Introduction to the CryptoPulse Quant Trading System

The CryptoPulse Quant trading system uses trading signals generated by a quantitative strategy developed by MarketGauge which combines the concepts of trend strength and ranking. The model starts by identifying the leading tradable cryptocurrencies by market capitalization. We then rank the remaining symbols based on their special formulation of the Trend Strength Indicator (TSI) score.

After the universal close of the crypto market (0:00 UTC) trading day, the top cryptocurrencies are ranked by TSI and evaluated for other entry or exit criteria and we determine which two cryptocurrencies should be in the portfolio for the next day based on this criteria.

Each position is managed with stops and targets. At each target, 1/6th of the original position is sold. After a target is reached, we move the stop up to the previous target. The remaining position will remain on unless it hits a stop or the model rotates out of the cryptocurrency.

Quick Start: Starting A Portfolio

You can start at any time by entering the positions already in progress at the correct fraction of a position (if we have already hit one target, then only approximately 5/6ths of the position should be entered – see “Open Positions” for current holdings and how much of the position remains on). 

The average trade lasts about 20 days but some can last a lot longer. The model will also spend some time in cash depending on market conditions. We recommend getting started with the positions already in progress, however, you can also wait for the next fresh entry signal, just be aware it could be some time before that signal is generated.

The website page “Model Portfolio” will show you the current positions and their stops and next targets. We recommend that you familiarize yourself with how to identify the next stop and target levels before your enter any trade.

When you initially put on the position, you can enter hard stops at the initial stop loss. You can also place orders to exit the appropriate amount at the first target (1/6th of position). Stops or targets can hit anytime in the 24/7 crypto market, so we recommend placing stops or targets ahead of time. It is even possible that multiple targets could be hit in any short-term move, so it may be necessary to put in multiple targets ahead of time, especially for the first few targets that are significantly tighter than the remaining targets.

Each portfolio spot is treated separately. New positions use the available capital from that portfolio spot. A portfolio spot may start at 50% of the portfolio but will grow or shrink with each new position until all the portfolio spots are rebalanced twice annually (end of June and end of December).

For information about opening an account at Coinbase, Kraken, or other exchanges, see the “Resources” tab in the CryptoPulse Dashboard area.

Maintaining A Portfolio

Shortly after the close of every crypto trading day (0:00 UTC), the website will be updated with the most recent trade data (closing price, return, etc…). Anytime a trading event occurs, you can expect an email or text alert updating the change. Profit targets or stops can be hit anytime through the 24-hour day. 

Trading Alerts & Position Updates

There are two types of potential updates. Each day after close of the Crypto market day (0:00 UTC)  the model will evaluate the relative ranking and condition of the cryptocurrencies and determine if there are any necessary position changes. This can include rotating out of one position into a new one, exiting a position to go to cash, or re-entering a position that was stopped with the same or new symbol. You will be notified of these changes in an email and text alert.

The other type of update occurs when one of our positions either reaches a target or gets stopped out. When this happens a special notification email and text will be sent out. The prices are published ahead of time. Stops or targets can hit anytime in the 24/7 crypto market, so we recommend placing stops or targets ahead of time. It is even possible that multiple targets could be hit in any short-term move, so it may be necessary to put in multiple targets ahead of time, especially for the first few targets that are significantly tighter than the remaining targets.

For both of these types of updates, the actual update can be found on the “Position Updates” page. Navigation to this page is found in the right-side navigation panel.

Managing Your Text Alerts

If you would like text alerts in addition to email alerts, simply go to the “Manage Mobile Alerts” link in the top navigation panel on this page and register your phone number.

Monitoring the Strategy Portfolio

You can easily see any recent trade alerts in the “Position Updates” section of the website. This page is updated anytime a trade alert is issued.

The “Model Portfolio” area of the website tracks the current open positions, position calculator, recently closed positions, and historical performance metrics. The data in this section is updated after the close of the crypto trading day each day.

We will also have monthly webinars where we will discuss our current holdings or new positions and answer any questions that our members might raise.

Frequently Asked Questions

This model has generated very impressive returns, both from great trade signals and from consistent application of the rules. As with any automatic rules-based system, there will be times when it is easier to follow the signals and times when the signals might not make as much sense. As a general rule of thumb with any trading strategy, we have found that most traders lose their discipline for two main reasons:

#1. They trade positions that have too much risk and this leads to incorrect trading decisions such as taking profits too soon, selling to prevent losses at the wrong time, or being afraid to enter new trades. The best way to overcome this problem is to start slowly.

#2. They don’t understand and believe in the trading rules of the system.

We have intentionally tried to keep the rules fairly simple to follow to help overcome some of these issues. We recommend that you start slowly to develop your trust and belief in the strategy. One day’s or even one month’s performance will not always be representative of the types of return or trading characteristics you can expect.

You do not need to start with real money, and you certainly do not need to start big! Building bigger positions is easy once you are comfortable and knowledgeable about the system. The most important part of getting started is finding the right low risk way for you to begin. The questions and answers below should help you towards that end. The information in the “How to Use The Model” page will also be helpful.

How do I start trading this strategy?

You can start any time either by entering existing positions already in progress or waiting for the next fresh signal. 

To enter existing positions, buy a proportion of the position consistent with the amount shown in the open positions. 6/6 indicates a full-size positions. At each target, we sell 1/6th of a position.  This will allow you to create  a portfolio that very closely tracks the day-to-day performance of the model portfolio. From this point, you will then need to manage the positions and follow along with any rotations or trades that occ

Everyday at the close of the cryptocurrency trading day (0:00 UTC time), the model evaluates the current positions and determines if their should be any changes (exits, rotations, new entries). An alert will go out shortly after 0:00 UTC time if a position change has been triggered. Trades last on average about 20 days, but some can last a lot longer, so it can take some time before all new signals are generated.

You are free to paper trade, “leg” into trades, selectively trade certain symbols or signals, or modify your trading in any way from the rules and methodology employed by the model portfolio.

One of our holdings dropped out of the top two, why are we still in the position?

We will generally hold the top two trend strength-ranked cryptocurrencies. We have a variety of rotation rules where we will rotate out of one cryptocurrency into the new leader if it has moved into the lead by a sufficient amount and other market technicals also align with an entry or rotation. 

How much capital should I use to trade this strategy?

The question of how much capital a trader should allocate to any trade or strategy is going to have a different answer for every trader based on capital available and your own personal trading style and risk profile. Additionally, MarketGauge is not licensed to be able to give that type of specific advice. A good rule of thumb is to start slowly. 

Cryptocurrencies are a highly speculative asset class with high exposure to news and regulatory risks. In the recent past, we have seen significant moves in the crypto market from regulatory and other comments about the space (countries being more or less favorable to crypto, energy usage, project news). The U.S. regulatory situation around cryptocurrencies remains in flux.

Regardless of how you start, you should always limit your capital to an amount that represents a level of risk that you can afford to lose. You can even paper trade the model for several weeks or a month to see how it trades. However, one period may not be representative of the return, risks, or volatility of the model over a longer period of time and in different market conditions. We provide full trade histories for the model and trading statistics that can help guide your expectations for how the model trades.

How much of each position should I buy?

The model typically holds two positions. New positions are added at the same position size of the position we are exiting. Once a position has been started, its percent of the portfolio can grow or shrink based on its relative performance, but you can also approximate even-sized positions and should get somewhat similar performance to the model. Twice annually at the beginning of January and July, the total capital is rebalanced between the two positions.

What is the TSI?

This is our proprietorially generated Trend Strength Indicator (TSI). It is one of the key parts of our model and is also used in a similar way for our ETF and All Stars models to rank and rotate into the leading instruments. The CryptoPulse Quant model uses a modified faster version of TSI to take advantage of the higher volatility in the cryptocurrencies space.

How do you enter new trades?

The model determines position rotations and some entry and exit criteria based on the closing values each day. The cryptocurrency market trades 24/7, but 0:00 UTC time is used to denote new days. Shortly after this time, if there is a position change, the model will broadcast an alert which may involve selling one cryptocurrency and buying another one or selling and going to cash. You can use market orders to enter and exit positions based on rotations.

How do I manage stops and targets?

We publish the next stop and target in the open positions section. Stops and targets (with stop or limit orders) can be placed ahead of time to automatically execute if the level is reached. Different trading platforms deal with order types differently. 

What happens if an order is triggered overnight?

An email and text alert will be sent out anytime a profit target or stop is hit. Targets and stops can be hit at any time through-out the 24-hour trading day. We recommend having stop or limit orders in the market for those key levels.