Do Our Automated Trading Strategies Work On Cryptocurrency?

Last year, Strategy 24 and 26 made a little over $150K combined trading BTC/USD and BTC/EUR.

Our goal is to find the holy grail of trade strategy. To do that, we focus on one instrument for comparison: Nasdaq futures contracts (NQ). Naturally, people want to know if the strategies work on other asset classes and one of the most common questions we get asked is: Do Your Automated Trading Strategies Work On Cryptocurrency?

Two posts I’ve written about crypto are:

An Argument Against The Ban of Bitcoin: Bitcoin Represents a Threat to The Permanent State, Not America (

Bitcoin Valuation: $4 Million (

So, I’m a big fan of all things crypto — especially bitcoin and doge. Bitcoin because it was first to market; doge because it’s what you use when bitcoin’s price goes through the roof and processing fees have to catch up. In other words, doge is a great range trade that you can buy for pennies. I also own a few other crypto like BCH, LTC and ETH.

The crypto universe is large, so we decided to focus on the following crosses for the backtest:










We also decided to only test on our best strategies over the time period July 2, 2020 to July 2021 (1 year). So we’ll be testing Strategies: 17, 20, 24, 25, 26, and 29 for one year on a 30 minute data series.

For links to all strategy descriptions click here.

Full backtest results are below, but these are our findings:

1) The strategy with the highest combined net profit across all crypto cross-pairs: Strategy 24, but it has a high degree of risk as measured by max drawdown. Max drawdown is nearly 3x higher in some cases.

2) The strategy with the highest combined avg profit factor across all cross-pairs: Strategy 26 (exit on close). We like this strategy the best since it combines a high profit factor with a low drawdown.

3) The crypto with the most wins across all strategies: BTC, specifically BTC/USD & BTC/EUR

4) The crypto cross pair with the highest profit factor in any one strategy: BTC/EUR. This isn’t a surprise. EUR is a strong currency, but not as strong as its big sister GBP or cousin USD. So when the value of BTC goes up, USD and GBP have more strength to maintain pricing than EUR. In other words, EUR is not as vulnerable to the impact of central bank manipulation. The pecking order is GBP, USD, EUR and this plays out in the overall volatility of cross pairs as well.

Summary: If you can only trade one cross pair with our strategies, it should be BTC/EUR (BTC/USD is a close second) using Strategy 26 (with an exit on close). If you can afford to trade more than one cross pair, and you’re looking for premium in exchange for a higher degree of risk, we recommend Strategy 24 and Strategy 26 on BTC/USD and BTC/EUR. Last year, Strategy 24 and Strategy 26 (with an exit on close) made a little over $150K combined trading BTC/USD and BTC/EUR.

Crypto Backtest Results

All backtests are performed on NinjaTrader 8 using Coinbase data (Coinbase only provides minute data). Click here for a link on how to connect to Coinbase using Ninjatrader 8.

Our primary performance indicators are profit factor, net profit and percent profitable. We’re also looking at the number of trades (a low number tends to skew results) and max drawdown (as a measure of risk). You can also think of max drawdown as the least amount you should have to trade the strategy.

Performance Indicator Definitions

  1. Trades - The number of trades used in the backtest to analyze performance.

  2. Drawdown - This refers to the maximum drawdown statistic, which provides you with information regarding the biggest decrease (drawdown) in account size experienced by the strategy. Drawdown is often used as an indicator of risk.

    Drawdown = single largest Drawdown

    As an example, your account rises from $25,000 to $50,000. It then subsequently drops to $40,000, but rises again to $60,000. The drawdown in this case would be $10,000 or -20%. Take note that drawdown does not necessarily have to correspond to a loss in your original account principal.

  3. Percent Profitable - This is a metric that shows the number of winning trades divided by the number total trades.

  4. Net Profit - The net profit made on the strategy for the backtest.

  5. Profit Factor - Gross Profit divided by Gross Loss

Strategy 17

Highest profit factor is BCH/EUR at 1.17, but highest net profit is $11,528 from BTC/USD on roughly 600 trades. On the whole, we do not recommend this strategy.

Strategy 20

The highest performing crypto for this strategy was BTC/EUR by far with 1.97 profit factor, 52% profitability, $17K in net income and max drawdown of $2,413, which is impressive. The only issue is that we’ve only got 139 trades for the year.

Strategy 24

Strategy 24 has the highest combined net profitability. Every cross pair has positive net profit. The highest cross pair for net income is BTC/EUR at $40K. It also has a profit factor of 1.40. However, max drawdown is high at $14.6K. In other words, you need at least $15K to trade.

Strategy 25

Strategy 25 is also consistently profitable across the board, with the highest profitability in BTC/EUR. The crypto pair with the highest profit factor at 1.75 is ETH/EUR, but total net profit is only $2.5K.

Strategy 25 (exit on close)

Strategy 25 is usually no exit on close. That is, the strategy description tells you “do not exit on session close”. The results below are from Strategy 25, with one exception, it does exit on close. So when you pull this strategy up, you need to make sure the “exit on session close box” is checked.

Strategy 25 boasts one of the highest combined total net profit at $114K and has a lower max drawdown than Strategy 24.

With approximately 1 trade per day, each pair could be traded for a total of approximately 10 trades per day or 3,380 trades per year. At the top of the crypto pack is BTC/USD, with net profit of $37K and a profit factor of 1.37. You could also just trade BTC/EUR, BTC/GBP and BTC/USD for the bulk of the net profit and approximately 1,000 trades per year. This would greatly increase profit per trade.

Strategy 26

Strategy 26 also performed well across the board, but with BTC/EUR and BTC/GBP in particular. BTC/EUR and BTC/GBP have profit factors of 1.58 and 1.54, respectively. Percent profitability is lower, however, max drawdown is slightly lower as well.

Strategy 26 (exit on close)

Strategy 26 does exit on close, however, the following results are what strategy 26 would be if it did not exit on close. It appears to enhance the performance of the strategy. In other words, if you don’t exit at the end of the day and just let the strategy continue through end of day close, it performs better. It doesn’t just perform better on net profitability, but on max drawdown as well, which is unexpected.

Strategy 29 (no exit on close)

Strategy 29 has a combined positive net profit, however, max drawdown is considerably high given the profitability. We do not recommend this strategy for trading with crypto.

For links to all strategy descriptions click here.

What’s Next

We will continue to monitor the crypto space. It is important to note that we back-tested all strategies using a 30 minute data series. This may be the cause of low net profit for LTC, ETH and BCH. Our next article on crypto will retest crypto pairs on our best strategies using a 1 minute data series. We hope to publish this research around the end of October.

Does learning about crypto get us closer to the holy grail?

Not directly, but the holy grail of trade strategy should work well across asset classes, not just NASDAQ futures or crypto. That’s why we’re going to look at stocks next, specifically stocks on the NASDAQ index. Since strategy 24 and 26 did so well with crypto and futures, we will be paying close attention to their performance with stocks.

To read more about our goals and how we define the holy grail of trade strategy, click here.