Can an automated trading strategy outperform Bitcoin (BTC) and Ether (ETH) buy-and-hold “diamond hands”? We explore how to develop a simple automated trading strategy and what kind of performance we can expect out of it.

This article, written by our partner TradingStrategy.ai is very interesting and explains whether a momentum trading strategy for Bitcoin (BTC) and Ethereum (ETH) can be effective.

Specifically, it focuses on a strategy using the Relative Strength Index (RSI) to see how much performance can be achieved with simple automated trading. It examines whether it is possible to outperform the “diamond hands” strategy of just holding onto BTC and ETH.

Key Points:

• Trading Idea: The strategy uses RSI to capture the momentum of the cryptocurrency market, aiming to outperform the buy-and-hold strategy by riding the uptrend.
• Strategy Plan: The strategy utilizes market orders and focuses solely on spot trading for BTC and ETH. It sets time frames of 1 day and 8 hours.
• Performance Metrics: Metrics such as Compound Annual Growth Rate (CAGR), maximum drawdown, and Sharpe ratio are used to evaluate the strategy’s performance.
• Backtesting: The strategy is tested against historical data to verify its effectiveness. This process includes grid searching various parameters and conducting robustness checks by shifting time frames.

Conclusion: This type of strategy can be expected to generate profits somewhere between the buy-and-hold strategies of BTC and ETH. Moreover, it is relatively less risky due to lower maximum drawdowns.

(Details in English) https://tradingstrategy.ai/blog/outperfoming-eth