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Buy and Hold strategies on cryptocurrencies can expose us to considerable market drawdowns that not everyone can easily accept.
Luckily for us, there are very interesting alternatives such as the strategy in today's video, which allows you to reduce the drawdown by as much as three times while maintaining (or even improving) the same profits as Buy and Hold.
The strategy works on Bitcoin and Ethereum and leverages a recurring pattern in these two markets that we've identified with our proprietary software.
By watching the video you'll discover:
- How the strategy works
- How to code it in PowerLanguage/EasyLanguage (a very simple open code system that you can use and revise)
- The results of the strategy and how they compare to Buy and Hold
Enjoy the video! 😎
Hey everyone and welcome to this brand new video! Today we'd like to show you a Bias strategy, meaning a strategy that has to do with recurring behaviors in the markets. Specifically, we're going to be talking about a bias strategy on the two main markets in the cryptocurrency sector: Bitcoin and Ethereum. They are the most capitalized cryptocurrencies and also the ones that have a longer history compared to the altcoins that were created only a couple of years ago.
Alright, so this equity line that you see on the screen right now is the result of two very simple lines of code Let me show you. This simple system simply enters the market on the 25th of the month.
Here you can see the text: If Day of Month of today's date equals 25 and t equals 200, so 2 am on the 25th day of the month, we'll buy our asset, in this case, Bitcoin.
If instead, the day of the month is equal to 3, namely the third day of the month and we are exactly in the middle of the day, at noon, then we'll close the trade.
In this way what are we going to do? Well we're going to buy Bitcoin and hold it for eight days, on average. Well the number of days we keep it obviously depends on how long the month is, but it makes little difference.
So, we'll hold Bitcoin for about 8 out of 30 days, so less than a third of the total time. This strategy brings the results that we showed you here.
You can see that we're dealing with a somewhat segmented equity line. We'll trade for 8 days and then the remaining 21-22 days, so from day 3 to 25, we'll stay flat. And indeed, as you can see, the equity curve seems to be divided into segments.
How did I perform this test? I supposed to always buy the same counter value.
In fact, if we access the Properties, we'll see that we're using a cash per trade of $100,000, so this is the reference for our capital.
Now it could be interesting to see what this strategy would do if instead of buying on the 25th to sell on the 3rd, we bought on the 1st day of the month to sell at the end of the month.
Let's see the results right away. It's enough to simply modify the script like this. So now we have that: if the day of the month is 1, so if we are on the 1st day of the month, and T is equal to 200, I left it like that because we have an hourly timeframe and just imagine that the month has just started, then we'll buy.
We'll sell instead if we are in a condition where the day of yesterday's month is greater than the day of today's month, therefore, if the month has changed. We did this trick simply to avoid getting errors where some months have 31 days, others perhaps like February have 28 days and so on.
Let’s compile the strategy and look at this chart, which can in all respects be considered as the chart of the Buy and Hold of Bitcoin.
Of course, this is not the standard Buy and Hold Return, which is this one here, because this would involve the reinvestment of profits. Now we aren't reinvesting the profits and in fact, every month we'll invest a fixed amount of $100,000, so the related equity line is this one here.
It's interesting to note that staying 100% of the time in the market, always with the same capital, from the beginning of the month compared to staying in 8 days... Some of you may have already noticed that you'll reach more or less the same point.
And that is indeed the case. Let's go and compare the two curves. I'm using a software program that helps me to reproduce MultiCharts equity lines and then compare them.
Here we are: this is our BTCUSDT Buy and Hold. You can see the same equity line altogether, but it's simply on a different scale. Here we start at 100,000, here we start at zero, so the gain is 250,000, namely 350,000 minus 100,000.
Let's go and plot the equity of the strategy seen earlier. And look at that effect. We'll arrive at the same point in terms of net profit, but with a drawdown that is significantly less than that of the Buy and Hold.
In fact, we can go from having over $90,000, this peak of $91,000, to having $30,000. So, the drawdown is 3 times less.
The net profit is basically the same. And, above all, and the most important thing, we have an open position for less than a third of the total time. And having positions that stay open for less time means less risk.
Not only will we risk less, but we'll have a lower drawdown and above all, we'll have the same net profit compared to a Buy and Hold.
Now you might be thinking that this is an overfitting on Bitcoin. I guarantee you that it isn't. Let me take the same strategy and apply it to Ethereum… I've already prepared the data here for your convenience. And you see, the results are even better.
They're even better because even if the strategy hasn't been performing very well in this extremely difficult period for Ethereum, it hasn't lost much. And in fact, we have a net profit that is much higher than the net profit of the Buy and Hold. Moreover, and I’d like to reiterate the concept, the drawdown remains drastically much lower.
But how did we determine these two very simple lines of code that we're sharing with you? These two lines of code here? Simply by analyzing the monthly recurring behavior of these markets with proprietary software called Bias Finder that we and our students use in Unger Academy.
This chart shows the average trend of a month of Bitcoin. You can see that more or less from the 25th of the month until we get to the 2nd or 3rd day of the month, we have this sensational average growth.
That's exactly what we aim for at Unger Academy, namely to be able to leverage market edges. Such an edge or recurring behavior could very well replace the Buy and Hold perspective.
So, if we wanted to hold a certain cryptocurrency, maybe using the same capital, then rebalancing it every month, I mean I would certainly prefer an alternative option that makes me stay less time in the market and that exposes me to market fluctuations only a third of the total time.
What days would I choose? From about the 25th of the month until the 3rd or 4th day of the month.
And with that, this video is over! Thanks so much for watching!
And before we say goodbye, I'd like to leave you with a piece of advice. In the description of this video you'll find a link that will let you access free presentation by Andrea Unger, our founder and the only 4-time world trading champion. You'll also be able to order your free copy of our best-selling book, "The Unger Method", or even book a free call with a member of our team.
If you liked this video please don't forget to leave us a like and subscribe to our channel and click on the bell to stay updated on the release of all our new videos.
Thank you again so much for watching this video and I will see you in our next video, bye-bye for now!
Need More Help? Book Your FREE Strategy Session With Our Team Today!
We’ll help you map out a plan to fix the problems in your trading and get you to the next level. Answer a few questions on our application and then choose a time that works for you.BOOK YOUR FREE STRATEGY SESSION NOW >>
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.