Within the quickly increasing universe of cryptocurrencies, Binance’s token, BNB, stands out as probably the most influential and broadly used digital cash. Initially launched in 2017 by the worldwide trade platform Binance, BNB was conceived as a utility token to supply customers reductions on buying and selling charges. Since then, its software has expanded properly past mere use on Binance, turning it right into a cornerstone for all kinds of monetary operations and decentralized purposes on the BNB Chain.
With a market capitalization that frequently ranks among the many prime 5 cryptocurrencies on the planet, BNB has established itself not solely as a heavyweight foreign money, but additionally as a barometer of the monetary well being of all the crypto sector. This distinguished place in comparison with different digital currencies like Bitcoin and Ethereum, which dominate the market by capitalization, places BNB in a novel place to capitalize on market fluctuations and rising tendencies within the area of cryptocurrencies.
On this article we are going to discover how the distinctive traits of BNB can be utilized to construct a sturdy algorithmic buying and selling technique, based mostly on a reversal method utilizing Bollinger Bands.
Bollinger Bands
This indicator takes its title straight from its inventor John Bollinger, who analyzed the habits of costs as they moved away or nearer to their transferring common. Bollinger determined to incorporate two bands, calculated as the usual deviation of the easy common of costs. The Bollinger Bands are subsequently fashioned by 3 components and are calculated by way of the next mathematical capabilities:
- UpperBand = common worth of the final N intervals plus 2 commonplace deviations;
- MedianPrice = common worth of the final N intervals (20 is the beneficial beginning quantity);
- LowerBand = common worth of the final N intervals minus 2 commonplace deviations.
Reversal buying and selling technique (Bollinger Bands) utilized to BNB
The technique that can be adopted is an computerized system with ‘imply reverting’ logics, which exploits Bollinger Bands as a market reversal level. When costs attain the higher band, we are going to promote, whereas on the decrease band we are going to purchase.
The session into account conventionally begins at 00:00 GMT and ends at 23:59 GMT, to make it coincide with the photo voltaic day, as cryptocurrencies are quoted 24 hours a day.
Assuming to function with $10,000 per commerce, the commerce can be closed when a revenue goal of $3,000 is reached, as the primary worth. It is going to be very helpful to additionally use a hard and fast cease loss from the start, which we assume to be $1,000. The cease loss ought to in some way shield the invested capital from trades with very excessive losses.
Making use of this technique to the BNB/USDT pair on a 15-minute time-frame, it’s doable to see how this ‘working engine’ would have carried out from 2021 to in the present day. Earlier knowledge isn’t considered as a result of, ranging from 2021, BNB has begun to ascertain itself among the many most important cryptocurrencies on the planet. This phenomenon can be as a result of sturdy general development of the crypto world and particularly the DeFi sector, with a major improve within the complete worth locked (TVL) in numerous platforms based mostly on BNB Chain. BNB has been used as the principle token for transactions and governance on many platforms, which has allowed a rise in demand and consequently its worth, rising to over 15 instances its common worth in 2020.
Outcomes of the reversal technique (Bollinger Bands) utilized to BNB
In figures 2, 3 and 4 the metrics obtained from the imply reverting technique based mostly on Bollinger Bands are seen: the outcomes are encouraging with a rising fairness line. That is undoubtedly a very good place to begin.
By analyzing the outcomes extra carefully, it’s doable to note that the typical commerce stands at round $41, which in comparison with the quantity of the only operation ($10,000) is equal to 0.41%, a price that doesn’t assure to cowl the working prices.
Optimization of the reversal buying and selling technique (Bollinger Bands) utilized to BNB
Attempting to outline a distinct working window might result in a greater outcome. Due to this fact, we proceed with optimizing the beginning time of the operation and its length (expressed in variety of 15-minute bars). The optimization outcomes are seen in determine 5. Working from 00:00 till the top of the next 60 bars, or till 15:00, the values enhance considerably: the overall revenue of the system rises to $222,450 with over 30% fewer operations (2,875), consequently the typical commerce rises to $77.
Outcomes are undoubtedly higher, however they point out a nonetheless tough technique, with a bigger common commerce, however nonetheless not very excessive, and a somewhat excessive drawdown in comparison with the online revenue (Internet revenue/Max DD = 3.6).
To proceed additional, one might attempt to optimize the initially hypothesized cease loss and take revenue values. The truth is, from a primary optimization on the cease loss, it’s confirmed that the worth of $1,000, which is 10% of the place worth, achieves attention-grabbing outcomes. Persevering with additional, in determine 6 it may be seen that by various the take revenue in steps of $500, there are attention-grabbing and somewhat secure outcomes round $5,000-6,000. Rising these values improves the metrics, however not in a really vital approach, so one might select, for instance, to make use of $6,000.
Including patterns to the reversal technique (Bollinger Bands) utilized to BNB
Contemplating that the technique nonetheless makes many trades (about 2,800 in 4 years), there may be in all probability nonetheless room to additional filter the operations. To do that, you possibly can use some worth patterns that may establish the most effective circumstances by which to execute the operations, filtering out these with a decrease likelihood of success.
For this goal, we are going to use a proprietary checklist that features many alternative worth mixtures, which can assist us perceive by which conditions BNB appears to raised reply to the entry logic of this technique.
By analyzing the varied mixtures of patterns, for instance, it’s discovered that by inhibiting the operability when the patterns “PtnLN=19” happen for the lengthy aspect and “PtnSN=11” for the brief aspect, a very good compromise is reached between the principle reference parameters (Internet revenue, Common commerce, Max Intraday Drawdown). With the sample PtnLN=19, will probably be prevented to go lengthy if the closing of the candle of the final session was larger than 0.5% of the closing of two periods in the past. With PtnSN=11 as an alternative, it would stop from getting into brief merely if the earlier session confirmed a downtrend in progress (marking each a decrease low and a decrease excessive).
It’s famous how this mix of filters really manages to extend the typical commerce ($240) and the online revenue rises above $400,000. Even the drawdown decreases and stands at -39,702$. A very good enchancment, additionally seen from the extra common form of the fairness line (determine 8), though within the second a part of 2023 it appears to have misplaced some shine. Solely time will verify the goodness of the alternatives made throughout the optimization section.
Conclusions on the technique
The reversal technique with Bollinger Bands has confirmed to be fairly attention-grabbing on the BNB/USDT pair, though it might want additional refinements to be able to function reside available in the market. This explicit cryptocurrency, though established, remains to be fairly younger and presents many alternatives for merchants who wish to attempt totally different approaches to the market. As at all times, it’s left to the reader to experiment and develop this concept to the fullest.
Till subsequent time and joyful buying and selling!
Andrea Unger
