Introducing Exponential Moving Averages on TokenSets
ETH12EMACO — the first Set to utilize an Exponential Moving Average (EMA) technical indicator — is now live on TokenSets!
Today, we’re introducing Exponential Moving Averages (EMA) to the Trend Trading Strategy category on TokenSets. The first Set that rebalances based on an EMA indicator — the ETH 12 Day Exponential Moving Average Crossover Set (ETH12EMACO) is now live on TokenSets.
- ETH12EMACO — the first Set to utilize an Exponential Moving Average (EMA) technical indicator — is now live on TokenSets!
- ETH12EMACO automatically rebalances based on crossovers between the price of ETH and the 12 Day EMA technical indicator.
- The new EMA meta-oracles (derived from MakerDAO’s ETH medianizer) that power the ETH12EMACO have been externally audited by ABDK and are open-sourced in our Github repo.
Exponential Moving Averages (EMAs) assign more weight and value to recent prices than Simple Moving Averages (SMAs). EMAs are more responsive to sudden price fluctuations and reduce price lag compared to many other trend following strategies including SMAs. As a result, EMA indicators are more favored by short term traders. Learn more on the difference between SMA and EMA here.
The ETH12EMACO Set
The ETH 12 Day Exponential Moving Average Crossover attempts to capitalize on short term price trends in order to accumulate ETH. If the price of ETH crosses below the 12 EMA, ETH12EMACO automatically rebalances all its ETH into USDC to stop losses in the downtrend. If the price of ETH crosses above the 12 EMA, ETH12EMACO rebalances its USDC into ETH to capture upside in the uptrend.
The 12 Day Exponential Moving Average (12 EMA) is one of the most popular trading indicators used by short term traders to determine when to enter and exit positions.
What is the difference between ETH12EMACO and ETH20SMACO?
In contrast to the ETH 20 Day Moving Average Crossover Set, the ETH12EMACO rebalances based on an exponential indicator that are more responsive to sudden price fluctuations. This means rebalances are more frequent with the goal of catching short term price spikes and dips.
How is the 12 EMA calculated on TokenSets?
The 12 EMA indicator is a weighted average of the on-chain MakerDAO ETH price for the past 12 days at approximately 7:05 pm UTC each day. Link to technical documentation of the EMA oracle here.
How the ETH12EMACO Set Performs
Disclaimer: The content below is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. The content below is provided for educational purposes only, and not indicative of future performance. None of the following should be interpreted as investment advice. The tools used below follow a predefined set of parameters and aren’t actively managed by Set Labs Inc.
This chart below compares the hypothetical performance of holding the ETH12EMACO Set against holding ETH over the last 1, 2, and 3 years, assuming a slippage rate of 1% during each rebalance.
Over the last year, the model shows ETH12EMACO would have outperformed ETH consistently. Based on historical data from the past year alone, the ETH12EMACO would have outperformed both ETH20SMACO and ETH50SMACO and accumulated more ETH.
It’s important to keep in mind the the charts below are based on a number of assumptions and are only meant for illustrative purposes. As always, past performance is not indicative of future performance.
The chart below illustrates the ETH that would have been accumulated using the ETH12EMACO Set following the same assumptions above.
Over the last 2 years, the model shows ETH12EMACO would have also outperformed ETH but underperformed specifically in strong bull markets.
Over the last 3 years, the model shows ETH12EMACO would have performed roughly the same as ETH, as it underperformed in most of the bull market in 2017.
The Set does not outperform ETH in all market conditions — instead it can be used by shorter term traders to accumulate ETH in flat or down-trending markets.
These charts use generated ETH hourly data sourced from Gemini. In production, the ETH12EMACO Set rebalances based on MakerDAO’s ETH price feed, which may output different results. If you’d like to play around with the data yourself (and tweak the parameters), feel free to fork the spreadsheet here.
Get started minting the ETH12EMACO Set on TokenSets here!
If you have an idea for a strategy that you’d like to see on TokenSets, please don’t hesitate to reach out to us.