Trading Ethereum Profitable: Strategy Example (With Backtest)
Ethereum made a new all-time high, rising over 20% from its previous ATH. Let's take a look at how you can trade Ethereum and take advantage of these uptrends.
Finding the Trend:
To make a successful strategy, we should start by identifying the trend. We can do this with the help of a trend-following indicator that will act as a filter. The MESA can work well here, this particular setup will keep a buy signal as long as the MAMA is above the FAMA.
In this example, we have changed the MESA's default values to Fast Limit 0.1 and Slow Limit 0.001. This change made the indicator less reactive to the price and better at finding long-term trends.
Entries & Exits
We then need an indicator that can find suitable entry points. For this example, we have chosen the MACD. Thus we will only take trades when the MESA displays bullish momentum and when the MACD gives a buy signal.
For the exit, you can use a strategy or sell settings. We have chosen to use the MACD again to time our exits. This is because Ethereum's trend is irregular; sometimes, it may be less volatile, while other times a lot more. Thus the MACD should be able to take full advantage of this volatility. Therefore our strategy will sell when the MACD gives a sell signal.
Results: In short, our strategy would look like this: enter when both the MACD and modified MESA give a buy signal and exit when the MACD gives a sell signal. We performed a backtest on ETH/USD (Kraken), with all the available equity used on each trade, a 0.1% fee was taken into account. This resulted in a profit of 164,121%, similar to the buy and hold of 179,352%. However, the strategy is less risky than the buy and hold as it doesn't lose much in a downtrend. Remember, this is just an example for you to create a suitable strategy, and not a recommendation.
Finding the Trend:
To make a successful strategy, we should start by identifying the trend. We can do this with the help of a trend-following indicator that will act as a filter. The MESA can work well here, this particular setup will keep a buy signal as long as the MAMA is above the FAMA.
In this example, we have changed the MESA's default values to Fast Limit 0.1 and Slow Limit 0.001. This change made the indicator less reactive to the price and better at finding long-term trends.
Entries & Exits
We then need an indicator that can find suitable entry points. For this example, we have chosen the MACD. Thus we will only take trades when the MESA displays bullish momentum and when the MACD gives a buy signal.
For the exit, you can use a strategy or sell settings. We have chosen to use the MACD again to time our exits. This is because Ethereum's trend is irregular; sometimes, it may be less volatile, while other times a lot more. Thus the MACD should be able to take full advantage of this volatility. Therefore our strategy will sell when the MACD gives a sell signal.
Results: In short, our strategy would look like this: enter when both the MACD and modified MESA give a buy signal and exit when the MACD gives a sell signal. We performed a backtest on ETH/USD (Kraken), with all the available equity used on each trade, a 0.1% fee was taken into account. This resulted in a profit of 164,121%, similar to the buy and hold of 179,352%. However, the strategy is less risky than the buy and hold as it doesn't lose much in a downtrend. Remember, this is just an example for you to create a suitable strategy, and not a recommendation.