Defying the bear market, this automated strategy is up 15% so far in 2022

Defying the bear market, this automated strategy is up 15% so far in 2022

Let’s be blunt: Being in a bear market sucks profoundly as a crypto trader. Most strategies that work when everything is green lead to losses. Growing the value of a portfolio takes twice as much work for half as much progress. The uncertainty over how long the market will remain down is exhausting. During these times, making use of every available tool that can enhance traders’ decision-making is key to success.

One such tool is the VORTECS™ Score, an algorithmic indicator available to the subscribers of Cointelegraph Markets Pro that is designed to use historical data on crypto assets’ performance to determine whether their current conditions are bullish, bearish or neutral.

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The Score can be creatively used in an infinite number of ways, but one hypothetical strategy based on detecting the strongest historical analogies massively outperformed both Bitcoin (BTC), which has lost some 25% of its value during the first month of 2022, and the aggregate altcoin market, whose losses are comparable. This strategy, called “Buy 90/Sell 70,” yielded a 15% gain between Jan. 1 and Jan. 27.

What does Buy 90/Sell 70 mean?

The most important thing about VORTECS™ Score-based testing strategies is that they are not meant to be directly replicated by human traders. Rather, they serve as a tool to assess the overall efficiency of the model over a period of time.

Trades that inform this strategy occur on a server rather than an actual exchange. There can be dozens of them per day, and the testing portfolio gets rebalanced according to a formula after each trade. Still, the results that these tests generate can provide a compelling picture of the algorithm’s performance.

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. Conventionally, a score of 80 is interpreted as high confidence in the outlook’s bullishness. Such scores are observed frequently, with around 50 instances in an average week.

Scores of 90 and above are much rarer; normally, there are just a few instances every week. What they indicate is that in the past, the observed setup of trading conditions reliably showed up before dramatic price spikes. The Buy 90/Sell 70 strategy means buying every asset whose VORTECS™ Score hits 90 and selling it once it drops below 70. If the testing algorithm already holds another asset at the time of the next 90 hit, the portfolio is rebalanced so that it holds all the qualifying assets in equal proportions.

How it has gone down in 2022

Throughout January 2022, a total of 18 crypto assets have achieved a VORTECS™ Score of 90. One of them was Voyager Token (VGX), pictured below, which hit the threshold on Jan. 25 against a price of $1.76 (red circle in the chart). Before the asset’s score went below 70, the price rose to $1.87. In the following hours, it went further up to $2.07, but that additional gain would not be accounted for in the 90/70 results.

Defying the bear market, this automated strategy is up 15% so far in 2022
VORTECS™ Score (green/gray) vs. VGX price, Jan. 20–27. Source: Cointelegraph Markets Pro.

The assets that hit the VORTECS™ Score of 90 tend to be more resilient than most other coins to the negative trends that exist in the wider market. Thanks to their extremely healthy individual conditions, these tokens delivered an average 5% gain within seven days of hitting 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, yielded negative returns in the first weeks of 2022. However, the success of the 90/70 strategy shows that historical precedent can be extremely informative even 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 risk including the risk of permanent and total loss. Past performance is not indicative of future results. Figures and charts are correct at the time of writing or as otherwise specified. Live-tested strategies are not recommendations. Consult your financial adviser before making financial decisions.

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