Bitcoin Trading for Dummies

BITFINEX:BTCUSD   Bitcoin / U.S. Dollar
This is designed as a basic set of rules for trading Bitcoins . It is quite conservative for Bitcoin , but has been back tested to show that it's also historically highly profitable.

Chart Settings:

Set MA Cross at 9,21 on daily chart

1) Always follow the rules
2) When MA crossover occurs trade in direction of crossover trend
3) When trading long have balance in Bitcoin
4) When trading short have balance in Fiat
5) When in doubt refer to rule 1

EDIT: Same strategy on Bitstamp starting on 2011-12-1 would give you a return of 1787%

Open Close Long/Short P/L %
1/12/2011 24/01/2012 Long 98%
24/01/2012 1/03/2012 Short 25%
1/03/2012 24/03/2012 Long -1%
24/03/2012 5/04/2012 Short -1%
5/04/2012 13/04/2012 Long 0%
13/04/2012 17/04/2012 Short -1%
17/04/2012 30/04/2012 Long 1%
30/04/2012 21/05/2012 Short 0%
21/05/2012 23/08/2012 Long 103%
23/08/2012 5/09/2012 Short -8%
5/09/2012 12/10/2012 Long 17%
12/10/2012 12/11/2012 Short 11%
12/11/2012 23/12/2012 Long 22%
23/12/2012 9/01/2013 Short 15%
9/01/2013 17/04/2013 Long 667%
17/04/2013 26/04/2013 Short -36%
26/04/2013 6/05/2013 Long 15%
6/05/2013 21/05/2013 Short 0%
21/05/2013 6/06/2013 Long 4%
6/06/2013 16/07/2013 Short 26%
16/07/2013 27/09/2013 Long 40%
27/09/2013 11/10/2013 Short -1%
11/10/2013 11/12/2013 Long 672%
11/12/2013 1/01/2014 Short 26%
1/01/2014 21/01/2014 Long 13%
21/01/2014 6/03/2014 Short 21%
6/03/2014 20/03/2014 Long -9%
20/03/2014 19/04/2014 Short 22%
19/04/2014 30/04/2014 Long 5%
30/04/2014 16/05/2014 Short 1%
16/05/2014 OPEN TRADE Long 39%
I'm a beginner to these terms. By MA cross, do you mean moving average crossover? And you are saying to look at 9-day and 21-day? Or do I have it wrong? Also, does simple/exponential/etc. matter?
tristyan DavidY
Yes a Moving average of 9 and another Moving Average of 21 on a 1 day chart. You could try it using exponential, but this back testing was done on just a standard Moving Average crossover.
Here is a nice script created by ninjabenja and LazyBear that you might like to try. You will just need to update the Fast and slow to 9 and 21
DavidY tristyan
Ok thank you!
Can I ask, how did you choose 9 and 21 as the optimal ones?
tristyan DavidY
Back testing a number of ranges this is the best balance I have found so far on the daily chart. I have not back tested all possibilities, but of what I have, I have found this to be the best so far. If you or anyone else finds a more optimal range over the same period of time I would be interested to know. Again this is designed as a low risk "trading for dummies" strategy. If you combine this with other proven back tested metrics, you are likely to be able to improve on this strategy. The key with this strategy is to trade with the trend and not against it. If you want to day trade this is not a strategy for you. I would never recommend only using MAs for a day trading strategy given how laggy they are.
Very interesting!
This looks pretty solid. IMHO, simple is good.

My only question is whether it can be optimised during stupid-bubble periods. Take the last bubble for example, because the initial crash was fairly quick, the EMAs correctly indicated to go short after significant value was lost. This would have proved to be profitable because there was a short recovery phase before a further crash. What if the initial crash had continued without a recovery phase? The trade might still have been profitable but there would have been a lot of "lost" opportunity, simply because of the speed of the dump.

My question is, could we add a third EMA or another indicator to apply during stupid-bubble phases to try to maximise return? This might necessarily add more risk of course.
Neat...but what about the other bubbles? 14 trades is hardly a statistically significant sample...
tristyan RimmerDall
Sure I had only done this on BFX as that's all the data they have. In the interest of answering your question I have now done it for Bitstamp back until November 2012. I have not bothered doing the math but I think you will find it is significantly more profitable over that period of time. Feel free to check the numbers.
tristyan tristyan
At rough count it looks like around 780% from November 2012 to when this charts starts in May 2013. Compound that profit and it would be crazy numbers.
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