Welcome back and thank you for stopping by!

Last time I discussed how I was going to really focus on developing a short strategy, this is a strategy that makes money while the price of an asset moves down. This is a hole I want to patch in my portfolio as soon as possible. So, over the last two weeks I dove into some market research to gather observations that can help me formulate a hypothesis about how the markets may behave. I like to take a scientific approach to things.

What I did was considerably basic, but I wanted to look at some of the forces I would have going with and against me. This is what I found, and as always none of this is financial advice.

All data is for January 1st, 2016 until August 31st, 2020.

  • Bitcoin has had 1.21 times the number of up days as down days (933 to 771)
  • The average up day has been 2 .66% the average down day has been -2.59%
  • Up days consecutively run at an average of 2.1 days in a row, with a standard deviation of up to 5 days in a row with a maximum of 12 days in a row.
  • Down days consecutively run at an average of 1.7 days in a row, with a standard deviation of up to 3.9 days in a row with a maximum of 8 days in a row.

So, what am I seeing here you ask?

I tend to be a mean reversion-based trader, the trades are usually shorter term and have a higher win rate, both things that sit physiologically well with me. So, going on that the standard deviation of up days has my attention. Is there an edge going short after 5 days upward movement in a row? How many times does this even happen? These are questions I hope to answer over the next two weeks.

Now I am well aware that  these averages and maximum run lengths can all change so what ever bits of this I do end up using I will have to keep a close eye one these parameters.

The goal for next week is to have back tested the hypothesis that after 5 up days in a row there is an edge to going short.

Until then stay safe everyone!