Horizon Trading Strategy — Trained to Buy Low and Sell High
Like every other financial asset, cryptocurrencies can be very volatile. To enable you to trade at the click of a button, OB (One Button) Trader built an AI trading bot that adjusts to incoming information. The Horizon V5 limits losses during a bear market and makes market-beating trades when a cryptocurrency is trading sideways.
What makes Horizon unique?
It is trained to adapt its trades to sudden changes in the price of a currency. It can also trade between candlesticks, instead of every four hours like other Ai bots. Finally, Horizon V5 buys or sells the cryptocurrency at a specified price, using limit orders. It can equally trade well in volatile market conditions.
How was Horizon trained?
Horizon V5 originates from the GRU model, which uses different combinations of price indicators such as open, close, volume, minimum, and maximum price to buy, sell or hold. Horizon is updated to use more data points than the previous generation and is trained on 64 data points from 32 previously. Given almost all AI trading bots are backward-looking, Horizon is better placed to identify trading patterns in different markets, especially as it was trained on market data.
Why does it stand out?
The monthly return on investment (ROI) for the horizon bot is +8.2% on average. In a market where cryptocurrencies have struggled to find direction after falling sharply through April and May 2021, this is pretty good. Horizon trades well as it was tested on real-time market data. It equally uses reinforcement learning, where the model performs trial and error calculations on price data in other to maximize your total reward.
How does it work?
Horizon scans the market for price information and then decides whether or not to make a trade. Horizon V5 determines whether to buy, hold or sell after scanning the market for new information using limit orders.
The AI uses the reinforcement model, which starts with random trials before developing sophisticated ways of identifying new price trends based on incoming information. It calculates and updates a hidden state — which is where the trial and error calculations happen. It then updates the model based on new price information before making a trade.
What are its pros?
There are several advantages to owning a Horizon bot.
1). One of the major advantages of Horizon V5 is that it uses limit-orders and can trade between candlesticks. As a result of this, it can buy or sell between candles i.e before the next market scan.
2). Horizon equally trades well during sideways markets. This is useful as cryptocurrency markets are not always in a bull or bear market. For example, during the week of July 28, Bitcoin did not move significantly in any direction and ranged between $32,699 and $36,660. Horizon is trained to perform well in such markets.
3). Finally, if you hold multiple cryptocurrencies, you are always seeking to have a balanced portfolio. Horizon V5 is good at minimizing losses as it sets buy or sell targets based on new price information. It can enable you to buy low price or get out of your positions depending on the price trend.
What are its cons?
However, there is one drawback. Horizon does not perform well during bear markets.
How often does it scan the market?
Horizon scans the market every four hours but is unique because it can trade between candles.
What is the expected trading frequency?
On average, the Horizon bot makes one trade a day and can make up to nine trades per week. It equally trades on spot markets using limit orders.
Rather than simply buy or sell based on the current market price, it sets a target based on where the price of the currency is likely to go next.
What type of markets should it be good at? (bearish, bullish, sideways, etc.)
Horizon is good at trading sideways markets.
What market pairs should it be good at?
The Horizon V5 trades well on all USD pairs due to its unique AI model.
Chart 1: Horizon Back testing results for ADA: USDT 2019–2020
The backtest for the Horizon V5 bot over the 2019–2020 period shows that the AI bot outperformed the broader market. The maximum drawdown is -20.14%. During the same period, the price of Cardano fell by –22% on February 15 alone. If you look at the upside, you can see that the Horizon bot strategy generated returns of about 207.48% between 2019–2020, while the market price of Cardano rose by 125%. If you invested $10000 during this time, you would have gained $20,748 on your initial investment.
Comparison with previous generations
Chart 2: Horizon Back testing results for EOS: USDT 2019–2020, 974 trades
Horizon is trained on 64 data points while it was previously modeled on 32 data points. As a result, the ML model is well placed to identify pattern in a range of markets.
Chart 3: Horizon Back testing results for ADA: USDT 2019–2020, 1010 trades
The ROI for the newer generation is 189.94% vs 355.46%. However, the newer bot tends to outperform the market and generated 1201.48% significantly higher than the 352.35% gain from the previous model.
Horizon VS Ascendant
Horizon V5 and Ascendant V4 have the most similar AI systems. They both use the stateless form of trading, but Horizon uses limit orders instead of market trades. As a result, both bots will make the same trades for all users regardless of their portfolios. However, they differ in several ways;
1). Horizon uses limit order while Ascendant uses market trades. This makes Horizon more agile and it can adapt to incoming information.
2). Horizon scans the market every four hours, while Ascendant V4 scans the market every one hour.
3). Horizon is trained on market data using reinforcement learning.
4). Horizon trades well when the market trades sideways or is trying to consolidate in a particular direction. While Ascendant V4 Horizon trades well in bull markets.
Chart 4: Horizon Back testing results for EOS: USDT 2019–2020, 974 trades
Chart 5: Ascendant V4 Back testing results for ADA: USDT 2019–2020, 974 trades
Horizon V5 outperforms Ascendant on several fronts
The Horizon V5 bot uses limit orders while the Ascendant V4 uses market trades.
The maximum drop in its price during the 2019–2020 period was -18.51%. On July 6th, EOS fell -6.02% to 3.836, which illustrates how it can shield you from losses.
Additionally, Horizon V5 returned 355.40% during this period, while the cryptocurrency rose by 31% in the broader market. Between 2019–2020, Ascendant V4 made a 33.41% ROI, while the currency pair only jumped 31% between July 2019 and July 2020.
Horizon V5 is trained to adapt to incoming information, limit losses, and forecast upturns before they occur. Not only does it use limit orders to trade, but its self-correcting AI also makes it unique to trade in a range of market conditions.
Join OB Trader to create a Horizon trading bot for FREE here.
Enjoy the ride 🚀