why crypto is so volatile<\/a> examines these causes one by one. For the trend follower, the effect matters more than the cause: moves in crypto are often large and persistent, and precisely such moves give a system something to follow. That same volatility makes discipline indispensable. Anyone trading on instinct is tested quickly in crypto; fixed rules hold their course where emotions do not.<\/p>\nLetting profits run, keeping losses contained<\/h2>\n
The rules of a trend-following strategy do two things in essence. As long as the trend is intact, the position stays on: profits are given room to grow, even when the temptation to take them early is strong. When the trend breaks, the strategy scales the position down against fixed criteria; that scaling down is designed to contain losses before they deepen. The combination produces an asymmetric design, one that accepts small setbacks in order not to miss the large moves. That is no guarantee of results, of course; it is the logic behind every rule.<\/p>\n
Why not simply buy and hold?<\/h2>\n
Perhaps the most common question about this approach is: why use a system at all, when you can simply buy bitcoin and hold on to it? The answer lies in the depth of the declines. In the downturn of 2018 bitcoin fell from almost 20,000 to just over 3,100 dollars, a decline of 84 percent; in that of 2022 from over 69,000 to around 15,500 dollars, 77 percent below the peak. Whoever holds on rides that entire decline and must first climb back to the old level before anything is earned. A trend-following system exits under its rules when the trend turns; the aim is not to sell the top, but to sidestep the deepest part of such a decline. There is a price for that: in a long, uninterrupted rise, buying and holding often does better, because the system pays for its discipline in false signals. We draw the full comparison between trend following and buy-and-hold in a separate article.<\/p>\n
The honest downside<\/h2>\n
Trend following has drawbacks too, and they deserve an equally honest mention. A trend only becomes visible after it has begun: the trend follower therefore enters late and exits late as well. Buying the bottom and selling the top is not part of the deal; that sacrifice is deliberate. There are also whipsaws: quick false signals, where the market reverses shortly after triggering a buy or a sell. In sideways markets without clear direction, those small losses accumulate. No set of rules performs in every market climate; a well-designed strategy is built to withstand such phases, in exchange for the chance to sidestep the deepest part of a major decline when one does follow through.<\/p>\n
How Callisto Capital applies the principle<\/h2>\n
At Callisto Capital, trend following is not a source of inspiration but the rulebook itself. The fund measures daily, for each coin, how the price relates to its moving averages: the average price over a fixed period, shifting forward a little each day. The exact settings are part of the system and remain confidential; the principle is explained in our article on moving averages. Based on that measurement, the system builds up or scales down positions in Bitcoin, Ethereum and a selection of larger altcoins, each with a fixed weight in the portfolio. A whipsaw is priced in as a cost of doing business: after a false signal, the next measurement simply applies, and nobody adjusts the rules in between. That is the core of it. Even on days when the news seems to give every reason to deviate, the system executes the rules exactly as they were set in advance. Readers looking for the full framework first, including diversification and risk management, will find it in our overview article on the systematic crypto strategy.<\/p>\n
Following, not forecasting<\/h2>\n
Trend following forms the core of Callisto Capital’s approach. The fund does not forecast prices. It follows signals that are defined in advance, and trades only when those signals call for it.<\/p>\n
Callisto Capital is a Dutch fund for joint account; its manager is registered with the AFM under the AIFMD-light regime and is not subject to ongoing supervision. Participation is open from an investment of 100,000 euro. This article is for information only and does not constitute investment advice.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"Trend-following investing means moving with the direction of the market rather than trying to predict it. The trend follower asks a modest question. Not: where will the price be a few months from now? But: which way is the price moving right now? The market itself answers that second question every day, and fixed rules…","protected":false},"author":3,"featured_media":2188,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"callisto_views":1,"footnotes":""},"categories":[22],"tags":[],"class_list":["post-1951","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-systematic-investing"],"acf":[],"_links":{"self":[{"href":"https:\/\/callistocapital.nl\/en\/wp-json\/wp\/v2\/posts\/1951","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/callistocapital.nl\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/callistocapital.nl\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/callistocapital.nl\/en\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/callistocapital.nl\/en\/wp-json\/wp\/v2\/comments?post=1951"}],"version-history":[{"count":4,"href":"https:\/\/callistocapital.nl\/en\/wp-json\/wp\/v2\/posts\/1951\/revisions"}],"predecessor-version":[{"id":2394,"href":"https:\/\/callistocapital.nl\/en\/wp-json\/wp\/v2\/posts\/1951\/revisions\/2394"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/callistocapital.nl\/en\/wp-json\/wp\/v2\/media\/2188"}],"wp:attachment":[{"href":"https:\/\/callistocapital.nl\/en\/wp-json\/wp\/v2\/media?parent=1951"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/callistocapital.nl\/en\/wp-json\/wp\/v2\/categories?post=1951"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/callistocapital.nl\/en\/wp-json\/wp\/v2\/tags?post=1951"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}