Minor adjustment and decision time

The next step in the Bollinger Band simulations is to look at recent BTC prices attempting to identify recent market trends. Adding a 3^rd variable to step through isn’t overly complicated. But coming up with a way to measure the results is. It’s going to require looking at each transaction and building a ledger to compute profit or loss on each sale then summing over all transactions. This will also require a minor adjustment. In past simulations, we’ve started by splitting our $10,000 stake equally between cash and coins. Since each sell transaction will have to match a previous buy, we’ll have to start with zero coins and all cash. All $10,000 will initially be allocated to cash.

The decision has to do with continuing this topic on the blog. One of the primary reasons for including bitcoin analysis was to generate some discussion (questions, ideas, suggestions, etc.). It has not happened. In fact, I don’t detect any interest in the blog or the files that I offer to share. So, it doesn’t make sense for me to take time away from actual analysis to continue posting. Therefore, I’m going to cease and spend my time in analysis. If you wish to comment or continue a discussion, contact me at ole44bill@gmail.com.

Bollinger Bands #6 Market direction impact

To see what the impact of the market trend has on the Bollinger Band model we can look at the results of 2018 and 2019. Bitcoin started 2018 started with a BTC price of $13,850 and ended at $3,747. It dropped rapidly early and was generally had a downward move. In 2019 it started at $3,747 and was at $8,327 on September 30^th. Before running the simulation for each year separately, we narrowed the parameters ranges. We used 7 to 16 days and standard deviation multipliers of 1.7, 1.9, and 2.1. Following are the top 10 combinations from each year (2018 on left, 2019 on right).

Net Worth	Days Desired	Std Dev Multiplier	#Trades	# Buys	# Sells		Net Worth	Days Desired	Std Dev Multiplier	#Trades	# Buys	# Sells
$6,716	15	1.9	111	60	51		$13,764	7	2.1	98	49	49
$6,548	14	1.7	134	72	62		$13,379	7	1.7	124	62	62
$6,547	13	1.7	140	74	66		$12,861	7	1.9	110	55	55
$6,352	15	1.7	126	67	59		$12,714	8	2.1	90	44	46
$6,323	14	1.9	109	59	50		$12,424	9	1.7	111	55	56
$6,190	12	1.7	137	72	65		$12,393	8	1.9	100	49	51
$6,054	14	2.1	95	52	43		$12,364	11	1.7	97	48	49
$6,050	16	1.9	107	57	50		$12,330	10	1.7	103	51	52
$6,008	16	2.1	89	49	40		$12,223	8	1.7	112	55	57
$5,997	16	1.7	125	65	60		$12,153	16	1.7	78	38	40

The top net worth combination of Bollinger Bands parameters was quite different for the 2 years. The 2018 (downward trend) parameters were closer to the combinations for the 2 years together. That makes sense because the BTC price on September 30^th, 2019 was lower than the opening price on January 1^st, 2018.

Unfortunately, the only profitable combination occurred in a rising market. Furthermore, a buy and hold strategy in 2019 would have a net profit of $12,223. That’s going to be a hard number to beat. But we have one more idea. We’re going to use some of the previous day’s prices and use both linear and quadratic regression to identify a recent trend. This will add a 3^rd parameter and complicate things.

This might take a while. I’ll use Twitter, @billlanke, to indicate when I post some results.