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) signalling 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) signalling 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.

  • We will also add a stoploss and take profit to prevent losses

 

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

Easily build your trading strategies with Mudrex. Start today!

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