Sample Strategy: Mean Reversion

In our previous strategy, we built mean reversion using the simple 'Price' block. Lets us try and improve the strategy now.

Hypothesis:

What goes up must come down. Reversion to the mean is one of the most fundamental properties of markets. As a result, let's try and create a strategy that looks at a short period average and compares it with a long period average and takes decisions on it.

We can use the Exponential Moving Average (EMA) indicator for this.

Strategy:

• Buy when: The short-term EMA, EMA (9), crosses up the long-term EMA, EMA(26) signaling that recent prices are now getting closer to the long-term average and increasing

EMA(9) crosses up EMA(26)

• Sell when: The short-term EMA, EMA (9), crosses down the long-term EMA, EMA(26) signaling that recent prices are now getting closer to the long-term average and decreasing

EMA(9) crosses down EMA(26)

Creating the strategy on Mudrex:

• Components: To make this strategy all we need is 2 compare blocks since we are comparing 2 indicators, one each to buy and sell. Below is how the blocks would look like:

• Final strategy visual: We would then go out and connect the compare blocks with the buy and sell blocks to complete our strategy.

Testing the strategy:

• Running on ETH/BTC -1H period from 1st Jan to 1st June gives a + 64.01% ROI

• Running on TRX/BTC -1H period from 1st Jan to 1st June gives a -12.92% ROI