I am looking into speculation in BitCoins. I am abandoning my long held disdain for trading and technical analysis. I feel quite excited by the promise of Digital Currencies and would certainly like to contribute to this cause. Anything that reduces the power of coercive agents and strikes a blow for free and voluntary exchange among individuals can count me as an ally. I believe that speculating in BitCoin is a way for me to contribute to this cause. After all I am adding my capital into the mix by speculating. As the Austrian school of economics understands, speculating is a good thing as it reduces fluctuations. According to the Austrian school, speculators reduce fluctuations, not cause it. A view with which I am in full agreement. Some thoughts regarding speculating
1. The speculation is not purely for money making. Part of it, like buying Gold, is philosophical. It is my way of kicking the wall street bankers and their creepy cronies, the politicians and bureaucrats in the teeth. Every time I buy Gold or a Digital currency, I kick them in the teeth. If I lose money doing it, so be it. There is no shame in losing having fought for a worthy cause.
2. My view is that Digital Currencies are here to stay. Though Bitcoin itself might collapse, Digital currencies will be around. So I will speculate in a basket of Digital Currencies. To start off with, my portfolio will contain BitCoins and RippleCoins in some ratio, which will be determined later. I will also keep a watch on new Digital currency systems and add the viable ones to the portfolio as and when they appear. I hope to create a basket of Digital Currencies to speculate in.
3. I am primarily a long. I will not short BitCoin or RippleCoin or any Digital currency (unless it is a case of fraud) in favor of any Fiat currency. If I do short a digital currency, it will only be in favor or another Digital currency, or precious metals. I expect the state to clamp down on digital currencies at some point. I expect the Digital currencies to take a hit at that point. If I can anticipate the event, I short. Whatever my gains from the shorts, I put it in Gold. The Fiat currency is just an intermediate.
4. I will set aside a small sum of money which I am willing to lose in this entire experiment, say X dollars. My first purchase will be a fraction of X. If I lose the entire sum, I close the experiment for Good. For ever. I keep playing as long as I have some of the X dollars. This rule is iron-clad.
5. The primary tool I plan to use in speculating is technical analysis.
Do you have any suggestions as to what other tools I must use?