ETH Trend Follower

## ETH Trend Follower — Full Methodology

### Trend Identification

1. **Primary trend:** 21-day EMA direction (rising = bullish, falling = bearish)

2. **Price position:** ETH must be trading above the 21-day EMA

3. **Macro filter:** BTC must also be above its 50-day SMA (crypto beta confirmation — ETH rarely rallies without BTC)

### Entry Criteria (Long Only)

1. ETH pulls back and touches the 21-day EMA without closing below it

2. RSI(14) is between 45 and 65 (momentum intact, not overbought)

3. 24-hour trading volume is above the 7-day average volume

4. Enter at the daily close when all conditions are met

### Exit Rules

- **Trend break:** Exit if ETH closes below the 21-day EMA for 2 consecutive days

- **Trailing stop:** 12% from the highest close since entry (crypto volatility requires wide stops)

- **RSI divergence:** Exit if RSI makes a lower high while price makes a higher high (bearish divergence)

- **No short positions** — ETH has a structural long bias in bull markets

### Position Sizing

- Allocate 3–10% of portfolio to ETH

- Crypto position sizes should be smaller than equity positions due to higher volatility

- Scale in: 50% on initial signal, add 50% on first successful retest of 21-EMA

### Best Market Conditions

Works best during crypto bull markets when BTC is leading and altcoins are following. ETH benefits from DeFi/NFT activity spikes and Ethereum network upgrades. Underperforms in bear markets and during BTC dominance surges (capital rotates away from ETH to BTC).

### Backtest Notes

Tested on ETH/USD daily bars from Jan 2020 to Dec 2024. The 21-EMA was chosen over the 50-SMA because crypto trends are faster and shorter-lived. The BTC macro filter avoided the worst of the 2022 bear market.