Research Article #26 - Bitcoin Volatility Regime Targeting

Study of how volatility affects a trading strategy

👋 Hey there, Pedma here! Welcome to the 🔒 exclusive subscriber edition 🔒 of Trading Research Hub’s Newsletter.

It is extremely time-consuming to find viable trading strategies. The average finance research paper spans 11,800 words and is 25 pages long.

In this series, I share trading strategies researched by us. I include their full Python code and performance in a short, simple-to-read article.

My mission is for you, the reader, to have access to a library of researched trading strategies. We cut through the academic complexities and focus on practical application.

Join over 600+ readers of the newsletter!

---

Introduction

Hey everyone, Pedma here!

First and foremost I want to say thank everyone that joined the newsletter over the last week.

It’s awesome to see so many people get interested in the strategies we will be sharing here.

Let’s get straight into what you’re here for: this week’s strategy.

Today we have yet another strategy that has potential to outperform Bitcoin buy and hold performance.

The strategy returned 2,716.29% during the same period that Bitcoin returned 1,165.26%.

A significant outperformance by a factor of 2.33 or an excess return of 133%.

Let’s investigate this strategy in more detail below.

---

Index

• Introduction

• Index

• Thesis for the Strategy

• Strategy Parameters

• Strategy Performance and Results

• Python Code Section

• Sponsor Of Today’s Article

---

Thesis for the Strategy

Many traders and investors have thought about using leverage to increase returns at one point or another in their careers.

There’s nothing inherently wrong about that, if done well.

Borrow funds, invest those funds, and earn higher returns as a result.

On of the problems with leverage is volatility.

Let’s start by defining Volatility:

• Volatility refers to the degree of variation of a trading price series over time, measured by the standard deviation of returns.

• In simpler terms, it’s a measure of how much the price of something changes over a certain period.

• If price moves up or down rapidly over short periods:

  • High Volatility

• If price stays the same of changes very slowly:

  • Low Volatility