Remember the Bitcoin strategy we introduced in early 2022 that, according to backtest results, could earn as much as Buy & Hold but reduce drawdown by three times? (You can find the video here -> https://ungeracademy.com/blog/smart-trading-on-bitcoin-same-profits-drawdown-of-1-3).

Well, in late 2022, we tested the strategy again to see how it performed in one of the worst years the crypto market has ever seen, and we were pleasantly surprised!

The strategy only works on the long side, taking advantage of what we might call an "end of month rally" in Bitcoin. Best of all, it consists in just three simple lines of code that make it accessible to virtually anyone.

Watch the video now to discover:
-The strategy's performance in 2022 (out of sample!) and comparison with Buy & Hold
-The strategy's code (open source) and how it works
-An example of how to apply the strategy on Ethereum

Enjoy! 😉

Transcription

Introduction

Hey everyone, and welcome back! Here’s one of the coaches at Unger Academy here, and in this brand new video, we’re going to be looking at the recent performance of a strategy for cryptocurrencies that we presented in a previous video of ours. I'll leave the link in the description of this video if you’d like to watch it to understand exactly how this strategy works, while in this video we will see how it performed in 2022, which we know was, well unfortunately, a very disappointing year for cryptocurrencies.

Code of the Strategy

Alright, so here we are in the Power Language editor of MultiCharts, which we need to develop our trading systems.

As you can see, you don't need to be an experienced programmer to use this software.

In fact, the strategy that we’ll look at today to see how it worked consists of just three lines of code. Yeah, that’s it.

In the first line we have the input, called "myTime," which is the entry time of our strategy, which occurs on the 25th of each month.

As we know, the crypto market is open every single day of the month. This means that this condition will always be verified and so it will always be possible to set up a market entry on the 25th of each month, entering at 11 a.m., as mentioned, which is our start time.

Then what we’ll do is we’ll go and close this long position, that we opened on the 25th of the month, we’ll close it on the third day of the following month.

At what time should we do that? We’ll, at 12, noon we’ll sell the previously opened contract.

Since we’re dealing with cryptos, we’ll use a fixed size of $10,000.

Backtesting on Bitcoin

Alright, let's go and look at this strategy immediately to see how it has been performing on Bitcoin since more or less... let me see... since late 2017 to the present day.

What you can see is that it’s remained stable... We showed it to you at about that time too.

Of course, it’s been about 6-8 months since we last showed this strategy live.

And even though it’s a long-only strategy, so in other words it doesn’t take any short positions, it has a very high Percent Profitable of over 75%, with a very good Average trade.

The size used, as mentioned, is $10,000, so this Average trade would be almost 5% on our position, which is very high.

And we can also see that the Drawdown on this strategy was indeed much lower than Buy and Hold.

Compared to the Drawdown this strategy saw in 2018, the recent Drawdown was significantly limited, at least for now, even if a good portion has since recovered.

So, compared to a Buy and Hold strategy that saw extremely negative returns in 2022, this automatic strategy was able to limit the damage in this market phase, even though it only entered long.

The strategy is based on the assumption that there is some sort of bullish trend around the end of the month and the beginning of each new month which could be triggered by reallocations from traders around the world, and maybe even from some funds.

We know that, to date, there are also funds that can trade Bitcoin.

And as you can see, the strategy is successful in these phases.

Of course, the trade won’t always be positive, and indeed not every month. But this is a system that could also be filtered a little bit more. However, be careful because the statistical sample in case histories like this namely, where the strategy makes only a few trades per year, in this case, 12 trades per year, and one trade per month, it will be very difficult to filter out the worst months.

But you know, maybe some conditions could be added here and there.

Backtesting on Ethereum

Now let’s also look at how this strategy would have performed on Ethereum.

The Equity curve of the system is also very good.

The Drawdown was - the last one, in 2022 – a bit more extensive on Ethereum.

However, we can see that even in the last period, there has been a good recovery.

You can see that the Drawdown decreased quite significantly in the last period.

And again, the comparison with the Buy and Hold shows us that the automated strategy is an absolute winner, since it would have limited, and strongly limited actually, the risk although it trades only on the long side.

The Average trade on Ethereum reaches almost 6%, exactly 5.9 %, with a Percent Profitable of over 72%.

So, this is a strategy that, in the out-of-sample period and in a generally challenging phase of the market, was still able to limit the damage and deliver some very good results, especially in the last phase where we saw this rebound.

Of course, these are slower strategies that need a bit more time to be correctly validated because, as mentioned earlier, the statistical sample isn’t huge.

Alright, we just thank you so much, I hope that you enjoyed the video.

If there is anyone among you who’s interested in the world of systematic trading, I recommend that you go and click on the link in the description of this video. From there, you can go and watch a free presentation by Andrea Unger, get our bestselling book covering only the shipping costs, or even book a free strategic consultation with a member of our team.

We really do hope that you have enjoyed this video, and if you have, please leave us a Like, subscribe to our channel, and go and click on the little notification bell, just there, in the bottom right, to stay updated on all our new content.

Thanks so much for watching and we will see you soon in our next video, bye-bye for now!

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