Research Article #26 - Bitcoin Volatility Regime Targeting
Study of how volatility affects a trading strategy
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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