This strategy is a mean reversion strategy that trades Bitcoin and tries to profit from small corrections against the longer term trend.
This is a short term swing trading strategy that trades on 1-hour bars. It trades both long and short. It is simple but quite effective and the structure of the strategy is profitable on several other markets. It takes trades based on consecutive closes against the longer term trend. It trades with a medium frequency and takes about two trades per week. A simple time-based exit is utilised together with a fixed stop loss.
This strategy is based on consecutive closes and two moving averages to determine the longer term trend.
The two moving averages are 50 and 200. For a long signal, we need the 50 period moving average to be above the 200 and the previous bar also needs to close above the two of them.
Bitcoin has a great tendency to trend rather than mean revert and this makes it perfect for this type of strategy that trades against the short-term trend. We use a simple stop loss of 40 points* and a time-based exit, which is a bit longer for long trades than short trades.
* Note that if your broker quotes BTCUSD in 1 decimal, the stop-loss in pips must then be 400 and if it quotes two decimals, then it needs to be 4000.