Anyone who follows my on Steemit will know that I follow the crypto charts, especially #BTC quite closely (and tradition to a lesser extent).
Off course I also trade them when I feel the need.
The holy grail of trading is to find a system that works.
Most who have found or developed such systems will jealously guard their secret,
"but I will buck this trend, and share one with you here."
Now off course it is up to you to be a grown up, and take responsibility for your own actions, and the risks you take, so this as an idea that you could follow, at your own risk.
Consider yourself warned!
The 21dma is a great indicator of momentum in markets. The number 21 is important in the fibonacci sequence.
If you don't know what fibonacci is (or who), then I encourage you to look this up in Wikipedia.
I have done a short "back on an envelope" study of BTCUSD market and its relationship with the 21dma.
(note here, I am using the EMA to be accurate: the exponential moving average)
So let me dissect this table so you can see this strategy.
I am assuming you are holding 1 bitcoin throughout the bull run of 2017. I do not care when you bought it. Could have even been bought at the very top of the market @ 20k.
In the table, this 1 bitcoin is shown in the blue cell.
I am assuming that you sell all your BTC for USD every time the price breaks down below the 21dema (daily exponential moving average), and buy BTC with all your USD every time the price breaks above the 21dema.
You can see the prices of BTC each time it passed either over or under the 21dema in the column called btc price.
The 2 columns called CAPITAL (BTC or USD) show your holdings after each trading event, so you are either holding all your capital in USD or BTC.
i.e. when price is above 21dema, you are holding BTC and with below, USD.
important note: I am only looking, in a very simple way, historically, each time the trend turned decisively to be either below or above the 21dema.
Spotting these exact moments in real time is another matter, but one could say for example: execute this trade once a daily candle closes above or below this indicator
This calculation ignores trading fees and other overheads.
So the trade is simply:
Buy or Sell your entire holdings on every crossing of the 21dema
Buy or Sell your entire holdings on every crossing of the 21dema
Result:
Today we are above our 21dema
so we would be holding on over 3.3btc,
or the equivalent of 27,272USD!
Today we are above our 21dema
so we would be holding on over 3.3btc,
or the equivalent of 27,272USD!
That is a profit in a bear market no matter when you bought!!
There are some caveats to this strategy, mainly revolving around the actual trigger moments for trading, i.e. spotting and executing the trades on the actual reversals.
Looking back historically, it is easy to spot the reversals, in real time it is not so easy.
This is in particular poignant for the first sell.
The first sell event in this table is on 22nd dec 2017, 5 days after all time highs, as btc plummeted downwards. This day was an ugly day for #bitcoin
If we miss timed this trade and ended up selling at the bottom of this crash moment, our sell price would have been 10,700usd! and not 15,140! Much lower!
How would this have changed things?
Wow, we would be sitting on 19,270usd.
So even if we had been so unlucky to buy at the very top, we would be just a little below break even right now!
Once last comment: I have picked the BTC bear market period. Why? Well this system would simply be buy and hold most of the time in the bull market phase since we normally sit above our 21dema.
Let's be honest, in a bull market, a 2 fingered ape can make money! It is in the bear market period when we need to be sharp and have a good strategy.
Hmmm wish I knew all this before. Well it's never too late to learn!
That's it for this post. Hope you guys get something out of this.
As always please upvote, leave comments, and resteem, and finally have fun and trade safe.