The most straightforward way to open a SHORT position is to lend the asset for a fee, then sell it at an exchange. Later you buy it back at an exchange, expecting to pay a lower price. Your profit is the price difference ex fees (and tax). Finally, you give back the asset to the lender.

An OUT signal requests to close an open position. That is, in case of a LONG position, the asset is sold. In case of a SHORT position, the asset is bought back.

A trading system systematically answers the following questions:
– Which assets should be selected?
– When should a selected asset be bought or sold?

The success of a trading system can be measured either by beating some benchmark or by maximizing absolute returns. While pursuing these objectives, risk has to be controlled systematically.

The trading systems of CryptoCaptain currently trade only Bitcoin vs. Fiat. The objective of the systems is to maximize absolute returns. The general approach to trading is characterized by aiming to fully capture profitable market trends over several weeks and even months.

CryptoCaptain uses its own algorithms from 10+ years of university research. We believe crypto asset markets to be driven by investors’ emotions and sentiments. CryptoCaptain has developed a unique AI to sense market sentiment. We use machine learning and text mining algorithms in a big data infrastructure to automatically assess investors’ postings, opinions, and predictions in a systematic and objective way. Tipping of the market sentiment forms the basis for deciding whether to buy or sell.

CryptoCaptain uses proprietary algorithms to automatically detect whether a trade’s odds are favorable – before and after opening a position. To open a position, the market first has to move in the expected direction. To detect when to better close a position, CryptoCaptain uses several patterns, e.g., it constantly checks the shape of the capital curve.

CryptoCaptain’s approach to measuring market sentiment is best suited for large assets. Large assets are discussed more frequently, thus our analyses are well grounded. Furthermore, Bitcoin well represents the overall market, has the highest trading volume, can be traded with fiat money on many exchanges, is less risky and more stable than altcoins. Nevertheless, we experiment a lot with trading other crypto assets as well.

CryptoCaptain recommends not to use automatic stop loss orders. For two reasons: (1) often, markets are driven towards the stops – and then, the market reverses. (2) CryptoCaptain’s risk management includes trailing stop losses, which can trigger a signal to close a position.

Earning short term profits is very competitive. Competitors are armed with computers, algos, and trading experience. Furthermore, short term trading incurs high transaction costs with your broker – and requires your attention all the time. Therefore, a longer time horizon of at least some weeks is favorable for many investors. Luckily, crypto asset markets boast sizable market movements that can persist for weeks and even months.