Volatility Stop Strategy (by Coinrule)

2021년 10월 14일

Traders often use the volatility stop to protect trades dynamically, adjusting the stop price gradually based on the asset's volatility.

Just like the volatility stop is a great way to capture trend reversals on the downside, the opposite applies as well. Therefore, another useful application of the volatility stop is to add it to a trading system to signal potential trend reversals to catch a good buy opportunity.

ENTRY

- When the price crosses above the Volatility Stop

EXIT

- When the price crosses below the Volatility Stop

For this strategy, the Volatility stop's multiplier is set to 3 to allow more flexibility to the trade. The strategy is designed for medium-term trades.

Based on the backtest result from a sample of crypto trading pairs, the most profitable time frame is the 2-hr.

The strategy works well with both crypto-to-crypto and crypto-to-fiat pairs. To make results more realistic, a trading fee of 0.1% is added to the script. The fee is aligned to the base fee applied on Binance.