All right, let’s kick things off. Greetings, everyone and welcome to the 17th installment of our Strategy of the Week series. We’re thrilled to be streaming simultaneously across an array of platforms. So, you could be tuning in via Twitter, LinkedIn, or numerous other venues. Don’t forget, the recorded version of this live stream will be uploaded on our YouTube channel afterward.
If you’re catching up with us through the YouTube recording, consider becoming a part of our vibrant discord community to stay updated about the next live streams, and you’ll find an invite link to this in the video description. This will also afford you the chance to pose any strategy-related queries in real time, enabling us to provide instant responses, which is really a win-win for both parties. Of course, we understand that live attendance may not always be feasible due to professional obligations and much more. In such cases, feel free to visit the recording on YouTube at your convenience.
Lastly, remember that our YouTube channel hosts a diverse array of Strategy of the Week videos. So, if this strategy isn’t quite your cup of tea, there’s plenty more to explore. Right, so let’s dive in. And this week, we’re spotlighting a strategy that harnesses the power of the relative strength index, or RSI, and basic moving averages to pinpoint entry points for long positions. For Position xx, we’ll again be leveraging these two technical indicators. What makes the strategy particularly appealing is it will not use trading new signals. And this means that we’ll be able to take advantage of Coinrule’s “any coin” scanner and this tool will scour the market hunting for coins that match our entry criteria and subsequently initiate trades on them. Additionally, the strategy comes prepackaged as a template on Coinrule making it a breeze to set up and launch.
For those interested in the deep dive again an accompanying script will be available on our TradingView Profile. So, if you wish to conduct a back test that’s entirely possible. And again, I’ll guide you through this process later on as usual. Okay, first, let’s have a look at the broader macro picture then.
So far, this week has progressed quite slow pace has been quite minimal volatility notable in both equity, equity, and crypto markets. And bucking this trend short-term treasury yields saw rise and given the lack of significant progress in resolving the debt ceiling issue amidst the power struggle between the two factions in Congress. And despite this, Sunday’s call was labeled productive by both political factions, and discussions are set to continue throughout the week. Hopefully, we can get a resolution soon.
This week’s economic calendar features significantly noteworthy event data disclosures. On Tuesday, we had a series of PMI releases from the US and UK. Additionally, there are multiple speeches from officials of the Bank of England and the European Central Bank, followed by the release of the Fed meeting minutes today.
Running out the week Friday we’ll see a disclosure of UK CPI and core PCE in the US. So now when we look at the Bitcoin daily chart here, and you can see that I’ve got some key levels highlighted during the last strategy of the week video on the Livestream. In fact, we highlighted that a variety of technical indicators are pointing towards an increase in bearish momentum for Bitcoin. As you can see, over the past two weeks, this has kind of played out down here, we’ve just had a general downward trend for the past two weeks.
The most important level we should really be looking at here is this one here. This is a support level of around $26,500. We can see so far, that Bitcoin has tested the support multiple times here, but it’s so far held strong. If this level is breached and we fall through it, I’d be looking to enter short positions. Another important indicator to take a look at here is the MACD, which is just down here.
You can see here that appears at the MACD line at this blue line basically looks like it’s about to cross above its signal line which is this orange line here. This will be a bullish signal we can see the last time this happened, Bitcoin, essentially, we can see here this histogram turned green, Bitcoin surged up towards 30k. So hopefully now we will see an increase in bullish momentum and hopefully move towards the 30k and hopefully reclaim that level.
Right, so let’s discuss the indicators we’re using. Mostly, most of you will probably be rather familiar with simple moving averages in the RSI, but I’m going to run through them quickly regardless, I’ll just load up the RSI here and get rid of the MACD just so you can visualize what I’m talking about.
There we have it. So, the relative strength index as I said often referred to as RSI is a popular tool used in technical analysis of all financial markets. And it’s essentially a momentum oscillator that measures the speed and change of price movements oscillating between zero and 100. As you can see here, we move between zero and 100 up here which you just can’t quite see on this chart but I promise you it oscillates between zero and 100. And traditionally the RSI is considered overbought and above 70. So, these readings here would be considered overbought, they appear extremely overbought and oversold when below 30. So here you can see an oversold reason oversold level here sorry.
Essentially when the RSI is above 70, it might suggest that the asset is being overbought and could be used, it can be due sorry for a price correction or reversal. Conversely, an RSI value below 30 suggests that the asset may be oversold and could be due for a price bounce or reversal. Excuse me. Essentially, the RSI is calculated using average price gains and losses over a defined period of time. This is typically 14 periods, essentially it is used to help identify whether an asset’s price momentum is strong or weak. It’s worth noting again that like all technical analysis tools, the RSI isn’t perfect and doesn’t guarantee success on its own. It’s typically used in conjunction with other tools and analysis methods to make informed trading decisions, which is exactly what we’re doing with the strategy today.
So, let’s look at some more moving averages as well here. This line here this blue line here is a Moving Average this is MA9. So Simple Moving Averages or SMA these again are widely used tools in technical analysis. And they essentially help smooth out price data by creating a constantly updated average price. Let’s get rid of the RSI as you can see the moving average in more detail here.
The average is taken over a specific number of specific periods of time sorry, like 10 days, 20 minutes, or 30 weeks. So, you can see this one here because we’re on the daily chart here. And we’re using MA9 This is taken over a period of nine days.
So how it works, let’s say that we want to calculate the 9-day SMA for a particular coin. For each day, you’d add up the closing prices for the last 9 days and then divide that total by 9. This essentially gives us the average closing price over the last nine days. And the next day, we would drop the oldest price and add the closing price for the new day. And again, divided by 9. And the process is repeated over and over which creates the moving average line on the chart. And so, this thing here, the main function of the SMA is to provide traders with a sense of the overall trend direction of the market. The SMA is moving up trend is up so we can see here trend is up. And we see here when it’s moving down the trend is down.
It’s worth noting again that SMAs seem biased using their nature since they’ll initially effectively sorry the point act past data, and there may be behind the market essentially. And again, just like the RSI is typically used in conjunction with other forms of analysis to make informed decisions, and they are not guaranteed essentially to predict market movements accurately on their own. And this is why we’re using a combination of two technical indicators to answer or enter and exit trades within our strategy here. Okay, so let’s discuss our entry conditions for the strategy.
As for the entry positions, the strategies are going to look for three conditions to be met. The first condition relies on the RSI we first require that the RSI is above 60 Just like this thing here. So, it’s above 60.
At the next entry to entry conditions, sorry rely on moving averages. So first we require MA9 increases by 6, this one here increased by 6. And we also require MA9 to be greater than MA100 Just like this example here.
Okay, so let’s go with the exit conditions. So, to exit condition to exit position sorry, the strategy again utilizes the Moving Averages in the RSI. The first two conditions rely on the RSI we require this greater than 30 to just up here and have a degree to decrease by 5 just like this example here.
Finally, finally, the exit strategy relies on moving averages. And we simply require MA9 to be less than MA100. Just at this. Once all of these three conditions are met simultaneously, a trade will close.
Great. So now we’ve discussed the entry and exit conditions of the strategy. Let’s have a quick look at backtesting. If you remember earlier, I told you the script is available on our TradingView Profile. So, I’ll just go to this now. Oops, sorry. This is it here RSI and MA percentage change.
You can essentially here we’ve got a description of the strategy; the entry conditions and the exit conditions. This is just what I’ve been over. But you know, it’s yours for your reference if you want to look at it again.
Another important thing and its standard form this script presumes that each trade uses 50% of the available equity. I want 0.1% trading fees also applied which is aligned to the base fee on Binance which is of course the largest cryptocurrency exchange by volume. I’m going to show you how to change these values later on. So essentially imagine you trade on an exchange with different fees. You can also simulate that here by increasing this number or decreasing it.
Okay, so this is the script of the strategy here. So, if you want to back-test it, you just come here and click Add to Favorite Indicators. And then you come to the chart that you wish to run on. I’m going to test it on RNDR, RNDR, sorry, on the one-hour timeframe. Just click, and come to Indicators. It’ll now be in your favorites here. So, you can just copy and paste the name. There you go, click it. And it should be added to the chart. So, you can see here, you get some backtesting data, you can also zoom out in the chart see if we would have entered long positions, and exited long positions.
So, it’s quite vulnerable to this. So here, we can see that an important thing to know as well as this, this back-testing data is from the start of 2022. So, the performance, it’s quite this data is quite recent as well over the last kind of year and a half.
So, with a total of 59 trades, the strategy made a total net profit of about 193%. And it’s profitable 33.9% of the time, you can see that once you’ve loaded this to the chart here. It’s very simple. If you want to test on different timeframe, you can just do this. So, you can see that it doesn’t perform as well on the two-hour and the one-hour. So, this might give you an idea that you want to run on two hours, the one-hour time frame rather than the two-hour. If you want to you can also change this up here. Let’s try on Bitcoin, for example.
Since it wasn’t profitable on the one-hour time frame on Bitcoin, let’s check 50 minutes. Yep, it was profitable here.
So, I’m going to, instead, I’m going to keep it on RNDR, sorry, on the one-hour time frame, because obviously we saw the performance on this timeframe and on this pairing was by far the greatest, but feel free to test out other pairings and timeframes. You know, obviously, I don’t have time check to check every single coin in the market by test check quite a lot. And this is one of the ones I found performed best. So, this is one I would certainly recommend and one I’m using.
As I mentioned earlier, if you want to change the trading fees, you can also just essentially change this value to 0.1. You can also change the percentage of equity that’s used for each trade to maybe 30%, just whatever is in line with your strategy. So, you can get more realistic back-testing results that are more in line with your strategy. Essentially, you could also change the RSI value as well. You could say like, if you wanted the buy condition, if you wanted to enter when it was above 70 instead of 60, you could change this value, and effectively just kind of play about the strategy and try and optimize it further for you. But in my experimentation, these values perform best. So, I’m going to keep them just as they are. So very simple. If you want to run this on Coinrule, you’ll remember I said it’s available as a template. So, it’s super easy to essentially get up and running. You just come to Cornwall comm to create a rule here, templates, and just click Search he was pasted in, here we are you can see we’ve given a description of the strategy and then select it and add it to the chart. So, add to the rule. This is essentially you just need to put in a few values. For example, if you want this to run on any coin, and if your coins are any specific bundle, but I’m just going to keep this work running on RNDR because we saw it perform very well. So, I’m just going to exclusively run the strategy on RNDR.
I’m also going to keep it on the one-hour timeframe. So, I’m just going to change all these values to one hour. And then when these conditions are met, I want to buy $100 of that coin with my USDT wallet as a limit order. And then if RNDR these are exit conditions here, obviously and these are our entry conditions. So then if the exit conditions are met again, a timeframe of one-hour is from the backtesting data, and we can see this performs very well.
Then I want to sell 100% of the amount bought of that coin to my USDT wallet as a limit order on the start immediately. Execute this 20 times proofread increases, and decreases wherever you’d like. And once you go click Launch here, and you’ll see we’re given some, just a little kind of preview of the strategy. If you’re happy with this, click Launch.
And there you go. Your strategy is now live. Thank you very much for listening to this live stream. I’ll just hang around for a couple of minutes just to see if you have any questions.
But yeah, I’m excited to see what you create. Please reach out to support@coinrule.com as well if you’re having any queries about the strategy and we’ll get back to you.
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