Sometimes, you might feel that learning about algorithmic trading is similar to learning a new language. There are many new words, some unique to crypto, others seemingly familiar but with a very specific meaning within trading. “Signal” is one such concept, and you will frequently come across it on HAL’s strategies profile. By the time you finish this article, it will hold no secrets for you.
Signals: a Short Definition
Broadly speaking, a signal is something that incites people to take action (as one says, “the referee gave the signal to start the game”). A trading signal triggers buying (“go long”) or selling (“go short”), based on technical indicators.
Instead of a hand wave or a shout, a trading signal takes the form of a number, with a positive value for “buy” and a negative one for “sell”. And just as signals can be frequent or rare, trading signals come in several frequencies. On HAL, they come from hourly to weekly.
How do Trading Signals Work?
There are two types of signal in their implementation: discrete and continuous. Continuous signals can take any value between -1 and +1 while discrete signals can only take specific values, for example 0 / 0.5 / 1.
This number is then turned into the sum to be allocated to the trade:
- 0 means nothing is sold or bought. It is also referred to as neutral.
- 0.5 means 50% of the allocated funds are exposed to the underlying asset; -0.5 indicates 50% of the allocated funds short the underlying asset.
- 1 leads to exposing 100% of allocated funds to the underlying asset; conversely, -1 leads to fully shorting the underlying asset.
Each signal is calculated by the bot at a specific timestamp depending on the frequency and then sent to the exchange to execute the trades.
Which Signals Does HAL Use?
HAL’s strategies are diverse and optimized for various market environments or objectives. It therefore makes sense that they follow different types of signals.
Source: HAL, CoinShares
- Wise strategies are long-only strategies – they can only buy the underlying asset or switch to neutral – and this is reflected in the values their daily signal can take. The allowed values are 0 (neutral) / 0.5 (50% of allocated funds are exposed to the underlying asset) / 1 (100% of allocated funds to buy are exposed to the underlying asset). This means 0 to 100% of the funds can be used to buy the underlying asset. The strategy never goes short, hence the absence of negative signals.
- Pulse strategies are buy/sell, short-term strategies. An hourly discrete signal (of – 1 or +1) drives buying (if the signal is positive) or selling (if the signal is negative). The strategy can therefore be 100% long (1) or short (-1) – or anything in between.
Artificial Intelligence (AI) Pick and Dynamic strategies combine several strategies, each with their own individual signal. As a result, they rely on continuous hourly signals that can take any value between -0.5 and +1.
HAL Signals: Sophisticated Indicators To Make Informed Choices
A signal essentially crunches data to make decisions on your behalf. As a result, it is faster than any human could be, online 24/7 and above all, unemotional. It follows preset rules and will not veer off course – a bot never panic sells.
Many trading bots rely on basic indicators, triggering crude decisions. One such example could be buying/selling the underlying asset solely based on price evolution. HAL strategies, on the contrary, are based on several research-backed indicators.
Let’s take a deeper look at the signals involved in a Wise strategy such as Wise: ETH. At its core, Wise: ETH is already a combination of 3 strategies, each with their own optimized signal. The first two strategies are medium-term tracking strategies. Their associated signals are weekly and daily buy signals that spring to action if the price rises above a trend indicator. The third strategy is contrarian and buys ETH when its price appears to be undervalued.
How do the signals make a call on whether to buy or go neutral on the underlying asset? They actually compute a large amount of historical data, along with advanced trading concepts such as moving average and slope indicators.
HAL signals are designed to follow short to medium-term trends. Their frequency is just right to do so: high enough so that the signals are being emitted on time to not miss good entry points into the market, and low enough to support high volatility (an over-active bot could be swayed by false signals).
That’s everything you need to know about trading signals as a beginner – a handy tool to automatically buy or sell on the market. If you want to have a deeper look at HAL strategies, log in today or browse our catalog.
Disclaimer:
Investing involves risk, including the possible loss of all the money you invest. In particular, crypto-assets are a highly volatile and speculative asset class. HAL is only suitable for traders who are willing to bear the risk of loss and experience sharp drawdowns. Past performance is not necessarily a guide to future performance.
The purpose of this material is to provide objective, educational and interesting commentary and analysis on developments in the crypto-assets sector. Nothing in this material should be interpreted as constituting an offer of (or any solicitation in connection with) any investment products or services by any member of the CoinShares Group where it may be illegal to do so. Access to any investment products or services of the CoinShares Group is in all cases subject to the applicable laws and regulations relating thereto.