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BOOK YOUR FREE STRATEGY SESSION NOW >>Welcome back to our regular deep dive into portfolio system analysis! Today, we're turning our focus to the cryptocurrency futures market, with a particular emphasis on Bitcoin Futures listed on the CME.
This dynamic market stands out not only for its extreme volatility but also for the substantial size of its standard contracts. A single Bitcoin Futures contract represents approximately five times the value of Bitcoin itself (e.g., $100,000 * 5 = $500,000), with each point equaling $5.
Thankfully, traders also have access to the Micro Bitcoin Futures contract, which is 1/50th the size of a full contract. This makes the notional value of a Micro contract approximately $10,000, assuming the underlying Bitcoin price is $100,000.
Now, let’s explore two actionable strategies for trading Bitcoin Futures.
Our first strategy operates on a 5-minute time frame and follows a standard 23-hour session, running from 5:00 PM to 4:00 PM (exchange time). This breakout/trend-following system is built around a classic approach: entering trades when the price breaks above or below the highs and lows of the previous trading session.
Figure 1 – Example of a trade executed by the first trend-following strategy on Bitcoin Futures (@BTC).
The risk management plan includes a classic stop loss set at $4,500 and a take profit level at $17,500. These are notably large values, but if used on a micro contract, they’d be scaled down by a factor of 50.
Below, we can see the equity line spanning from May 2023 to early 2025. The curve demonstrates a consistent upward trajectory, highlighted by an exceptional 2024 that aligned perfectly with Bitcoin’s bullish trend.
Figure 2 – Equity Line of the first trend-following strategy on Bitcoin Futures (@BTC).
Let’s zoom in on the system’s key performance metrics. The strategy boasts a Net Profit of $214,000, with a maximum drawdown of around $29,000—an impressive figure given the size of the underlying asset. The average trade surpasses $2,000, ensuring ample coverage of operational costs and slippage.
Figure 3 – Strategy Performance Summary of the first trend-following strategy on Bitcoin Futures (@BTC).
Figure 4 – Total Trade Analysis of the first trend-following strategy on Bitcoin Futures (@BTC).
Let’s move on to the second strategy, which operates on a 5-minute time frame and is based on trend-following logic, a predominant approach in this market.
In this case, we will enter long positions when the price surpasses a level calculated as the distance from the previous day’s closing price, plus a number of points derived as a multiplier of the Average True Range (ATR) indicator, which measures the underlying asset's range of movement in points.
Conversely, for short positions, we will subtract a number of points, again calculated using the Average True Range.
The stop loss is set at a monetary value of $5,500, while the take profit is $5,000 (relatively small for this underlying asset) and is lower than the stop loss, a characteristic that makes this system quite unique.
Figure 5 – Example of a trade executed by the second trend-following strategy on Bitcoin Futures (@BTC).
Let’s now analyze the equity line. The curve shows a consistent trend over the historical period considered earlier, and particularly, the performance in 2024 has been outstanding. Additionally, the strategy recently achieved an equity peak, surpassing $115,000 in profits.
Figure 6 – Equity Line of the second trend-following strategy on Bitcoin Futures (@BTC).
As always, let’s delve deeper into the strategy's other metrics. In this case, the average trade is lower than the previous strategy due to the narrower take profit, but it remains sufficient for real-money operations ($708). The drawdown, on the other hand, exceeds $38,000. This value is relatively normal given the nature of a futures contract with a notional value of $500,000 and the extreme volatility of this market.
Figure 7 – Strategy Performance Summary of the second trend-following strategy on Bitcoin Futures (@BTC).
Figure 8 – Total Trade Analysis of the second trend-following strategy on Bitcoin Futures (@BTC).
Today, we analyzed two interesting trading systems that are part of our strategy database.
Bitcoin Futures, and especially Micro Bitcoin Futures, are relatively new products. Nevertheless, they are proving to be valid alternatives to traditional futures products that we typically use to develop strategies.
These are highly interesting products that offer valuable opportunities to improve portfolio diversification.
We hope this article has sparked your curiosity and your desire to develop new strategies!
If you're interested in trading the queen of cryptocurrencies, check out this video where we tried to apply a classic trading strategy from the 1970s to Bitcoin: 1970’s Strategy Applied to Bitcoin: Does It Work? The Result You'd Never Expect.
Happy trading, everyone!
Andrea Unger here and I help retail traders to improve their trading, scientifically. I went from being a cog in the machine in a multinational company to the only 4-Time World Trading Champion in a little more than 10 years.
I've been a professional trader since 2001 and in 2008 I became World Champion using just 4 automated trading systems.
In 2015 I founded Unger Academy, where I teach my method of developing effecting trading strategies: a scientific, replicable and universal method, based on numbers and statistics, not hunches, which led me and my students to become Champions again and again.
Now I'm here to help you learn how to develop your own strategies, autonomously. This channel will help you improve your trading, know the markets better, and apply the scientific method to financial markets.
Becoming a trader is harder than you think, but if you have passion, will, and sufficient capital, you'll learn how to code and develop effective strategies, manage risk, and diversify a portfolio of trading systems to greatly improve your chances of becoming successful.
