Earnio results of April 2023

April has passed, with a resulting loss of 6.4%. Each drawdown is closely monitored and evaluated to ensure that it is a normal (standard) progression, that everything is within the model and within all the risk parameters that are present to some degree in each trade.

All of the parameters indicate that the current situation corresponds to the normal distribution of historical declines and the outcome of our strategies thus reflects the current market situation.

Even so, every downturn is an unpleasant pressure on the psyche and a test of our will and conviction, whether we trade automatically or discretionarily. One would think that our team is used to such pressure after years of experience, but the truth is that surviving a drawdown period is never mentally easy, even for experienced traders.

This makes it all the more important to thoroughly analyze the performance and quality of our portfolio.

Let's analyze the past month's results a bit more closely. There are two main factors that influenced the final state of trading.

1) Market structure

Bitcoin (as well as other capitalized cryptocurrencies) has been in a price area between $26,800 and $28,800 since about mid-March, a relatively small equilibrium range within which more than 70% of our transaction volume has been traded. In fact, this area acts as a strong magnet, so the market does not have the strength to move away from this area for a longer period of time. This is because there is currently no sufficiently strong catalyst.

Looking at the last third of the month, you can notice that the market has repeatedly tried to break out of the equilibrium area upwards, only to reverse and go back to where it started from. The volatile moves are compounded by relatively thin liquidity. This trend can be seen in the majority of risk assets this year. Taking advantage of this structure is downright inappropriate for directional strategies that try to follow the trend.

2) Strategies

How are the strategies themselves faring? The following chart shows the trajectory of the curve of trades closed within each strategy over the past month.

Occasionally, the market structure doesn't suit the strategies and April was one of those months.

Most of the strategies were in a slight losing range close to zero, except for two directional strategies that were not downright comfortable with the sudden change in direction during the last week of April and therefore experienced a series of consecutive losses at the end.

April only confirms the importance of a long-term horizon for this type of an investment.

Although Earnio delivers results every month, it is inherently a long-term affair[TH1] and cannot be evaluated over the course of one or a few months. In the short term, Earnio results can be highly volatile, but it is over the long term that these short-term fluctuations can even out.