Are you able to generate profits by making use of a simple RSI buying and selling technique to Bitcoin? In our steady seek for probably the most environment friendly and profitable crypto buying and selling methods, we now have a better take a look at the Relative Power Index (RSI).
Intimately, we are going to current and talk about our in depth backtest outcomes and make clear the query of whether or not you’d have made cash by making use of the RSI buying and selling technique to Bitcoin in 2023.
Right here’s what you can find on this article:
A fast introduction to the Relative Power Index and our buying and selling technique.Key components of our backtestA super-extensive deep dive into the backtest resultsAnd lastly, an evaluation of the outcomes and the reply as to if using the Bitcoin RSI buying and selling technique is smart.
Prepared? Let’s get it began!
The Relative Power Index (RSI) is a pivotal software within the arsenal of many merchants, significantly within the dynamic realm of cryptocurrency buying and selling.
Developed by J. Welles Wilder in 1978, the RSI is a momentum oscillator that measures the velocity and alter of value actions. It operates on a scale of 0 to 100, making it an indicator that’s each accessible and informative.
Central to the RSI’s utility is its capability to determine overbought and oversold circumstances available in the market (this can be necessary for our Bitcoin RSI buying and selling technique, too). An asset is usually thought of overbought when the RSI studying is above 70, which may point out that it could be primed for a value pullback or correction. Conversely, an asset is deemed oversold when the RSI dips beneath 30, suggesting a possible value bounce or upward correction.
Within the context of Bitcoin, a extremely risky asset, the RSI takes on added significance. It permits merchants to gauge the market’s momentum and probably anticipate vital value actions. Nonetheless, it’s essential to notice that whereas RSI could be a highly effective indicator, it’s not infallible.
Within the fast-paced world of cryptocurrencies, RSI indicators ought to ideally be used along side different evaluation instruments and market indicators to kind a extra complete buying and selling technique. This multifaceted strategy may also help merchants navigate the complexities of the market and make extra knowledgeable choices.
Need some backtest outcomes? Bitcoin Backtest: How Efficient Was the MACD Technique in 2023?
Earlier than wanting on the backtest outcomes, understanding how and what we backtested is important. Due to this fact, this chapter will offer you all the things it’s essential find out about how our Bitcoin RSI buying and selling technique works and current the core parameters.
Bitcoin RSI Commerce Indicators
As talked about above, the RSI has two essential ranges, referred to as overbought and oversold. These two ranges can function entry factors for trades. And that’s precisely how we structured our backtest:
Bullish Sign: We opened an extended commerce at any time when the RSI returned from an oversold degree (< 0) into the impartial space (>30).Bearish Sign: Conversely, we opened a brief commerce when the RSI returned from overbought ranges (>70) into the impartial space (<70)
Backtest Parameter
Listed here are the core parameters of our Bitcoin RSI backtest:
Preliminary Capital: $1,000Take Revenue: 3percentStop Loss: 1percentLeverage: 2xChart Timeframe: 1H and 1DB
It’s time to depart the theoretical playground and dive into the outcomes. As you’ve seen above, we carried out the backtest based mostly on the day by day and hourly timeframe. Accordingly, the outcomes are clustered in response to the timeframes. Furthermore, we are going to cluster the outcomes in response to lengthy and brief trades. Let’s get into it!
Lengthy Indicators
Buying and selling the Bitcoin RSI technique on the day by day chart would have resulted in solely two trades in 2023. Nonetheless, extra importantly, none of them would have been closed efficiently based mostly on our buying and selling parameters. Accordingly, you’d have resulted in a lack of 4% on the finish of the 12 months.
General Variety of Trades: 2Win Trades: 0Win Fee: 0percentMax. Drawdown: $40Final Win/Loss: -4percentFinal Quantity: $960
Quick Indicators
Though the quantity of brief indicators is significantly increased in comparison with the lengthy indicators, the outcomes are equally worse. Primarily based on a win price of on 25%, you’d have closed the 12 months with a meager lack of $5.
General Variety of Trades: 8Win Trades: 2Win Fee: 25percentMax. Drawdown: $41Final Win/Loss: -0.5percentFinal Quantity: $995
Lengthy Indicators
The outcomes on the hourly chart are solely barely higher than on the day by day chart. Out of 56 trades, you’d have been in a position to shut 16 efficiently. This may have resulted in a win price of 29%. Nonetheless, finally, you’d have been in a position to shut the 12 months with revenue of 13%.
General Variety of Trades: 56Win Trades: 16Win Fee: 29percentMax. Drawdown: $2.4Final Win/Loss: 13.2percentFinal Quantity: $1,132
Quick Indicators
Buying and selling the brief indicators of our Bitcoin RSI technique would have been probably the most profitable in comparison with the opposite indicators, leading to a whopping revenue of virtually 66%. Nonetheless, it’s price mentioning that the win price continues to be sub-optimal, with solely 34%.
General Variety of Trades: 76Win Trades: 26Win Fee: 34percentMax. Drawdown: $149Final Win/Loss: 65.7percentFinal Quantity: $1,656
After reviewing the detailed backtest outcomes, the reply to the above query is comparatively easy: No! Nonetheless, right here’s a extra detailed evaluation of the outcomes:
Devastating Win-Fee: Neither the day by day nor hourly trades resulted in an appropriate win price. Normally, we contemplate a buying and selling technique as price buying and selling when the win price is above 70%. Due to this fact, the achieved win charges are far beneath the specified outcomes. Accordingly, one can not advocate the Bitcoin RSI technique (a minimum of not with the described setup).Purchase & Maintain Outperforms RSI Technique: Probably the most necessary benchmarks for each buying and selling technique is the comparability with merely shopping for and holding an asset. On this context, the Bitcoin RSI technique carried out worse. Even probably the most profitable sign resulted in solely 65% revenue on the finish of the 12 months. On the similar time, you may have achieved a whopping ~125% (and even 250% with a 2x leverage) by merely shopping for Bitcoin in January and promoting Bitcoin in September.
