Bitcoin Everything Indicator is designed to give a complete view of the major factors that influence BTC’s price, including on-chain forces, macro and technical influences, as well as fundamental ones. It has been remarkably accurate in identifying both the tops and bottoms of cycles since its creation. Today, we’re taking it one step further.
We’ll look at how to upgrade this tool that is already powerful with a simple modification. It will give you more actionable and frequent insights without losing its core integrity. This might be what you need if you want to actively approach the Bitcoin markets.
What is Bitcoin Everything?
The original composite tool was the Bitcoin Everything Indicator The signal is composed of several signals that are not correlated.
The data is equalized, and the model has not been overfitted. An aggregate score tracks BTC’s broad market dynamics. It doesn’t depend on a single indicator or model. Rather, it captures confluences of various domains shaping collectively Bitcoin price movements. Backtesting has shown that this indicator is able to consistently identify macro turning points including tops of cycles and bottoms of capitulations across major Bitcoin cycles.
Signs that are not frequent but strong
The original Everything Indicator, while accurate, was not a short-term indicator. The signals would appear only every few years and mark the major turning points in each bull market. It was a valuable tool for investors who wanted to scale up at macro-tops or buy lows in upcoming generations.
It was not very helpful for people who wanted to become more proactive, do strategic DCA, rotate capital or manage risk by mid-cycle withdrawals. What is the solution? Increase the signal resolution while maintaining the integrity of the macro model.
Add A Moving Average
This improvement is simple and elegant: Apply a Moving Average to the Everything Indicator Score, then look for cross-overs. We can use the indicator as a signal and watch for changes in direction, just like we would with price-based strategy.
A 200-period moving average is applied by default. If the Everything Indicator crosses over this MA it indicates that many components such as liquidity, sentiment and technicals are all trending up together. These crossovers are a sign of a new bullish market trend and can be used to enter the market earlier than waiting on cycle lows. Crossing below the average moving price can also serve as an indication of de-risking, or distribution, particularly when it happens at or close to previously identified zones that are overheated.
The performance of this strategy was impressive, even when conservative trading assumptions were used (such as increased fees and slippage). In the early days when BTC only traded at $4, this strategy returned over 3.1,000,000 percent. It outperformed a simple buy and hold.
Increased Signal Frequency
We can shorten it further, to 20 periods for instance, in order to accommodate active investors. The indicator can be used to generate hundreds of exit and entry signals in a single cycle, while maintaining its original logic.
The returns were still strong and the outperformance compared to BTC holdings remained unchanged. The tool is flexible. Now, it can serve long-term traders looking for macro confirmation as well as active traders wanting to react more quickly to changes in the market.
Reduced moving average periods have many benefits. They include earlier market signals, frequent guidance on accumulation, prompts to exit during conditions of overheating, and the ability to prevent prolonged drawsdowns.
You can also read our conclusion.
This indicator could offer the best-of-both-worlds: an all-encompassing, high-integrity view of the market, with the ability to provide frequent, actionable signals via a moving average overlay. This strategy outperforms holding BTC, even with friction in real trading, fees, and slippage. It has been tested over many timeframes including as early as 2011.
If you already use the suite of indicators from Bitcoin Magazine Pro, it might be time to go one step farther. Add overlays. Move moving averages. Bands and filters can be added. These tools become more intuitive and powerful the more you customize them to fit your strategy.
To access more research and analysis, including technical indicators, live market alerts, as well as a community of analysts growing, please visit BitcoinMagazinePro.com.
This is not financial advice. It’s just for your information. Before making an investment decision, always do thorough research.
“This article is not financial advice.”
“Always do your own research before making any type of investment.”
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Source: bitcoinmagazine.com
