Crypto Market Strategy (CMS)

18 Nov 2023

/Introduction
The Crypto Market Strategy (CMS) is a composite strategy for the cryptocurrency market. It integrates multiple strategies (called signals) to ensure you are exploiting multiple patterns/anomalies in the market.

/Signals
The three distinct strategies, each providing signals based on specific market conditions are explained below:

1. Limit Range: This signal targets stable market periods, triggering signals based on micro breakouts in price. The market during this period is described as stable because of the short lookback period required for breakout, four bars is the default.
2. Trend Breakout: This signal seeks to capitalize on significant market movements following consolidation periods, it triggers when large price breakouts occur. The market during this period is described as volatile because of the long lookback period required for breakout, forty bars is the default.
3. Momentum: After breakouts, price uptrends may persist for a long time, typically weeks to months. This signal captures long term trends.

An upward blue arrow signifies a long entry signal, a downward red arrow indicates a short entry signal, while an upward/downward pink arrow indicates an exit signal. All signals will have a label indicating the triggering strategy and number of units (this can be disabled in the style settings).

/Construction
The strategy is constructed using minimal indicators, it is basically price action and moving averages.

/Settings
The settings are organised according to the signals;

1. Limit range
Entry - This is the size of breakout
+Exit - Closes the trade in profit
-Exit - Closes the trade to minimise loss

2. Trend breakout
Entry - This is the size of the breakout
Exit - Closes the trade to minimise loss

3. Momentum
Entry - This determines how quickly a signal is triggered
Lookback - This is the duration considered for the entry

/Results
The backtest results are based on a starting capital of $13,700 (convenient amount for retail traders) with 5% of equity for the position size and pyramiding of 3 consecutive positions because there are three signals. Commissions vary from broker to broker with some charging zero commissions, so commissions is set to an exorbitant $3 per order to ensure profitability in backtests is reproducible in live trading. Slippage of 3 ticks is used to ensure the results are representative of real world, market order, end-of-day trading. The backtest results are available to view at the bottom of this page.

Note:
Past performance in backtesting does not guarantee future results. Cryptocurrency markets are particularly volatile, and individual execution and market changes can significantly affect strategy performance. Price data may also vary across exchanges.

/Tickers
CMS has been backtested primarily on BTCUSD. It also performs well on ETHUSD.