A simple strategy that beat buy and hold

Buy and Hold is bad

With the recent rise of crypto, more and more new investors are coming in. Those new investors don’t know anything about trading and how this market can behave.

I once was that new investor that made money during a bull market but had no idea when to get out. As the result, you watch the market going down. At first, you are telling yourself that it is just a correction. Then it is an opportunity to buy the dip. Then, it must be the bottom soon, we are 50% down, so you keep holding and holding. Having no clue that you are in for another 20% drop.

Here’s is why you should exit a trade when you are at loss:

% Gains needed to breakeven after a drawdown

As you can see, if you let your losses become bigger, it will take you a huge bull market to overcome the losses. Being afraid to close a trade will happen to most of the new traders. But it’s fine, as long as you learn from it.

I have learned from my mistakes the hard way, in fact, they were not mistake, just ignorance and magic thinking.

Since then, I have read, watch, practice, learn and learn about trading. I decided to go with Trend Following as my strategy to start trading. It would take too much time to explain to you in detail what trend following is in the post, maybe in another post, but basically, we follow the trend 😉

Today, I am offering you a simple script of Trend Following. I created this script for newcomers. To stop this buy and hold madness and give everyone the opportunity to get and when it’s time or even short the market to make money on the way down.

This script will send you an email when you need to go Long (Buy) and when to go Short (Sell).

Moving Average crossing

The script is very simple, it’s 2 moving average, one MA is FAST (look at small timeframe), and the other is SLOW (look at longer time frame).

Moving Average (MA) cross (Bitcoin)

A moving average calculates the average price for the last X candles. When the MA FAST crossover the MA SLOW it means we have to buy because the recent price average is getting higher than the less recent price average. The reverse is also true, if it crossunder, you need to get out or to short the market.

Backtest results

Those are the results of the backtest for BTC/USDT for a 4 Hours Timeframe.

Backtest results MA cross BTC-USDT

See that little white line? In the middle of the big blue fill… That’s the buy and hold results. The blue fill is the return of the strategy.

The strategy will also have drawdowns, which are times when the strategy doesn’t work and you lose money. We calculate the drawdown from the highest equity you had versus the lowest after you reach the high peak. The maximum drawdown for that strategy was around 30%, which seems like a lot, but it is way less than holding from 20K to 3K 😉

During that 3.5 years backtest, buy and hold would have given you a return of 709.06 % while using the strategy would have given you 3266.44 %.

Risk Management when trading bitcoin

This strategy does not include any risk management feature. But I highly suggest that you use our position size calculator in order to have better risk management and control your losses.

There is no stop-loss included also, for that metric, we published another script for tradingview that will give you 3 choices as to where your stop loss should be. Using this script combine with the position size calculator will get you on the path to be a successful crypto trader.

How to use the strategy

I hope that I have convince you so far, if not, well.. Good luck..

So for those that want something better than buy and hold, here is what you have to do.

If you already use Tradingview and know your way around, you can go straight to it here: https://www.tradingview.com/script/OaxKzdv1-Trend-Surfers-MA-Cross-Short-and-Long/

If you are not familiar with tradingview, here you go:

  1. Go to Tradingview.com (Affiliate link, go directly if you wish. 30$ off any upgraded plan.. Also free option)
  2. Register a free account
  3. Go to your account setting and enter the email you want to receive your signals to in the SMS email field.

  4. Go to https://www.tradingview.com/script/OaxKzdv1-Trend-Surfers-MA-Cross-Short-and-Long/
  5. Scroll down and add the script to your favorite

  6. Go to the chart section of Tradinview and select BTC/USDT (https://www.tradingview.com/chart/ABBkRIp7/)
  7. Click on the Indicator tab, then Favorites, and select our script.

  8. Make sure the timeframe is 4H

  9. Create an alert

  10. Setup the alert by selecting our script, select email-to-sms, and write {{strategy.order.alert_message}} in the message section.

That’s it, I hope that the step were clear enough.

You can add alert to other chart like ETH-USDT or any other pair that you would like to trade.

If this is too complicated, we offer fully automated fully managed trading signals, it’s 100% free. Check How to setup Zignaly signals to learn how to use how automated trading signals.

If you have any questions, don’t hesitate to contact us via email or on our discord channel.

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