Holiday Momentum Breakout Strategy from 2022 to 2024
In quantitative trading, simple behavioral patterns can lead to strong systematic insights. One of the most consistent patterns involves calendar-driven behavior, and this report evaluates how the Holiday Momentum Breakout Strategy performs across different market regimes. The study validates how this strategy reacts to volatility around U.S. Federal Holidays and how it behaves during major market disruptions from 2022 to 2024.
Research Hypothesis: Why US Holidays?
The Holiday Momentum Breakout Strategy is built on the idea that U.S. Federal Holidays influence short-term volatility. Although digital asset markets operate continuously, trading activity from major institutions still follows the traditional U.S. market schedule.
During holiday periods, three behavior shifts commonly appear:
- Liquidity becomes thinner, making price moves more reactive.
- Volatility expands, as fewer large orders stabilize the market.
- Breakouts move faster, allowing momentum to extend without institutional counter-pressure.
This hypothesis forms the foundation of how the Holiday Momentum Breakout Strategy selects its entry window and identifies potential momentum expansions.
Strategy Structure: “The 3-Layer Gatekeeper”
The Holiday Momentum Breakout Strategy uses a strict combination of filters to validate trend strength. A position is triggered only when all conditions confirm alignment:
- Time Filter: The date must fall within a window from five days before to one day after a U.S. Federal Holiday.
- Trend Filter: The closing price must stay above a selected simple moving average.
- Momentum Trigger: The closing price must exceed the highest high of the previous N days.
Mathematically, the signal requires a confirmed time window, a directional trend, and verified momentum strength to activate.
Mathematical formula for the signal:
Methodology (Backtest Environment)
To ensure objectivity, the backtest was conducted with the following parameters:
- Data: Daily OHLCV price data.
- Assets: A basket of 6 major Crypto assets (BTC, ETH, BNB, SOL, ADA, LTC).
- Period: 01/01/2022 – 31/12/2024 (Covering the 2022 Crash, 2023 Accumulation, and 2024 Recovery).
- Fees: 0.1% per trade.
- Capital Management: Equal Weight allocation.
Parameter Optimization: Finding the “Sweet Spot”
Before analyzing performance, we conducted a Grid Search across 16 parameter combinations to identify the most robust configuration. The goal was to maximize the Sharpe Ratio (Risk-Adjusted Return).
Analysis of the Heatmap:
- The “Dead Zone” (N=5):
The top row (N=5) shows the lowest performance. This indicates that short-term breakouts during holidays are unreliable in the current market structure. They are often “fakeouts” caused by low liquidity rather than genuine trend reversals. - The “Sweet Spot” (N=30, SMA=50):
The heatmap reveals a concentration of high performance (Yellow Zone) around N=30 (Lookback Days) and SMA=50 (Trend Filter).- Why SMA 50? In the volatile period of 2022-2024, the 50-day average reacted faster than the 100 or 200-day lines, allowing the strategy to re-enter the market quickly during the 2023 recovery.
- Why N=30? A monthly high breakout provides strong confirmation of a genuine institutional push, filtering out weekly noise.
Decision: We selected the optimal configuration (N=30, SMA=50) for the detailed performance analysis below.
Empirical Results
Applying the optimal configuration (N=30, SMA=50) to the dataset yielded impressive results, particularly regarding risk management.
A. Performance Summary
| Metric | Strategy Result | Analytical Insight |
| Total Return | +41.42% | Positive returns despite a bear-dominated period. |
| CAGR | ~12.25% | Stable compound growth, outperforming traditional savings. |
| Max Drawdown | -6.60% | Critical Success Factor: While the general market dropped >70% in 2022, this strategy barely scratched the surface. |
| Sharpe Ratio | 1.2576 | A ratio >1.0 indicates a highly efficient investment strategy. |
Performance Report for N=30, SMA=50.
B. Visual Comparison: Strategy vs. Buy & Hold
The chart below perfectly illustrates the value of “Active Defense.”
- 2022 (Left): Bitcoin (Grey line) crashes. The Strategy (Green line) stays flat. It held cash, preserving capital.
- 2023-2024 (Right): As the market recovered, the strategy stepped up, capturing gains without the emotional trauma of the drawdown.
C. Deep Dive: Monthly Returns Analysis
The Monthly Returns Heatmap below visualizes the strategy’s “Active Defense” mechanism.
- 2022: The Shield of Silence (Active Defense)
The row for 2022 is almost entirely filled with 0.0. This confirms that the Trend Filter (Price < SMA_{50}) worked perfectly. As the market crashed (Luna, FTX), the algorithm detected the downtrend and forced the portfolio into 100% Cash (USDT). It survived the Crypto Winter unscathed. - 2023: The Sniper Shot
- Jan 2023 (+14.4%): As the market bottomed and bounced, the strategy immediately triggered, capturing the early year rally.
- Nov-Dec 2023 (+6.7%, +7.2%): It successfully identified the year-end momentum, capitalizing on holiday volatility.
- 2024: Patience Pays Off
After months of sideways movement (represented by 0.0s and minor fluctuations), the strategy delivered a strong performance in November 2024 (+10.8%), coinciding with the post-election market euphoria.
Conclusion
The data from 2022-2024 confirms that Holiday Momentum Breakout is a “Sniper” system.
It is not designed for adrenaline junkies. It spends months doing nothing (holding cash). However, that patience is its superpower. By avoiding the catastrophic losses of 2022, it preserved capital to capitalize on the 2023-2024 recovery. With a Max Drawdown of only -6.6%, this is an ideal component for a risk-averse portfolio.
Disclaimer: Past performance is not indicative of future results. The analysis assumes standard transaction fees and does not account for slippage in low-liquidity environments.
