Hello Quantpick!

 

A lot of people like Quantpick's automatic Bitcoin trading series, and I'm really happy to see some people put them into practice and make steady profits! In return for this, we would like to cover the following topics this time!

 

1. Volatility Breakthrough Strategy Review!

 

2. Heybeat VB V.S. Quant Pick's VB

 

3. Heybeat FF V.S. Quant Pick's VB V.S. bitcoin

 

4. Correlation & Statistical Analysis & Conclusion!

 

Let's begin shall we?

 

1. Volatility Breakthrough Strategy Review!

 

Before we get started, let's do a quick review! The strategy my Quantpick uses is Larry Williams' Volatility Breakthrough Strategy, which is simple yet powerful logic! This logic was verified through data that it worked well in an index with a high personal weight such as the KOSDAQ index.

 

Click here to learn more about the strategy!

 

Likewise, it works very well in the highly private and volatile cryptocurrency market!

 

Let's take a look at the backtest data for the past 10 years.

 

I hope my balance grows as well as the above backtest result! However, the strategy capa is limited and there was not much trading volume in the past, so the transaction cost including slippage will be very cut ~ So in practice, I guess that it will be possible to achieve a lower return than the back test!

 

2. Heybit VB V.S. Quant Pick's VB

 

However, in the past, Heybit also used a volatility breakout strategy, and I actually put a seed into that strategy. However, the yield was much lower than I had expected. At that time, it rolled over 10 billion won to over 2000 users. The Heybit version of the VB (Volatility Breakthrough) strategy was very good in defense against a down market, but it was somewhat disappointing as it generated about 30% profit for about 1000 days.

 

Quantpick personally backtested the data, and no matter how much I thought, I could get a higher return than this, but I guessed that it was too much risk management. And I decide to try to manage my funds with the same strategy myself!

 

And in the last 9 months or so, I have been able to get close to 100% returns!

 

Even before Heybit's VB strategy ends its service

 

Even comparing the performance, we outperformed much.

 

WHY? How did that happen??

 

I don't know the exact reason, but let's make a simple guess.

 

1. Timeframe Distribution

 

Heybit increased the strategy capa and reduced transaction costs through time frame distribution. However, when Quantpick directly backtested the time frame dispersion index, INTRADAY MOMENTUM (intraday momentum) was not certain in time zones other than 9 am to 11 am Korean time. Therefore, it seems that Heybit VB had a low return by including a time frame with a low return in the strategy.

 

2. Volatility Control Techniques

 

Heybit used a money management technique that adjusts the weight of the next day based on the previous day's volatility as a volatility control technique. Using this technique, if the previous day's volatility is large, reduce the investment the next day, and if the previous day's volatility is small, increase the investment the next day. For this reason, the fixed volatility is adjusted to 1%~2%, and according to the law of geometric mean, the long-term loss is minimized and small profits are accumulated to draw a picture upward. It has good defense, but has the disadvantage of having to give up some profits. The quantitative pick simply invested 90% of the fund at a fixed rate without adjusting it.

 

3. Universe too broad

 

Bitcoin and Ethereum account for 70% of the total coin market cap. The volatility breakthrough strategy works well with the index, and even if you only trade Bitcoin and Ethereum, you can see that you are trading the index itself in the coin market. Heybit VB may contain a coin that does not work well in the volatility breakout strategy, or it may have worked well in the past but may not work well in practice. Quantpick similarly simply trades only Bitcoin and Ethereum.

 

3. Heybit FF V.S. Quant Pick's VB V.S. bitcoin

 

In response, Heybit opened the strategy on November 2, 2020 to achieve higher returns by using a high-frequency trading strategy called FOREFRONT and mixing more diverse models than VB. Currently, the exact trading logic is kept private to maintain alpha. A brief introduction is below!

 

It has been operating for 155 days now and is recording a 106.1% return and -10.45% MDD! It is showing much better results than the existing VB! Of course, the market was so good at this time that I think all market participants would benefit (including Quantpicks)!

 

Below is the profit curve so far! It is making a beautiful right-of-way!

 

Monthly performance has been profitable for all but March so far!

 

Enter the above data one by one directly into Excel,

 

When I printed it out in Excel, I was able to get a chart like the one below!

 

Next, let's take a look at the profit curve of Quantpick VB.

 

Likewise, it is constantly moving to the right!

 

Heybit FF Strategy VS Quantpick VB Strategy!

 

Heybit's FF strategy is showing better results than Quantpick's VB strategy!

 

There was a brief win-win section, but after all, an institution is an institution!

 

By the way!

 

When I analyzed what would be the result if I brought bitcoin data based on CoinMarketCap and maintained it for the same period, the chart below is drawn.

 

Ah… Should’ve waited for bitcoin… hahah

 

However!

 

Below is the latest 2018.01.01 ~ 2021.04.06 Quantpick's VB backtest result! When backtesting in Trading View, I tested very conservatively by setting trading fee + slippage = 0.2%. Therefore, the discrepancy rate from actual practice is very small, and it can be regarded as a fairly accurate result.

 

If you have been operating from 2018 to now, you can see that MDD -80% is avoided, MDD -20% is defensible, and in the long run, it outperformed the benchmark (Bitcoin)!

 

To sum it up!

 

1. Automated trading may yield relatively low returns in a bull market. However, it has a very good defense against a downtrend.

 

2. It can outperform the benchmark as time goes by while minimizing losses and accumulating profits steadily.

 

3. Since it draws a steady upward-sloping profit curve, you can live comfortably and automatically earn profits.

 

4. Correlation & Statistical Analysis & Conclusion!

 

What is CO-RELATION?

 

Correlation is a measure of the relevance of different asset classes or strategies. It ranges from (-1) to (+1) and is very good for risk management if you invest in a strategy or asset class that has a negative correlation but an upward sloping return curve. There is a positive correlation, but 0.5 or less is pretty good.

 

Quantpick calculated Heybit's FF strategy, Quant Pick's VB strategy, and Bitcoin's daily correlations for the past 5 months. Reliability may be a bit low due to the narrow data range, but I will tell you the results of the analysis over that period!

 

* Daily volatility was measured using the CORELATION() formula in Excel.

 

1. The correlation between the Heybit FF strategy and the Quant Pick VB strategy is 0.13322

 

2. The correlation between the Heybit FF strategy and Bitcoin is 0.2245.

 

3. The correlation between Quant Pick VB and Bitcoin is 0.0588.

 

I was also very surprised while analyzing it~ The correlation between each strategy is rather low! However, the FF strategy must be renewed every 6 months and 25% of the proceeds must be paid as a performance fee!

 

1. Using the Heybit FF strategy, but deducting 25% of the performance fee, it was possible to obtain a return of about 80%.

 

2. Quant Pick VB does not pay performance fees because it is directly managed by individuals. During the same period, a return of about 70% was obtained.

 

3. Bitcoin had the highest decline (MDD) of -25.41% based on the daily data closing price. However, it should be remembered that during the day, it has gone up to -35%. Instead, I was able to get a crazy return of about 335% in this bull market!!!

 

What the above results suggest is "You can do all 3 methods at the same time"! You can hold a portion of Bitcoin and operate the remaining portion with an algorithm with low correlation!

 

In conclusion!

 

There is no right answer to investing!

 

We set standards and principles so that we can make sustainable investments according to our own inclinations, and we gradually change and update the logic to suit the market, but we believe that fundamental principles must be adhered to.

 

During every market cycle, no strategy works all the time. However, rather than moving around like a swallow, I think it would be better to stick to your strategy and take profit when the cycle comes, or use multiple low-correlation strategies at the same time!

 

It's like Warren Buffett, the greatest investor of all time, said his grandfather was obsolete in the industry because his grandfather didn't invest in tech stocks in the dot-com bubble of the 2000s. But Grandpa Buffett sticks to his principles and most of his fortune could be amassed later in his life.

 

 

Quantpick VB Practical Trading Log: https://coinpick.com/daily_quant

 

Quantpick VB automatic trading method: https://coinpick.com/quant_program/8574

 

Quantpikc's Naver Blog: https://blog.naver.com/chimberle

 

You can also set your own standards and principles and make successful investments.

 

I sincerely hope that you achieve the life you want, and this post is the end of this post!

 

Thank you very much :)