Backtest results for approx 3 years of ADA/USDT, ended with 24% of initial capital, committing all of current balance to each trade. Looks pretty bad, so I checked the actual prices over the period and ADAUSDT went form 2.1820 at the start of the period to 0.3818 at the end, i.e. ended at 17.25% of initial value. So I think I can call that a win for my strategy. I lost less money than with a buy and hold strategy.
I think I need to refine my signal a bit. Perhaps look for gain over a shorter timeframe. And maybe actually a 2% gain and not a 1% gain. Of course with a more than 80% drop over the period of the backtest, perhaps a long-only strategy is not the way to go. I’m looking at that because it’s much easier to implement, just trade in a Binance Spot Wallet with OCO orders. Have I mentioned my dissatisfaction with the ban on margin trading by Australian citizens? What party do I vote for to get that reversed?
If the crypto market generally goes up over the next couple of years this isn’t a problem, but my optimism from the start of the year has significantly declined. The approval of BTC spot ETFs by the US SEC at the start of the year presaged a large inflow of capital to the crypto market, but that hasn’t happened. The ‘legitimizing’ of crypto as an asset class, the ease of onboarding due to ETFs rather than holding crypto, the increasing scarcity of BTC particularly, all these have made no difference. The fact that there is a wealth transfer from my generation to younger people as we die off, and younger people are more comfortable with digital assets, has also made no difference yet. Perhaps it will all happen after I’m dead.
UPDATE:
I’ve backtested only more recent data here, and added an extra condition before entering a trade – that the average return over the past 60 bars (15 days) be positive. Another parameter to optimize, but at least I’m getting some profit at last.
AFTERTHOUGHT
The pair of conditions (positive MA and positive ML prediction) give a better outcome than either one alone. Perhaps instead of just using a positive moving average as an entry condition I could use something a little more sophisticated such as a moving average crossover. In this case the XGBoost model is providing the meta-labelling to a traditional trading strategy. Not sure where RL fits into all this, but it might be a while before I’m confident with that anyway. However it does mean that I can roll some of the features that I was planning to use in the RL model into the XGB model, such as general crypto index, SPY, Fear and Greed, etc. No harm in trying I guess. This whole thing is definitely a Work in Progress.
