1/ Trend Following
The oldest trading approach and Crypto
- Description of a robust strategy
- Overall results for Binance Futures history
- Results on Binance Futures daily time frame in each year
- Basic characteristics of the strategy
The oldest trading approach and Crypto
- Description of a robust strategy
- Overall results for Binance Futures history
- Results on Binance Futures daily time frame in each year
- Basic characteristics of the strategy
2/ Trend following is probably the oldest trading strategy.
It is based on a simple idea. If an asset starts to move in a certain direction, it tends to continue in that direction.
Simple, right?
Simple ideas work in trading...
It is based on a simple idea. If an asset starts to move in a certain direction, it tends to continue in that direction.
Simple, right?
Simple ideas work in trading...
3/ Our crypto trend following strategy has the following parameters:
- trades on the entire universe of coins from Binance Futures
- trades to the long side when Bitcoin trades above its 50-day MA
- trades to the short side when Bitcoin trades below its 50-day MA
- trades on the entire universe of coins from Binance Futures
- trades to the long side when Bitcoin trades above its 50-day MA
- trades to the short side when Bitcoin trades below its 50-day MA
4/ Entry and exit conditions:
- up to 20 open positions
- trade the most up or most down coins
- Entry long: Coin crosses MA20 upwards
- Exit long: Coin closes below MA20
- Entry short: Coin crosses MA20 downwards
- Exit long: Coin closes above MA20
That's it...
- up to 20 open positions
- trade the most up or most down coins
- Entry long: Coin crosses MA20 upwards
- Exit long: Coin closes below MA20
- Entry short: Coin crosses MA20 downwards
- Exit long: Coin closes above MA20
That's it...
5/ What are the results on Binance Futures daily time frame?
Of course, the strategy made the most money in 2021. That's also when the markets trended the most.
The strategy cannot make money when the markets are flat. This is not the holy grail!
Of course, the strategy made the most money in 2021. That's also when the markets trended the most.
The strategy cannot make money when the markets are flat. This is not the holy grail!
6/ It is interesting to look at the strategy year by year.
That way we can better understand its strengths and weaknesses...
That way we can better understand its strengths and weaknesses...
7/ The year 2020 was marked by the Bull Market.
The long side of the strategy earned. The short side was flat.
At the same time, there were not many pairs to trade at this time. The results would probably have been better...
The long side of the strategy earned. The short side was flat.
At the same time, there were not many pairs to trade at this time. The results would probably have been better...
8/ The year 2021 marked a massive Bull Market.
At the same time, there was an ample amount of coins traded on Binance Futures.
The strategy earned 885% with a drawdown of 25%.
Even the short side made money in the dips between May and August.
At the same time, there was an ample amount of coins traded on Binance Futures.
The strategy earned 885% with a drawdown of 25%.
Even the short side made money in the dips between May and August.
9/ 2022 was in the spirit of a Bear Market.
Short side made some money. The long side lost money.
The overall result was 14% with a drawdown of 25%.
What is most important?
The strategy has protected the profits of previous years...
Short side made some money. The long side lost money.
The overall result was 14% with a drawdown of 25%.
What is most important?
The strategy has protected the profits of previous years...
10/ In 2023, the market is slowly rolling sideways with very low volatility.
The result of the trend strategy corresponds to this. For now, 8% with a drawdown of 17%.
You can clearly see how the long side hedges the short side and vice versa.
The result of the trend strategy corresponds to this. For now, 8% with a drawdown of 17%.
You can clearly see how the long side hedges the short side and vice versa.
11/ Main characteristics:
- strategy makes money in trending periods
- strategy makes money in volatile markets
- strategy loses/goes sideways in the non-trading period
- by trading up to 20 positions at a time, you reduce the risk of holding one coin
- strategy makes money in trending periods
- strategy makes money in volatile markets
- strategy loses/goes sideways in the non-trading period
- by trading up to 20 positions at a time, you reduce the risk of holding one coin
12/ Is it worth trading in crypto?
Crypto is a trending market. Trend and breakout strategies have great potential.
You have to understand the nature of these strategies. They will only make money in trending periods.
Don't ask for miracles!
Crypto is a trending market. Trend and breakout strategies have great potential.
You have to understand the nature of these strategies. They will only make money in trending periods.
Don't ask for miracles!
13/ Bonus: More stable results
You have to trade more uncorrelated strategies to get stable results.
Add one mean reversion strategy to the trend strategy with different entry and exit logic.
Suddenly we can make a profit in the sideways market too...
You have to trade more uncorrelated strategies to get stable results.
Add one mean reversion strategy to the trend strategy with different entry and exit logic.
Suddenly we can make a profit in the sideways market too...
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