This model has generated very impressive returns, both from great trade signals and from consistent application of the rules. As with any automatic rules-based system, there will be times when it is easier to follow the signals and times when the signals might not make as much sense. As a general rule of thumb with any trading strategy, we have found that most traders lose their discipline for two main reasons:
#1. They trade positions that have too much risk and this leads to incorrect trading decisions such as taking profits too soon, selling to prevent losses at the wrong time, or being afraid to enter new trades. The best way to overcome this problem is to start slowly.
#2. They don’t understand and believe in the trading rules of the system.
We have intentionally tried to keep the rules fairly simple to follow to help overcome some of these issues. We recommend that you start slowly to develop your trust and belief in the strategy. One day's or even one month’s performance will not always be representative of the types of return or trading characteristics you can expect.
You do not need to start with real money, and you certainly do not need to start big! Building bigger positions is easy once you are comfortable and knowledgeable about the system. The most important part of getting started is finding the right low risk way for you to begin. The questions and answers below should help you towards that end. The information in the “How to Use The Model” page will also be helpful.
How do I start trading this strategy?
You can start any time either by entering existing positions already in progress or waiting for the next fresh signal.
To enter existing positions, buy a proportion of the position consistent with the amount shown in the open positions. 6/6 indicates a full-size positions. At each target, we sell 1/6th of a position. This will allow you to create a portfolio that very closely tracks the day-to-day performance of the model portfolio. From this point, you will then need to manage the positions and follow along with any rotations or trades that occ
Everyday at the close of the cryptocurrency trading day (0:00 UTC time), the model evaluates the current positions and determines if their should be any changes (exits, rotations, new entries). An alert will go out shortly after 0:00 UTC time if a position change has been triggered. Trades last on average about 20 days, but some can last a lot longer, so it can take some time before all new signals are generated.
You are free to paper trade, "leg" into trades, selectively trade certain symbols or signals, or modify your trading in any way from the rules and methodology employed by the model portfolio.
One of our holdings dropped out of the top two, why are we still in the position?
We will generally hold the top two trend strength-ranked cryptocurrencies. We have a variety of rotation rules where we will rotate out of one cryptocurrency into the new leader if it has moved into the lead by a sufficient amount and other market technicals also align with an entry or rotation.
How much capital should I use to trade this strategy?
The question of how much capital a trader should allocate to any trade or strategy is going to have a different answer for every trader based on capital available and your own personal trading style and risk profile. Additionally, MarketGauge is not licensed to be able to give that type of specific advice. A good rule of thumb is to start slowly.
Cryptocurrencies are a highly speculative asset class with high exposure to news and regulatory risks. In the recent past, we have seen significant moves in the crypto market from regulatory and other comments about the space (countries being more or less favorable to crypto, energy usage, project news). The U.S. regulatory situation around cryptocurrencies remains in flux.
Regardless of how you start, you should always limit your capital to an amount that represents a level of risk that you can afford to lose. You can even paper trade the model for several weeks or a month to see how it trades. However, one period may not be representative of the return, risks, or volatility of the model over a longer period of time and in different market conditions. We provide full trade histories for the model and trading statistics that can help guide your expectations for how the model trades.
How much of each position should I buy?
The model typically holds two positions. New positions are added at the same position size of the position we are exiting. Once a position has been started, its percent of the portfolio can grow or shrink based on its relative performance, but you can also approximate even-sized positions and should get somewhat similar performance to the model. Twice annually at the beginning of January and July, the total capital is rebalanced between the two positions.
What is the TSI?
This is our proprietorially generated Trend Strength Indicator (TSI). It is one of the key parts of our model and is also used in a similar way for our ETF and All Stars models to rank and rotate into the leading instruments. The CryptoPulse Quant model uses a modified faster version of TSI to take advantage of the higher volatility in the cryptocurrencies space.
How do you enter new trades?
The model determines position rotations and some entry and exit criteria based on the closing values each day. The cryptocurrency market trades 24/7, but 0:00 UTC time is used to denote new days. Shortly after this time, if there is a position change, the model will broadcast an alert which may involve selling one cryptocurrency and buying another one or selling and going to cash. You can use market orders to enter and exit positions based on rotations.
How do I manage stops and targets?
We publish the next stop and target in the open positions section. Stops and targets (with stop or limit orders) can be placed ahead of time to automatically execute if the level is reached. Different trading platforms deal with order types differently.
What happens if an order is triggered overnight?
An email and text alert will be sent out anytime a profit target or stop is hit. Targets and stops can be hit at any time through-out the 24-hour trading day. We recommend having stop or limit orders in the market for those key levels.