Let’s face it: being in a bear market sucks as a crypto trader. Most strategies that work when everything is green result in losses. In...
Let’s face it: being in a bear market sucks as a crypto trader. Most strategies that work when everything is green result in losses. Increasing the value of a portfolio takes twice the work for half the progress. The uncertainty about the duration of the market decline is exhausting. During these times, using all available tools that can improve traders’ decision-making is key to success.
One of these tools is the VORTECS™ Score, an algorithmic indicator made available to subscribers of Cointelegraph Markets Pro which is designed to use historical data on the performance of crypto assets to determine whether their current conditions are bullish, bearish or neutral.
The score can be used creatively in an infinite number of ways, but a hypothetical strategy based on detecting the strongest historical analogies massively outperformed both Bitcoin (BTC), which lost about 25% of its value in the first month of 2022, and the overall altcoin market, which suffered comparable losses. This strategy, called “Buy 90/Sell 70”, generated a gain of 15% between January 1 and January 27.
What does Buy 90/Sell 70 mean?
The most important thing about VORTECS™ score-based testing strategies is that they are not intended for direct reproduction by human traders. Rather, they serve as a tool to assess the overall effectiveness of the model over a period of time.
The transactions that inform this strategy occur on a server rather than an actual exchange. There can be dozens a day, and the test portfolio is rebalanced according to a formula after each transaction. Nevertheless, the results generated by these tests can provide a convincing picture of the performance of the algorithm.
The way the indicator works is as follows: the higher the VORTECS™ score, the more confident the model is that the observed conditions are bullish for a coin, based on historical precedent. Classically, a score of 80 is interpreted as high confidence in the uptrend of the outlook. Such scores are seen frequently, with about 50 cases in an average week.
Scores of 90 and above are much rarer; normally there are only a few cases each week. What they indicate is that in the past, the observed pattern of trading conditions has reliably manifested before dramatic price spikes. The Buy 90/Sell 70 strategy consists of buying all assets whose VORTECS™ score reaches 90 and selling them once it falls below 70. If the test algorithm already holds another asset at the time of the next hit 90, the portfolio is rebalanced so that it holds all qualifying assets in equal proportions.
How it went in 2022
Throughout January 2022, a total of 18 crypto assets reached a VORTECS™ score of 90. One of them was Voyager Token (VGX), pictured below, which reached the threshold on January 25 against a price of $1.76 (red circle in the chart). Before the asset’s score dipped below 70, the price moved to $1.87. In the following hours, it went even further up to $2.07, but this additional gain would not be factored into the 90/70 results.
Assets that achieve a VORTECS™ score of 90 tend to be more resilient than most other negative trending coins that exist in the broader market. Thanks to their extremely healthy individual conditions, these tokens have delivered a 5% average gain within seven days of reaching the ultra-high score in 2021.
Of course, a strong VORTECS™ Score performance is never a guarantee of future price movement. All strategies based on buying at the score of 80, for example, gave negative returns during the first weeks of 2022. However, the success of the 90/70 strategy shows that the historical precedent can be extremely instructive even in the amid a massive correction in the crypto market.
Cointelegraph is a publisher of financial information, not an investment adviser. We do not provide personalized or individualized investment advice. Cryptocurrencies are volatile investments and carry significant risks, including the risk of permanent and total loss. Past performance does not represent future results. Figures and graphs are correct at the time of writing or as otherwise specified. Live tested strategies are not recommendations. Consult your financial advisor before making any financial decisions.
COMMENTS