Coinbase sends me alerts when certain cryptos move + or - 5% in a given timeframe. Some of these involve NU, XML, and CGLD. I'm not shilling these, I just read them constantly in the alerts I get, so they must be volatile. I was thinking, people cherish discussing whether it's better to buy high or buy low. Would you rather buy every 5% drop in a instrument or every 5% gain? In other words, you are following a crypto or a stock or whatever. If you had to pick, would you rather buy more every time it rises 5% or every time it declines 5%? You have to do it whenever it happens for a year.
Your asking the wrong question. The question should be: Does crypto mean revert or trend? The answer will lead you to the commensurate strategy. I just gave you your most important lesson...in LIFE. Don't get hit by a truck.
I would do what the backtest of the instrument told me to do, with the assumption that my backtest had a built-in stop loss criteria. In the 1970s-1980s you could have made a fortune buying new n-day highs and selling new n-day lows in a basket of physical commodities futures. I would assume the same type of strategy would have worked extraordinarily well over the last 5 years in a basket of popular cryptocurrencies....will it work as well for the *next* 5 years is the question. In short, backtest, backtest, backtest.....and then follow your strategy to the "T"....the following the strategy part is the hard part.
This is very sound advice. Also, don't go into a test with a pre concieved bias. Let the market test tell you what the proper course of action is.
A while ago I tested this in spx/spy. Buy after x% retracement. It was irrelevant and even lowered returns somewhat. Buying lower could not make up for the missed returns.
Yep. It depends on the instrument, the trading rules, timeframe, etc. Generally, pullbacks and breakouts are more successful if you trade in the long-term trend's direction. Having said that, the Turtle style you mentioned simply assumed the breakout of a 20-day high (or whatever) was the new trend. It worked great in the 70s/80s, not so much by the early 90s when more people had computers/trading software and the pros started fading highly-publicized simple trading systems. It can still work if there's a huge new bull market in something (like cryptos) or in times of great uncertainty/volatility...but those things are hard to define and quantify.