Before we get into the details of how a simple rule created the kind of insane ROI noted in the title, let’s get one thing clear.
You cannot repeat this result.
Actually, no human can. Even a trading robot would not be able to replicate this particular strategy in real life, because it is a thought experiment, a proof of concept, rather than a real way to make money in cryptocurrency trading. Trading fees alone would kill this particular strategy for most traders.
But that doesn’t mean it’s useless; in fact, it is the perfect way to illustrate how a simple strategy can work for traders in real life.
So let’s get started. What could you do, right now, today, with this algorithm?
What does “Buy in 80, Sell in 12 hours” mean?
This is the basic premise. In collaboration with data company The TIE, Cointelegraph Markets Pro has developed the VORTECS ™ score, an algorithmic determination of how bullish or bearish current market conditions are for a given crypto asset.
The score is based on historical data, and essentially sifts through the entire history of a coin or token looking for conditions that are similar to current ones.
Look for a number of similarities and outliers: for example, trade volume, recent price action, social sentiment, and even the volume of tweets about that asset.
If you find similarities, analyze what happened next. Did the asset go up or down? How consistent was that movement? How important was the rise or fall?
Combining all this data, it creates the VORTECS ™ score, a dynamic and constantly evolving assessment of current market conditions for each asset listed in the system. The higher the score, the more bullish the prospect and the more confident the algorithm is. Conversely, a very low score is bearish (and equally confident). A neutral score of 50 means that the algorithm does not see a significant correlation between current conditions and past price performance.
The Markets Pro team started testing a whole series of strategies the day the algorithm was activated.
A strategy of “Buy in 80, Sell in 12 hours” means that the test ‘buys’ every asset that crosses the score of 80, which is considered strongly bullish. And then ‘sell’ the asset again after exactly 12 hours.
Of course, this does not happen on an exchange, but on a spreadsheet. And since the test wants to keep the holdings of all the assets that are within its range equal, it rebalances every hour.
For instance, If SOL were to exceed 80, and you were the only asset with that high score, the test would place 100% of your current portfolio in SOL. But if BNB also crossed 80, the test would assign half of its position to BNB at the next hourly rebalancing.
Why can’t you do this
First of all, let’s assume you are human if you are reading this. If you are human, you need to sleep. The test works 24 hours a day, every day, and has done so for more than ten months. Even new parents get a baby break from time to time.
In second place, the algorithm does not take into account liquidity or depth of orders on a particular asset on a particular exchange. You buy at the current price and sell at the current price, which we all know is not necessarily realistic.
And thirdly, the commissions for an hourly rebalancing would be prohibitive, no matter how much BNB or FTT you have.
So why is it a valuable test?
It is about evaluating whether the VORTECS ™ algorithm is good at its job.
When you see bullish conditions, will you be right most of the time? When the score goes up, do prices usually go up? Obviously, with this test, the answer is yes.
And while the strategy “Buy in 80, sell in 12 hours” It is an outlier, there are other strategies that have created a hypothetical massive return on investment.
For instance, Buy in 80, Sell in 24 hours. That is sitting in “earnings” of the 13.099%. Other good strategies include:
- Buy in 90, Sell in 168 hours | + 4.544%.
- Buy at 80, Sell at 80 | + 14.862%.
In fact, with Bitcoin offering a 49.5% return since the tests began running on January 5, 2021, each of the strategies You have outperformed the ROI of simply holding BTC.
And that indicates that VORTECS ™ is working properly. In general, over time, you are showing that the historical trading conditions of digital assets can be a useful indicator of the current health of that asset.
In other words, a high VORTECS ™ score has a proven correlation with price appreciation. Not in all cases, nor for all assets … but overall, this ten-month-long test has proven to be a compelling case.
Warren buffett (perhaps paraphrasing Hegel) once said that: “What we learn from history is that people don’t learn from it.”
(As a cryptocurrency skeptic, you may want to reconsider your position.)
That’s what the VORTECS ™ score is all about. Learn from history. And that is why a hypothetical return of 36.205% is important.
It tells us that we are seeing the correct story.
Cointelegraph Markets Pro is available exclusively to its members for a monthly price of USD 99, or annually with two free months included. It has a 14-day money-back policy, to ensure it meets the cryptocurrency trading and investment research needs of subscribers, and can be canceled at any time.
Cointelegraph is a financial information publisher, not an investment advisor. We do not provide individual or personalized investment advice. Cryptocurrencies are volatile investments and carry significant risk, including the risk of permanent and total loss. Past performance is not indicative of future results. Figures and graphs are correct at the time of writing this review or as otherwise specified. Strategies tested in real time are not recommendations. Consult with your financial advisor before making financial decisions.
All investment returns quoted are accurate as of 12 pm ET on 10/23/2021.
Keep reading: