BITCOIN FUTURES SYSTEM
The unprecedented global money supply expansion accelerated by stimulus packages in trillions of dollars are the main reasons for Bitcoin’s recent surge in popularity. This is because Bitcoin, like gold cannot be printed because the Bitcoin, inspired by the rarity of gold, was designed to have a fixed supply of 21 million coins, over 87% of which have already been produced. In fact Bitcoin’s market cap is only approximately $200 billion, and a large portion of that is locked up in long term holdings or lost accounts. I have done considerable research on Bitcoin, published in my article in the August 2020 issue of Technical Analysis of stocks and Commodities and more recently in binance.com . Bitcoin’s rising popularity motivated me to design a system for trading bitcoin futures taking advantage of my correlation analysis from my research and other conventional technical analysis methods and indicators. It is a long/short daily and consists of five different trading signals:
A trend following strategy seemed the most appropriate to use in order to take advantage of the bitcoin’s strong trends so the first two conditions included trend indicators. To increase the accuracy of the signals an Intermarket condition filtered out trades in the opposite direction of the most strongly correlated assets. Trend following systems, however, only produce trades in trending markets so in order to increase the number of trades in sideways or choppy markets I added a third signal using oversold/overbought indicators which were deployed only in a trading range. The fourth signal, exploited the strong directional correlation between bitcoin and two other highly correlated assets to trigger trades when the divergence rose above a critical level. This condition used the proprietary intermarket divergence indicators presented in my Intermarket Trading Strategies book.The last signal used money flow indicators to trigger trades.
The holding period for each trade is a maximum of 11 days unless the position is closed earlier by 3 different exit conditions. You can see below a simulated performance of the system by trading only 1 Bitcoin futures contract from the first date that the contract was listed in the CME until the current date of uploading the system on this site. To avoid the pitfalls and illusion of optimization I only used minimal walk forward optimization.
The system is available for the Amibroker , Multicharts , Tradestation and Metastock platforms. You can purchase it by clicking on the appropriate button below.
Note: The code was developed using Amibroker and translated to easy language so the Multicharts and Tradestation strategy performance may not be exactly the same as the above because of fundamental differences between the two programming languages. On testing the system with Multicharts it produced more trades, the drawdown was higher, the % winners was lower but the profit factor and the win/loss ratio was higher than the Amibroker simulation test above.