Our strategies are designed based on algorithms and mathematical models that monitor prices and other market indicators such as trading volume and funding levels. Depending on the trading horizon, we do this on an hourly, daily or weekly basis. Our approach is a statistical approach based on fixed-length observation windows depending on the strategy. At this stage we have implemented Trend-Following strategies as well as Mean-Reversion ones.
These strategies attempt to isolate and generate performance from trends by attempting to capture gains through the analysis of an asset's momentum in a particular direction. This is optimal during clear trends during a bull or a bear market, what we call a trend is when the price is seen to be moving in one overall direction.
There are various trend trading strategies, each using a variety of indicators and price action methods, the most common trend indicators are Moving Averages, Moving Average Convergence Divergence (MACD), Relative Strength Index (RSI) and On-Balance Volume (OBV).
Asset price move back and forth following a certain pattern. While doing so, it often revolves around a specific mean. It might move across or bounce off the mean. Mean reversion strategies are designed to exploit this tendency to generate performance by assuming that asset prices and historical returns will eventually revert to its previous state. This theory can be applied to both buying and selling, as it allows a trader to profit on unexpected upswings and to save on abnormal lows.
Nevertheless, the return to a normal pattern is not guaranteed. In fact, unexpected events could indicate a shift in the norm. Such events could include, but are not limited to, an on-chain event, a whale transferring large volumes through blockchains or even an exchange hack. A crypto asset could experience a mean reversion even in the most extreme event.
Trend-Following vs. Mean-Reversion
|Many small losses and fewer large gains||Many small gains and fewer large losses|
|Generally lesser Risk/Reward||Generally higher Risk/Reward|
|Trading with the trend||Trading against the trend|
|Momentum indicators generally work well||Oscillators generally work well|