www.livebitcoinnews.com
Bitcoin Network, News, Charts, Guides and Analysis
How to Turn a good Bitcoin Profit: MIT Researchers Devise ‘Magic’ Two-month Formula It doesn’t take rocket science to trade bitcoin profitably. On any particular day, you will encounter numerous theories on Reddit seeking to explain bitcoin price movements, and these could vary from striking technical indicators to the conspiracies of FUD (fear, uncertainty and doubt) mongers.
Bitcoin News
LiveBitcoinNews.Com
However, all this may change if a new paper that claims to have come up with a trading strategy that can yield an 89 per cent return in a span of less than 2 months is to believe. How? The two authors, associate professor Devavrat Shah of the Massachusetts Institute of Technology and Kang Zhang, a computer science student, gathered data from OKCoin, the largest exchange in the world in terms of trading volume from the period of February to July. They fed the data into a statistical model (predictive) they have created then used the results to carry out a simulation of CNY/BTC trades. In this simulation, the trader could only go short or long 1 BTC per every trade. Volatility = More Profits The trading simulation comprised data collected for 50 consecutive days between the months of May and June and it did yield extremely profitable results. The simulated investor put in 3,781 yuan and was involved in 2,872 trades. The entire cumulative profit was 3,362 yuan, which means an 89 per cent return rate on the initial sum deposited.
Bitcoin News
LiveBitcoinNews.Com
During times that volatility was high, the trading strategy was established to yield the greatest profits: this was the period at the end of May and beginning of June. Again, it was found to be profitable when the price waned steadily at the end of the simulated period.
Bitcoin News
LiveBitcoinNews.Com
Moreover, the trading strategy generated a Sharpe ratio of 4.1, according to the authors. Sharpe ratio, named after its inventor Prof. William Sharpe in 1966, expresses a portfolio’s return following adjustment for the risk-free return rate. The higher the ratio, the better: in layman’s language, high ratios can be interpreted to mean a trader produced returns with less risk involved, with scores of 3 and above deemed excellent. Looking at the MIT trading simulation’s Sharpe ratio, it compares favourably to benchmark mutual funds such as the Vanguard Total Stock Market Index Fund, the largest such vehicle on the globe worth $355bn. A one-year Sharpe ratio of 1.79 has seen the fund return 8.32 per cent in the last year alone. What does it mean? Claims of technical traders in bitcoin markets could be lent credibility by the paper’s results. After analysis of their prediction data, the authors found evidence of ‘ head and shoulders’ and ‘triangle’ patterns in the price charts. This, the authors reckon, points to the fact that there are indeed such patterns, and this also means their trading strategy was a success.
Bitcoin News
LiveBitcoinNews.Com
They also note that more profits can be generated by crunching more data, although this would then call for what they termed ‘computation at a massive scale’. At the predictive modeling stage, for instance, they employed a 32-core machine with 128GB of RAM and ‘representative’ time-series data. Twitter Trend Analysis the Inspiration The duo based their predictive simulation on a ‘latent source model’ that was the subject of discussion in another paper published in 2013 which was designed to predict what topics would be trending on Twitter. This one involved three authors: Shah flanked by two other researchers at Twitter and MIT. Amazingly, according to them, the model was able to predict trending topics correctly up to 79 per cent of the time.
Peter Mwai Peter is the Creator of great business content that comes home to roost on Live Bitcoin News. Ever the bitcoin enthusiast, he intends to shed light on the market dynamics that will help you make enlightened decisions. make sure to follow his insight. More Posts - Website