Overview

Trading in the market requires a tactical edge—a strategy that adapts to the ever-changing market dynamics. This report delves into how a simple enhancement to the classic Moving Average (MA) Crossover approach can significantly boost trading performance.

What is the Moving Average Crossover Strategy?

A traditional Moving Average (MA) strategy is a technique traders use to identify trends in the price of an asset, like Bitcoin. It involves using moving averages, which are the average prices of the asset over a specific number of days.

Here’s a straightforward breakdown of how it works:

Fast and Slow MAs: You have two MAs, a fast and a slow one. The fast MA might calculate the average price over a shorter period, like the last 10 days, and the slow MA might use a longer period, like the last 50 days.
Crossover Signals: When the fast MA crosses above the slow MA, it suggests that prices are trending upward, signaling a buying opportunity. Conversely, when the fast MA crosses below the slow MA, it might indicate that prices are trending downward, signaling a selling point.

We’ve meticulously backtested the MA crossover strategy against Bitcoin’s ebbs and flows from January 1, 2022, to November 5, 2023. The data speaks volumes, inviting a deeper understanding of market behaviors and strategy performance.

Quantity Traded: 1 BTC

MA Crossover traded BTCUSDT Futures

SMA1	SMA2	Total Net PnL	Total Fees Paid	Number of Trades
SMA10	SMA20	$4,998.59	$25,958.92	931
SMA10	SMA50	-$1,261.47	$13,290.47	479
SMA20	SMA50	$9,949.17	$11,310.83	411
SMA50	SMA100	$18,711.29	$5,367.71	200
SMA100	SMA250	$3,098.79	$2,086.21	78

Note: The Net PnL values have been calculated after deducting fees, ensuring a transparent view of the strategy’s profitability.

Enhancing with Market Sentiment: MA Crossover Plus Funding Rate Indicator

We’ve refined the strategy, tuning into the market’s rhythm with a funding rate indicator — assuming rates above 5% signal bullish tides and below -5%, a bearish swing. Only the trades that align with these sentiments are considered.

For example, we ignore the signal if the sentiment is bullish according to the funding rate and the MA crossover suggests a short trade.

Refined Strategy with Market Sentiment Filter:

SMA1	SMA2	Total Net PnL	Total Fees Paid	Number of Trades
SMA10	SMA20	$20,422.29	$8,520.21	590
SMA10	SMA50	$16,620.42	$5,051.08	354
SMA20	SMA50	$17,900.63	$4,407.87	308
SMA50	SMA100	$19,480.14	$2,613.86	192
SMA100	SMA250	$11,700.30	$1,579.20	120

Note: The Net PnL values have been calculated after deducting fees, ensuring a transparent view of the strategy’s profitability.

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Comparative Analysis of Equity Curves

Yellow Line: Gross PnL

Blue Line: Net PnL (Gross PnL – Fees)

Equity Curve: SMA10 vs. SMA20 Pairing

Equity Curve: SMA10 vs. SMA50 Pairing

Equity Curve: SMA20 vs. SMA50 Pairing

Equity Curve: SMA50 vs. SMA100 Pairing

Deploy the 50/100 MA Crossover on your Delta Exchange account with Tradetron https://tradetron.tech/strategy/3800997

Equity Curve: SMA100 vs. SMA250 Pairing

Implementing the market sentiment filter through the funding rate indicator further refines this curve. The result is a more stable increase in equity, signifying steadier returns and reduced risk exposure.

Both equity curve comparisons demonstrate the added value of incorporating market sentiment into the MA Crossover strategy. By filtering trades against the identified market momentum, our strategy mitigates undue risk and capitalises on a more consistent growth pattern.

Insights at a Glance

Our analysis revealed that:

The traditional MA Crossover strategy often falls prey to market noise, resulting in more losing trades.
Incorporating a funding rate indicator refined our trade execution, aligning it with market momentum and significantly improving trade outcomes.
Across all SMA pairings, the enhanced strategy increased Net PnL and lowered the volatility of returns, indicating an improved risk-adjusted return.

Final Thoughts:

By marrying the MA Crossover strategy with a keen understanding of market sentiment through the funding rate indicator, traders can pivot from a scattershot approach to a targeted, high-precision strategy. This report underscores the importance of an adaptable trading plan that leverages the synergy of indicators to carve out a path to consistent profitability in the dynamic world of Bitcoin trading.

We Value Your Insights!

Your trading journey is unique, and we’re keen to explore strategies that resonate with you. Share your curiosities and interests in the comments — your input could spark our next analytical deep dive. Together, let’s uncover the strategies that will shape future market victories.

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Optimising Returns: Pairing MA Crossovers with a Trend Indicator