Crypto Only Strategy

[Howard]

I would like to develop a custom strategy in Quant Trader that’s similar to the Nasdaq100 Strategy or the Dow4 strategy where we pick the top 4 tickers in that segment and couple that with a Hedge strategy. For this Crypto only strategy, I would like to pick the top 4 tickers of say a list of 30-40 large cap coins, and use that as the RiskyStrategy. And I would like to create a meta strategy that rebalances between the RiskyStrategy and the HedgeStrategy (or if HedgeStrategy is not possible, I would just replace with USDC or #CASH). Have you guys tried and do you know if it’s feasible? The first step would be to create the ticker list first, between the 3 data sources available in QT, which has the largest set of crypto ticker time series and do you know where I can get the ticker list?

Looking forward to hearing your thoughts.

[Frank1 Grossmann]

Our current strategy has a Hedge which is TMV (3x leveraged Treasury) or AGQ (2x leveraged Silver). It would not work to combine crypto ETFs with our normal hedge because of the huge volatility difference. We use risk weighted return to decide which is the better investment and this only works if volatilities are similar. The only ETFs for Treasury or precious metals which come close to the volatility of Crypto Coins are these leveraged ETFs

[Howard]

Hi Frank, hope all is well. I was playing around with this the last few days and was trying to create a pure crypto strategy. I was able to get the prices from Tiingo. They have pretty much prices of all the crypto tickers. Then, I have a risky strategy that chooses the top 3 coins and for the hedge, I use short eth/usd (will try btc/usd, but my model now is using short eth/usd in the hedge and uses an allocation setting of min. 50 and max. 80%), similar to what you guys use for the inverse vol ETF. In laymen terms, I want this strategy to find the best X/ETH and profit from that over time.

Based on the backtest, provided the LB is short enough (< 10 days) and the rebalance period is frequent (Weekly in my test), the result is quite encouraging. But a few sticking points:

– Price history of a lot of the alt coins is short, so this model might just overfit the results. I used the past 1 year as the period for optimizing the parameters.

– Quant Trader currently doesn’t support looking at prices daily and skip the weekend. It would be great if for crypto tickers, it can capture the weekend prices in the backtest as the swings are material over the weekend in crypto.

– Hedge – Short ETH when ETH goes into a big rally mode beating all the alts would not be a viable short. Instead of 50% hedged, one could just try to do say 40% to increase return, but that’s also not a good hedge in the traditional sense. If not ETH, perhaps the hedge could choose other alt-coin pairs that have liquidity and a high beta? Also, short ETH might not be available in a lot of accounts, but for those who have access to a crypto futures, they can get into this position via short ETH/USD futures, but one has to watch the funding.

Happy to share the file if anyone is interested in sharing how one might improve this strategy.

[Frank1 Grossmann]

Hello Howard. I would be very interested to look at your strategy. Can you zip and send the ini files to [email protected]? I will have a look at it next week when I am back from my holidays. There may be a possibility to also include weekend prices. QT uses a symbol (we use SPY) in the system settings to define normal trading days. If a strategy symbol then has additional weekend trading days, these are just skipped. Perhaps you can just use some Bitcoin/currency symbol instead of SPY to add the weekend days.

[Howard]

Thanks Frank, I will send across. Enjoy your holiday! Use BTC-USD instead of SPY -> Makes sense, will try. But when I need to use QT for my other stock based strategies, do I need to change it back to SPY / 252 Trading days? Or should I run 2 separate instance of QT – one for crypto and one for stocks ?

Another question I have is for a weekly rebalancing strategy, currently, QT’s default rebalance period is Mon to Fri, 5 days assuming no holidays in between. For the purpose of my crypto trading strategy, could I change to say Wed to Tue (7 days), and I rebalance on the say day on Tue or the next day on Wed?

P.S. The “Notify me of follow-up replies via email” doesn’t seem to work. I checked the flag when I submitted my last set of comments but I didn’t get any email notification.

[Author]

Posts