Imagine someone named Apei, working the night shift at an auto parts market. On August 17, $APE opened at 0.1238. His coworker Lao Tang said to buy and hold, rather than stay up watching the screen. Apei set himself a different rule: whenever the closing price was lower than the previous day's close for 3 consecutive days, he would buy 1000 USDT at the close on the third day, then count forward 4 more completed daily candles and sell at that day's close. If the previous trade hadn't been sold yet, he'd skip any new signal.
I tested this rule using completed Binance spot APE/USDT daily candles from August 17 to November 14 (UTC, 90 candles total). The November 15 candle hadn't closed yet, so it wasn't included. The first candle had no prior close, leaving 89 days that could be evaluated.
Over those 89 days, there were 8 instances of 3 consecutive down days. In 3 cases, the previous trade hadn't been sold yet (October 8, and October 25 and 26), so they were skipped as the rule specifies. That left 5 trades: 2 winners and 3 losers, with no two trades handing off on the same day. Cycling 1000 USDT through 5 trades turned it into 1157.43, for a compounded gain of 15.74% and an average gain of 3.14% per trade. The first 3 trades were 2 wins and 1 loss, compounding to +19.51% and bringing the balance to 1195.10; the final 2 were both losses, giving back 3.15%. The best trade was a buy at the September 15 close of 0.1234 and a sale at the September 19 close of 0.1409, for +14.18%. The worst was a buy at the October 24 close of 0.1287 and a sale at the October 28 close of 0.1251, for -2.80%.
If Lao Tang had bought at the August 17 open and held until the November 14 close of 0.0794, his 1000 USDT would have become 641.36, a loss of 35.86%. Over the same period, $BTC was up 1.99% from the August 17 open to the November 14 close.
The turning point came during those days in October. The intraday high reached 0.191 on October 2, and the October 4 close of 0.167 was the highest closing price in those 90 days. Apei was out of the market on both days: his second trade had already been sold on September 19, and he didn't buy his third trade until October 7. Lao Tang's balance could have reached 1542.81 intraday on October 2 (+54.28%), and was still at 1348.95 at the October 4 close (+34.89%). From that peak to the November 14 close, it fell 58.43%; it would need to rise another 140.55% to get back there. The two points were 43 days apart.
On November 14, the intraday low was 0.076, also the lowest of those 90 days. It closed at 0.0794, down 14.25% from the November 13 close of 0.0926. There hadn't been 3 consecutive down closes, so Apei didn't buy.
Lao Tang's balance was higher in early October, but later fell below his starting amount. Apei had more losing trades than winning ones, but thanks to that one trade in mid-September, he still ended up above his starting balance. These are historical data from completed candles; they don't indicate what will happen next and aren't a recommendation to buy or sell. Which would you choose: buying after 3 consecutive down days and holding for 4 days, or holding all the way through?
I tested this rule using completed Binance spot APE/USDT daily candles from August 17 to November 14 (UTC, 90 candles total). The November 15 candle hadn't closed yet, so it wasn't included. The first candle had no prior close, leaving 89 days that could be evaluated.
Over those 89 days, there were 8 instances of 3 consecutive down days. In 3 cases, the previous trade hadn't been sold yet (October 8, and October 25 and 26), so they were skipped as the rule specifies. That left 5 trades: 2 winners and 3 losers, with no two trades handing off on the same day. Cycling 1000 USDT through 5 trades turned it into 1157.43, for a compounded gain of 15.74% and an average gain of 3.14% per trade. The first 3 trades were 2 wins and 1 loss, compounding to +19.51% and bringing the balance to 1195.10; the final 2 were both losses, giving back 3.15%. The best trade was a buy at the September 15 close of 0.1234 and a sale at the September 19 close of 0.1409, for +14.18%. The worst was a buy at the October 24 close of 0.1287 and a sale at the October 28 close of 0.1251, for -2.80%.
If Lao Tang had bought at the August 17 open and held until the November 14 close of 0.0794, his 1000 USDT would have become 641.36, a loss of 35.86%. Over the same period, $BTC was up 1.99% from the August 17 open to the November 14 close.
The turning point came during those days in October. The intraday high reached 0.191 on October 2, and the October 4 close of 0.167 was the highest closing price in those 90 days. Apei was out of the market on both days: his second trade had already been sold on September 19, and he didn't buy his third trade until October 7. Lao Tang's balance could have reached 1542.81 intraday on October 2 (+54.28%), and was still at 1348.95 at the October 4 close (+34.89%). From that peak to the November 14 close, it fell 58.43%; it would need to rise another 140.55% to get back there. The two points were 43 days apart.
On November 14, the intraday low was 0.076, also the lowest of those 90 days. It closed at 0.0794, down 14.25% from the November 13 close of 0.0926. There hadn't been 3 consecutive down closes, so Apei didn't buy.
Lao Tang's balance was higher in early October, but later fell below his starting amount. Apei had more losing trades than winning ones, but thanks to that one trade in mid-September, he still ended up above his starting balance. These are historical data from completed candles; they don't indicate what will happen next and aren't a recommendation to buy or sell. Which would you choose: buying after 3 consecutive down days and holding for 4 days, or holding all the way through?