Do you know that in almost all sports, part of a winning strategy isn’t just on improving yourself and/or your team, but also on knowing who your opponents are. Let me use basketball for example.
In NBA, all teams have dedicated staffs to learn about opposing teams’ strategies and players. What do they learn? Anything from something as basic as your preferred shooting spots, to what your team usually will do during specific events. Who are the best defenders on the team, and who are the worst. Those info usually will be compiled into videos and get passed to the coaches and players.
For example, some players prefer to shoot from the right side of the court, while others prefer left side. If I’m defending a player that I know like to shoot from the left, I will intentionally force them to go right. If I know a player is a bad 3-point shooter, if they are still beyond 3-point line, I won’t get too close on them. But if they are Stephen Curry, then I need to be close to him the entire time. As you can see, how I do things going to be different depending on the opponent I’m facing.
Let’s take another example. In tennis, there are 3 types of surfaces, which are Hard, Clay, and Grass. Each surfaces have their own characteristics, which make each player must adjust their play. How you play on clay will be different than on grass for example, despite if you are facing same opponent. While adjusting your own play due to different court type, you also need to know how your opponent will adjust on it. You can’t expect them to play the same in clay as in grass court.
That’s why before every match, you need to know who your opponent is, and how they usually play on that court, and how usually they adjust against a player like you, and how you must adjust to counter that, and so on. What are their strengths and weaknesses. Pro players won’t randomly go on random court and challenging random player without having info about that player, if there is a big stake on the line.
Now let me bring this into trading context. Let’s separate market into 3 different categories, which are up, down, and sideway. Then let’s say we have 3 coins, named A, B, and C. In overall up market, all three coins might or might not behave the same. A and B might be going up, but C is going down due to some P&D for example. Then on bear market, A and C going down, but B is going up. But on sideway market, A is going down while B and C oscillate sideways. Can you create one strategy that can handle those three coins on those different markets with different behavior? Let’s make it complicated and throw one thousand coins on your strategy, which make it having thousands or millions possible movements of each coin on each market.
That’s why before you trade a coin, taking the tennis analogy above, you should know some info about it. How it moves, why it moves, etc. You can’t just throw any strategy on random coins and expect it to be able to handle them all. That is why on my fried chicken approach, the first thing you must do is to pick the coins first.
Let’s put the fried chicken approach into tennis example. Let’s say you MUST win a match of tennis. You are free to choose any tennis player as your opponent. There is no deadline on when the match must be done. What you must do first is to create a list of players that you think you can beat. For example, you are at your best on clay court. You will want to play against players that are at their weakest on clay best of their records for example. After you have such list, only challenge them when both of you are at clay court. Don’t challenge them while you are on other courts. Also don’t challenge players that are not on your list or players that are unknown to you.
Same thing for trading. Pick coin(s) that you want to trade first, then focus only on them. Overfit as much as you can, only if the overfitting match the info you have. of course, the info should be plenty enough. Don’t overfit on 1 day worth of 5m candles for example. More data will lead to better overfitting. Be discipline and don’t trade anything outside of that list.
Most public strategies failed because it wants to fight any coins on any markets with same approach for all. That just won’t work long-term. You might get lucky for a while, but it will always ends up with defeat.
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