🚀🌟 Today I want to share with you a super interesting experiment conducted by Larry Connors and Cesar Alvarez, where they tested whether people with no trading experience could achieve good results using a simple strategy called "Double Seven". The results were surprising and show that with a clear and disciplined approach, even beginners can achieve consistent profits in the markets. 📈
Experiment Details:
Participants: People with no previous trading experience. 🧑🤝🧑
Strategy Used:
Buy: When the price is above the 200-day moving average and closes at its lowest level of the last seven days. 📉
Sell: When the price closes at its highest level in the last seven days. 📈
Results:
S&P 500 (SPY): Since 1993, the strategy has made 154 trades with an average gain of 1.18% per trade and a success rate of 82.5%. 💪
ETF Portfolio: When applied to an ETF portfolio, with a maximum of five open positions, 1189 trades were made with an average gain of 0.63% per trade and a success rate of 72.3%. The CAGR was 5.74%. 📊
🚀 Roadmap to Implement the "Double Seven" Strategy in Crypto 🌐
1. Choosing the Crypto Asset 📊
Steps:
Recommendation: Start with Bitcoin (BTC) or Ethereum (ETH) to test the strategy, as they are more stable and less prone to market manipulation. (less and less with institutional ones, so if you want to try others that you know how they move, go ahead, I personally do not use BTC either, too expensive for my taste)
2. Setting up the 200-Day Moving Average 📈
Click on the indicator to open the settings.
Change the "Length" to 200 days.
Make sure the Source is set to "Close" to base the average on closing prices.
Click "OK" to apply the changes.
Steps:
Use a technical analysis platform of your choice.
( #Binance over here!)Set the 200-day simple moving average (SMA) on the chart.
Recommendation:The 200-day SMA is a key indicator in the strategy. Make sure the cryptocurrency is above this average before considering any trade.
👉 Tip: To apply the Double Seven strategy effectively, use a daily (1D) chart. This setup allows you to see the long-term trend and generate more reliable signals. The 200-day SMA is more accurate on daily charts, ensuring that your decisions are based on stable and clear trends.
The black line on the chart is the 200-day SMA, which shows you the long-term trend. In this case, the TRX price is clearly above the SMA, indicating an uptrend. This means that the cryptocurrency is in a good position according to the "Double Seven" strategy. If the price closes at its low of the last seven days while staying above this line, it could be a good time to consider a buy. (THIS IS NOT AN INVESTMENT ADVICE IT IS AN EXAMPLE)
3. Identifying Purchase Opportunities 🔍
Steps:
Buy when price closes at its seven-day low and is above the 200-day SMA.
This means you are buying when the price has fallen in the short term but is still within a long-term uptrend, which is key to the Double Seven strategy.
Make sure buying volumes are consistent to confirm entry.
Solid volume confirms that there is sufficient interest in the market, which reduces the risk of false breakouts.
Tip: You can use automatic alerts on the platform to be notified when the price meets these conditions. This way, you won't miss any buying opportunities.
4. Determining the Operation's Exit 📉
Steps:
Sell when the price closes at its seven-day high.
This is where the strategy seeks to capitalize on a short-term bounce or rise within an uptrend. (depending on the point in the previous example we were looking for convenience and it was not in a week, but clearly this is subjective and proportional risk/reward)
Look for signs of market exhaustion before making the sale.
Indicators such as the RSI or candlestick patterns can help you identify if the market is losing strength.
Recommendation: Consider a flexible stop-loss based on the asset's volatility to protect your profits. This allows you to adjust your strategy according to market conditions.
5. Portfolio and Risk Management 💼
Steps:
Diversify your investments by applying the strategy to a portfolio of different cryptocurrencies.
This minimizes risk as you will not be dependent on a single asset.
Do not invest more than 20% of your capital in a single operation.
This way you protect yourself from significant losses if a trade doesn't work out as you expect.
Recommendation: Use the strategy on a maximum of five cryptocurrencies at a time to optimize performance and minimize risk. This allows you to maintain a manageable and effective portfolio.
6. Strategy Evaluation and Optimization 📊
Steps:
Review and analyze your trades monthly to adjust strategy as needed.
This helps you identify what's working and what's not, to continually improve your strategy.
Consider testing different time periods (such as 2-15 days instead of 7) to find the most suitable settings for each cryptocurrency.
Flexibility in the period allows you to adapt the strategy to the particularities of each asset.
Recommendation: Keep a detailed record of all operations to identify patterns of success and areas for improvement. This is crucial for continued growth and optimization.
I am leaving you a post that will help those who do not carry their notebook.
📓 Tom Basso: The Power of Trading Journals 📊
7. Automation (Optional) 🤖
Steps:
Use trading bots that allow you to implement custom strategies.
This helps you execute strategy more efficiently and capture opportunities even when you're not in front of the screen.
Configure the bots to execute the "Double Seven" strategy with the rules defined above.
Bots can follow the rules of the strategy to the letter, eliminating the emotional factor.
Recommendation: Always monitor your bots and adjust parameters based on market conditions. This ensures that your bots continue to trade in line with current trends and conditions.
How to implement the strategy?
Setup the Spot Grid Bot: Adjust the buy and sell levels to match the points you would manually identify using the 200-day SMA and the seven-day lows/highs.
Use the Futures Grid Bot: If you want to take advantage of leverage or trade long/short positions, this bot will allow you to automate those decisions.
Tweak the Spot DCA Bot: You could set it to automatically buy at lower prices (when the market hits lows) and sell when the price hits new highs, which would align with the exits from the Double Seven strategy.
(if the publication is of interest we can go into this in more depth)
This roadmap reinforces the idea that a simple and well-defined strategy can be extremely effective, even for those who are just starting out in the world of trading. The key is discipline and following the rules without getting carried away by emotions. 🙌 Anyone can start getting positive results in the markets. Simplicity can be one of your best allies in trading! 🎯#BinanceSquareFamily #Bitcoin #Ethereum #Tron
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