenue stream? Off the top of my head, I could see at least these four approaches:
Gambler - willing to risk fully cashing out early in order to try to gain more coins.
Revenue Stream - slow, predictable revenue with a balance between growth and income.
Long Term Investor - heavily weighted towards holding, but small withdrawals along the way.
Trader - looking to balance long term asset value with the potential to gain coins along the way.
Each of these archetypes would use the tool differently. I'd like to walk through the thinking process for the bucket I fall into - Trader. I believe Bitcoin's future value is still at least two orders of magnitude from where it is today. But money in five years doesn't change my life situation today. So, I'm willing to sell a few of those coins today, with my eyes open to the cost in future money. As I do so, I'd favor buying back in closer to my sell points than going for huge gains, as this would let me retain more of my original coins, at the expense of potentially greater gains.
Withdrawal Strategy
The default values you see in the spreadsheet (minus the Starting BTC) are the values I actually use. I use 5% / 0.5%, at least for now, because I know it is very conservative. But coins I sell today, along with some form of locked in gains, provide a much more valuable opportunity. Because in reality, I'm willing to reinvest those "forever sold" gains, at the right price, these gains give me the opportunity to gain more coins. It's a win-win. If the rebuy never hits, I have locked in profits. If the Rebuy does hit, I've gained Bitcoins. And I can now reset the same sale, and potentially do it again.
In ultimately deciding on your Withdrawal Strategy numbers, you need to plan for the worst case. Plan for a graph that goes vertical, and that you never hit a single rebuy. That every coin you sell really is gone, forever. If you can't hold to this rule, you will end up rebuying later for a loss of Bitcoins, negating the entire purpose of this fixed strategy. Try to put yourself in those shoes, with Bitcoin at $10,000, or $100,000, and see how many Bitcoins you'll have left. Are you okay with the number you sold along the way? If so, you're good. Maybe you can afford to increase the amount you sell at each checkpoint. If you can't stomach the number of Bitcoins you sold, reduce the number. Try to find the balance where, regardless of whether your orders are filling or not, you are equally okay with the result.
Rebuy Strategy
The values you use here are wholly dependent on what your goals are as Bitcoin appreciates in value. You've already set your Withdrawal Plan. In the "worst case" event that the price skyrockets upward, never returning to any previous price point, those values will reflect your USD and BTC balances at various USD/BTC checkpoints. Now, you get to fine tune that strategy, by stacking on top of it your strategy for what to do when Bitcoin values go back down. If money you take out is truly intended to be out forever, you need not use this sheet. Just stick to the Withdrawal Plan, and enjoy your profits :-) If there is _some_ price at which you'd be willing to reinvest profits, read on.
Your Rebuy Plan will have to find its balance between trying to retain existing coins and trying to gain new coins. Rebuy % of Original asks the question - how much profit do you need off a locked in sale in order to buy back in? If you kept this value ridiculously tight, say 98% - you will not really be cashed out for very much, all that often. Your gains will also be very small. Conversely, let's say you are only willing to rebuy at 1/4 what you sold for. Most of these Rebuys are never going to hit - you're going to have a lot of coins that stay in USD. But - if and when an extremely volatile event occurs, many of your orders will fill, and at 400% gains in terms of BTC from where you sold.
Rally Aggression is the last piece in fine tuning your trading strategy. There are different ways that Bitcoin goes up. Slow and steady appreciation is very different from parabolic rally mode. Rally Aggression lets you dynamically adjust your Rebuy % downward, relative to the sales price, when rallies (bubbles, next-level adoption) are taking place. This happens by recognizing that successive Sales have Filled without any rebuys having occurred. When this happens, each Rebuy gets discounted further off the previous. If you use a value of 0, your rebuys will never change - they'll always stay fixed at the Rebuy % you set. On the opposite end, if you use a value of 100, your Rebuys will essentially remain fixed at the beginning price of the rally. Play with numbers in between there until you find the place on that curve that fits your risk/reward balance.
If you choose a high Rally Aggression value, you are betting that a significant correction is in the future. If you're right, your BTC gains will be larger. If you're wrong, more BTC will remain out. Conversely, if you keep your Rally Aggression value low, rebuys will continue to track Sell Price at the same percentage. When an eventual downturn occurs, more of your Rebuys will be filled, each for a smaller gain.
Wrapping Up
I was going to make this tool be invite-only. I decided to go this route instead, because it gives me a chance to step up on this here soapbox for a minute :-) We _are_ the Bitcoin community. It grows when we build tools, help each other, teach people about Bitcoin, reduce its barrier to entry. As your Bitcoin holdings increase in value, I'd encourage you to plan to give something - any amount. Even if for you that is 1% - it feels good, and it has a funny way of coming back to you. Anyhow, I'd be thrilled if you sent me a donation (address above). But I'd be even more thrilled if you found some guy, aspiring to build a Bitcoin tool that you thought would add value to the ecosystem, and donate to them instead. Or best of all, figure out your own way to contribute! When Bitcoin adoption grows, we all benefit.
Requisite Disclaimer: None of this is to be taken as trading advice. I am sharing my strategies and tools as information. What trades and trading strategy you employ is your responsibility. (And always consider a predetermined Stop Loss!)