In the course of time, in the blink of an eye, I have been in the cryptocurrency world for ten years. Looking back, I entered this unpredictable land with a capital of 1 million, only to lose over 700,000 in the first three years! The despair and collapse felt like the biting cold wind in the depths of winter, piercing deeply into my soul. Imagine if I had invested this million in real estate at the beginning, my value would have multiplied by now, which is truly regrettable! Moreover, even my partner nearly left me due to this heavy blow.
However, after much reflection, I did not sink into despair. After a long period of deep reflection, I vowed to rally again and fight in the market. Although I was filled with reluctance, starting in the fourth year, I resolutely used the remaining 300,000 as a new starting point, accumulating profits step by step, and steadily moving forward year by year until I finally saw the light.
To this day, the initial 300,000 has beautifully transformed into over 34 million, with stable returns that are gratifying. In this long journey, I have summarized ten unshakeable rules and a unique cryptocurrency trading strategy. Today, I am willing to share these valuable experiences with everyone.
I hope that those wandering and confused in the crypto world can gain wisdom from this and avoid detours and repeating mistakes. You should know that blindly following trends and crashing into walls will come at a heavy cost!
So how can one excel in cryptocurrency trading? Once a person enters the financial market, it is hard to turn back. If you are currently at a loss and still confused, and plan to make cryptocurrency trading your second career, you must understand the 'simplest DPO indicator strategy.' Understanding it thoroughly can help you avoid many detours. These are my personal experiences and feelings, and I suggest you save them and ponder them repeatedly!
Today's words, although brief, are pearls of wisdom. I hope you savor them carefully, as they will surely lead to enlightenment and yield rewards!
[Indicator Introduction]
DPO, developed by Walt Bressert, is used to assist in judging the short-term trend of stock prices. Its calculation method eliminates the long-term trend of stock prices, leaving only short-term price fluctuations, forming a range of oscillation lines, making it easier to identify overbought/oversold levels in small cycles. When the DPO oscillation line goes up, it indicates that the stock price is in an uptrend. When the DPO oscillation line goes down, it indicates that the stock price is in a downtrend.
[Algorithm Steps]
Cycle parameter: N
DPO = CLOSE - REF(MA(CLOSE, N), N/2 + 1)
[Indicator Usage]
When DPO > 0, it indicates that the stock price is rising in the short term, generating a buy signal;
When DPO < 0, it indicates that the stock price is falling in the short term, generating a sell signal.
[Indicator Backtesting]
Target: CSI 300 Index
Backtesting Period: Daily and weekly data (from June 1, 2010, to January 19, 2024)
Signal Generation:
When DPO > 0, it indicates that the stock price is rising in the short term, generating a buy signal;
When DPO < 0, it indicates that the stock price is falling in the short term, generating a sell signal.
Common parameters:
N1, N2 = 20, 0
[Strategy Performance]
Target: CSI 300 Index
Backtesting Period: Daily and weekly data (from June 1, 2010, to January 19, 2024)
Common parameters:
N1, N2 = 20, 0
[Parameter Improvement]
Most technical indicator parameters are about the choice of cycles. Different parameters of an indicator correspond to different uses. For example, short-term moving averages are used to observe short-term trends, while long-term moving averages are suitable for observing long-term trends. Therefore, the selection of technical indicator parameters can be dynamically chosen within a certain range based on the investor's own preferences.
Although the principle of selecting 'parameter plateau' has been adopted, and symmetric or complementary processing of threshold parameters has been employed to reduce the number of parameters, it still cannot avoid the phenomenon of overfitting in technical indicator parameters. Therefore, 'optimal parameter out-of-sample testing' is used.
The default parameters of the technical indicators above have been backtested. Next, we will traverse the regression of technical indicators with different parameter combinations using the given parameter pool.
Taking the CSI 300 as an example, we perform a traversing backtest of technical indicator parameters in the sample. The backtest period for traversing the parameters of the technical indicators is from June 1, 2010, to March 16, 2018, and the out-of-sample testing period is from March 17, 2018, to January 19, 2024. The specific performance is as follows:
By calculating the Sharpe value of each parameter combination, the one with the maximum Sharpe value is taken as the optimal parameter combination. The performance of technical indicator parameter combinations is as follows:
[Parameter Stability]
The stability of signals refers to the cumulative return of the corresponding trading target N days after forming buy and sell signals based on technical indicators. Here, N takes values such as 3, 5, 10, 20, 30, and 60. The average return rate observed after N days of signal generation is used to assess the effectiveness of trading signals.
[Performance under Different Market Styles]
Divide the market from January 4, 2010, to March 14, 2024, into 5 bull markets and 5 bear markets, and statistically analyze the performance of technical indicators under default parameters for each phase. The specific market state division and evaluation index definitions are as follows:
In a bull market style, annualized return % average = 29.892%
In a bear market style, annualized return % average = -10.610%
Finally, let’s look at the performance of technical indicators under default parameters on CSI 300, CSI 500, CSI 1000, National 2000, and ChiNext indices.
[Summary and Improvement Directions]
Technical Indicator DPO Signal Discovery:
When DPO > 0, it indicates that the stock price is rising in the short term, generating a buy signal;
When DPO < 0, it indicates that the stock price is falling in the short term, generating a sell signal.
Technical Indicator DPO, under the default indicator of 20, annualized return of 0.054, Sharpe ratio of 0.447;
Technical Indicator DPO, the optimal combination for parameter N1 {1:50} is: 21. This parameter combination was backtested from '2018-03-17' to '2024-01-19', with a Sharpe ratio of 0.015 and an annualized return of -0.006, far below the performance evaluation of the default parameter combination.
Technical Indicator DPO, after trading the optimal combination, the returns at 3, 5, 10, 20, 30, and 60 days, with the highest average return occurring 20 days after buying;
Technical Indicator DPO, under different market style performances, in a bull market style, the average annualized return % is: 29.892%, in a bear market style, the average annualized return % is: -10.610%. It is difficult for the indicator to consider both trend bull and bear markets. There are also significant differences in performance under different indices.
Finally, let me share a set of cryptocurrency trading insights:
1. Don't rush to get in: When you hear that others made money, you might feel itchy to jump in, but don’t rush in. You need to understand some basic things first, grasp what cryptocurrency trading is about, and then consider investing your money.
2. Be careful not to chase up or down: Don’t blindly follow the crowd; don’t buy just because others are buying. By the time you realize they are buying, it might be too late. It’s better to wait patiently for a good opportunity before taking action.
3. Don’t put all your eggs in one basket: Don’t put all your eggs in one basket. Diversify your investments by buying different ones, so the risks are spread out.
4. Set a bottom line for yourself: Think about how much loss you can tolerate; don’t throw all your money in just for a gamble. Set a stop-loss point, and when losses reach a certain extent, stop promptly to protect your capital.
5. Learn more, don’t mess around: Learn more about the knowledge of the crypto world, such as checking the basics of a certain coin, and listening to what professional players say. Don’t just listen to baseless rumors and gossip.
6. Don’t be too greedy: Seeing that you made some money, don’t think about making more; you might end up with nothing and not even a penny left. Take some profits out in time; don’t always think about making more.
7. Don’t be led by your emotions: The market is volatile, but don’t panic like an ant on a hot pan because others are anxious to sell; don’t blindly follow the trend just because others are buying.
8. Time is your friend: Don't be in a hurry, time will help you. Don’t think about getting rich overnight; be patient, take it slow, and make money steadily.
The above 8 principles are mistakes I have made repeatedly in the past. Now I share them with everyone. Please study them carefully, practice continuously, and achieve unity of knowledge and action. I hope to help cryptocurrency friends avoid several years of detours.
All of the above are insights from 10 years of trading cryptocurrencies, having experienced many ups and downs. These are heartfelt words of great enlightenment, hoping to be useful to everyone. Produced by Yan'an, it must be a fine product. There are beauties in the crypto world, unique and independent. The soul has its way, and the mastery of cryptocurrency has its skills!
No matter how diligent a fisherman is, he wouldn’t go fishing in stormy weather but would carefully guard his fishing boat. This season will pass, and a sunny day will surely come! Follow me, and I'll teach you both fishing and the art of fishing. The door to the crypto world is always open. Only by going with the trend can you have a life in harmony with the trend. Keep this in mind!
