Ep. 57 - Akil Stokes on System Hopping + Ethereum Flash Crash

 

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In this episode:

We discuss the Ethereum flash crash and whether currency traders should risk trading cryptocurrencies

Owen updates on his ladsladslads tour of Las Vegas

Trading legend Akil Stokes outlines his views on changing markets and the difference between system hopping and trading adaptability

Trader Interview - Akil Stokes of Trade Empowered - Trading Adaptability versus System Hopping

This is Akil Stokes’s second time on the show and he comes at us with a lesson just as powerful as his original appearance. In his previous outing on episode 37 Akil told us how to survive your first year in trading. This week his message is for traders with a bit of experience under their belt - how to be adaptable in changing markets

Any trader with a few months in the markets will have felt the classic urge to try out a new system. Very few traders will have found their first trading system, perfected it, traded it for profit, and never changed. If you did, then well done! If you are anything like us, you will have shopped around for a few different styles and systems before alighting on your preferred method.

Empirical Evidence

Even when you have chosen your trading system you may then feel the need to alter, adapt or change it altogether. Our question for Akil was - when is it legitimate to fiddle with your trading system?

Akil Stokes is a legendary trader and having a chap like him tell us that it is OK to change your trading system is a relief. But the advice comes with some strict rules! Empirical evidence is everything. Without constantly analysing your live trading data the markets will shift before you know it and catch you out.

This is one of our best interviews yet and a lesson that all traders could benefit from.

Ethereum Flash Crash

Here at the TBT ivory tower we have been keeping our beady little eye on the world of cryptocurrencies. It seems that there are a lot of people making a lot of money trading these things.

But, discretion being the better part of valour, we decided to stay away. We know we can make modest profits trading regular currencies, so why risk it all on trading something we don’t fully understand?

We view forex trading as a stack of small, systematically won gains that compound to provide a return greater than that achievable in conservative investing. Buying a bunch of Ethereum CFDs and hoping that “cryptocurrencies are going up” has no place in that philosophy.

It Could Happen Again

Coinbase, the operators of the GDAX Ethereum exchange that was hit by the crash, have themselves stated that their Exchange did exactly what it was supposed to. This wasn’t an error. Someone sold a big order and the market went down. A lot. The market is just too small and too new, and is easily manipulated, either accidentally or deliberately.

This Ethereum flash crash has highlighted the risks of dabbling in the unknown, and as the Blokes discuss on this week’s episode, there is no reason why the exact same thing can’t happen again.