The profitability of Bollinger Bands trading bitcoin futures

ABSTRACT

We explore whether investors would receive excess profits by round-turn trading (hereafter referred to as trading) Bitcoin futures based on Bollinger Bands trading strategy (BBTS). Since investors are suggested to first buy (then sell) Bitcoin futures as oversold (overbought) signals emitted by the BBTS (i.e. penetrating lower (upper) Bollinger Bands regarded as a buying (selling) signal), we aim to explore whether investors would have better returns by trading such futures according to the BBTS. Results show that the average holding period return (AHPR) is over 20% for trading Bitcoin futures following the BBTS. Furthermore, after we adjust the 60-day moving average (MA) instead of the 20-day MA for the BBTS, the AHPR is above 50%. It is noted that if the margin could be deemed as an investment amount, its rate of return would be much higher than the 50% for trading Bitcoin futures.

KEYWORDS:

• Bitcoin futures
• Bollinger Bands trading strategy (BBTS)
• average holding period return (AHPR)
• contrarian strategies

JEL CLASSIFICATION:

• G02
• G11
• G14

Availability of data and materials

The datasets used and/or analyzed during the current study are available from Min-Yuh Day on reasonable request at [email protected].

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

Min-Yuh Day has really appreciated the financial support from the Ministry of Science and Technology, Taiwan, R.O.C. (MOST 110-2410-H-305-013-MY2) and National Taipei University (NTPU), Taiwan (110-NTPU-ORDA-F-001).