Bitcoin trading is relatively very volatile and unpredictable. Many traders do not quite find a way to harness the fluctuations and subsequently will be forced to resort to using buy-and-hold strategies that will get them minimal returns. This high number of strategies may make it hard to know which one will be effective.
For such a problem, we researched different bitcoin trading strategies and followed their trend since their invention. Here on this website, QuantifiedStrategies.com, we have designed and back-tested numerous strategies by sound technical analysis and historical data so that traders can take decisions intelligently in this very volatile market.
Here are three successful Bitcoin trading strategies that have stood the test of time. In this article, we’re going to explore the mechanics behind each strategy, delve into some backtested results, and give you actionable insights to enhance your trading approach. Let’s get started!
Strategy 1: The MACD Histogram Approach
Understanding MACD
The strategy relies on the MACD indicator itself. This is one of the most applied indicators of any trader. MACD has three key components:
- The mathematical difference between the two exponential moving averages: 26-day and 12-day.
- A 9-day exponential moving average of the MACD line; this is called the Signal Line
- Difference between the MACD line and the signal line; it is called the MACD Histogram
Trading Rules
This strategy uses a MACD histogram-centered focus. The trading rules are as follows: BUY Once the histogram moves positive. SELL Once the histogram moves negative. It is based on making money by capturing the momentum of Bitcoin after it has started trending. ### Performance Insights We have written this strategy out in Python and the code has been backtested since 2015. Here are the remarkable results: Annual Return: 77% Buy-and-Hold Return: 61% – Time Spent: 54% of time
This strategy was generating better profits while it was invested in fewer moments, hence fewer temporary draw-downs. This momentum trading using the MACD histogram concludes that momentum trading might be an even good strategy in the Bitcoin market too.
Momentum Breakout Strategy
Strategy Overview
The second is also a momentum-based strategy focused on explosive moves of the price of Bitcoin. The rules are pretty self-explanatory:
Buy when the price breaks above the close from 25 days ago
Sell when the price falls below the close from 25 days ago
Performance Metrics
On the whole, this strategy has really been good in the long run. The exceptional trades are such examples that a return of up to 42% was gained in 43 days. The win rate is only 43%, yet average returns still beat buy-and-hold.
The Average Return is more than buy-and-hold
- Time Spent: 56% of the time
This strategy further justifies the fact that despite lower winning percentages, the momentum-based strategy will still yield very good performance because it is done so well.
Strategy 3: Trading Patterns Based on Seasonality
Seasonal Trends
The third strategy adopts seasonal patterns that have been profitable in older markets and, interestingly, thrive with Bitcoin as well. This strategy involves:
- Buying Bitcoin on the fifth-to-last trading day of the month.
-Trade on third trading day of the new month.
Results and Profitability
This seasonal strategy has an amazing record of achievement. Most trades are winners; even the average profit is an astonishing 6.6%. In aggregate, a good average profit is made on most trades, a whopping 3.2%. The annual return is thus getting close to 41%
-Time Invested: That’s just 23%
This trend is flat for the last couple of months but still potentially a winning strategy for traders looking to play based on historical trends.
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Conclusion
To recap, let’s talk about three winning Bitcoin strategies to enhance your trading methodology:
- MACD Histogram Strategy: Momentum-based strategy with an annual return of 77% and was invested only 54% of the time.
- Momentum Breakout Strategy: This is simply a breakout strategy that is known to generate good profits with a lower win ratio.
- Seasonal Trading Patterns: This is the time-based strategy that operates within the historical cycles of trends to produce smooth profitable returns.
All of these strategies have its merits and can be suited to individual trading preferences. Although past performance is never a guarantee in the future, these are some good strategies for trading in the ever-changing Bitcoin market. For further detailed insights and additional strategies, please visit QuantifiedStrategies.com. Happy trading!