Profit Maxima: a crypto strategy

2021년 11월 24일

This strategy is designed for those who are looking for long-term positions with low risk and high profitability.

How does it work?
In short, the basis of this strategy is the frequent modeling of the price using regression equations and the estimation of the range of price movements.
The price modeling process starts from the first bars and will be repeated on each bar. This process is performed in each candle based on the data available up to that candle, and data for subsequent bars is not used.

There is also no fixed price model, but it will change from one candle to the next; Therefore, the more candles there are, the larger the statistical population and therefore the quality of the price model increases.

I have also used the concept of scarcity. Bitcoin is the first scarce digital object in the world. Once something becomes scarce enough, it can be used as money. This scarcity gradually increases and affects the price. The entire crypto market also follows Bitcoin.
However, always remember that past results in no way guarantee future performance.

Why this strategy generates a small number of trades?
Preston Pysh believed Bitcoin cycles happen in three phases: the Bull Run, the Correction, and the Reversion to the Mean. He estimates there are about 200,000 blocks per cycle and there are about 144 blocks per day.

Therefore, each cycle of Bitcoin lasts about four years. The entire crypto market follows bitcoin. On the other hand, cryptocurrency is a new phenomenon. They have a limited price history.

This strategy is designed to open a long position at the lowest possible price. In addition, due to the concept of scarcity and its continued impact on prices, trading in the “short” direction is avoided.

The combination of these factors leads to generate a small number of trades. However, you can test it on several different charts to make sure it works properly.

Default settings
{ default_qty_type } = strategy.percent_of_equity
{ default_qty_value } = 3.3
{ commission_value } = 0.1
{ pyramiding } = 3
{ close_entries_rule } = "ANY"

In a simple word, buy (Entry) and sell (take-profit) orders are each done at three different levels. At each level, 3.3% of equity is used (9.9% in total)

0.1% commission is considered for each transaction.

“close_entries_rule” determines the order in which orders are closed. The default is FIFO (first in, first out), but in this strategy, orders are executed in “first in, last out” order. In this way, the lowest buy (Entry) order corresponds to the lowest sell (take profit) order.

Choose the best chart
Charts have a significant impact on the performance of the strategy. As mentioned, the more historical bars there are, the larger the statistical population and therefore the quality of the price model increases.

You can use the Chart Quality panel to choose the appropriate chart:
The ‘Historical Bars’ field shows the number of candles in the chart. Choose the chart of an exchange that has the most historical bars.

The ‘Recommended Chart’ field shows the suggested chart for some symbols.

The “Predictability” field indicates to what extent price movements can be predicted using the model; the higher the “predictability”, the more credible the results of the strategy. "Predictability" indicates that the results of the strategy are reliable or not.

The image below shows the recommended chart for 20 different symbols:


How to use
You don't need automated trading platforms to use it. It can be used by placing simple buy and sell (take-profit) orders manually.

The green and red lines indicate the 'Entry' and 'Profit' levels respectively. If there is no order (buy / sell) active on one of these levels, it will be displayed in gray. The corresponding values are displayed in the Entry & Profit Limits table.

After choosing the appropriate chart, you can use this table to place your orders manually.

Note that trading in the "short" direction is not recommended at all.

Samples

2022년 1월 17일

릴리즈 노트

Update to version 1.02
Multiple changes were made to improve the appearance.

2022년 1월 18일

릴리즈 노트

Update to version 1.03
Some minor changes