A Dynamic Momentum Squeeze Strategy with VectorBT

Trading in high-volatility markets like Ethereum requires more than just a “buy low, sell high” mentality. It requires a systematic approach to volatility expansion — often called a Momentum Squeeze — paired with rigorous risk management.

Algorithmic Trading with VectorBT

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In this article, we’ll break down a sophisticated momentum strategy using vectorbt, focusing on two "pro" pillars: Adaptive Position Sizing and Trailing Volatility Stops.

1. The Strategy Logic: Catching the Volatility Breakout

The core of this strategy lies in identifying when a market is “coiling” (a squeeze) and entering when the momentum shifts.

• The Momentum Engine: We use a crossover between the Kaufman Adaptive Moving Average (KAMA) and a standard EMA. KAMA is brilliant because it adjusts its sensitivity based on market noise, filtering out “fakeouts” better than a simple MA.
• The Squeeze Filter: We utilize Bollinger Band…