Curriculum·R404 Execution and Trade Craft·about 33 min
Entry models
By the end of this lesson you can
- →Separate the three families of entry model by the source of the edge each one claims
- →Explain why a dated, universally known catalyst is the weakest entry signal available
- →Compute how entry quality changes position size at constant risk
- →State the test any entry model must pass before it is worth trading
Senior · enrolled learners
This lesson opens with The CME futures launch, 17 and 18 December 2017.
- What happened
- CME Group self-certified its bitcoin futures contract on 1 December 2017 for a first trade date of Monday 18 December, with trading opening on the evening of Sunday 17 December; Cboe had listed bitcoin futures a week earlier, on 10 December. CME had announced the plan on 31 October, so the launch was public weeks in advance, and it was widely presented as a way for institutional investors to buy in. Bitcoin, worth over $10,000 from 1 December, rose steeply and peaked at roughly $19,511 on 17 December, the day CME trading opened. By 6 February 2018 it had fallen to about $6,465. A Federal Reserve Bank of San Francisco Economic Letter published in May 2018 argued that futures gave pessimists a practical way to put money behind their view for the first time, and noted that the two earlier 2017 declines had returned to their pre-crash levels in about a month while this one had not by late April 2018.
- The decision point
- The entry signal was a date on a calendar that everybody could see. Nothing about it was wrong as a fact, and the institutional infrastructure it represented did arrive. What it could not be was an edge, because an edge is a difference between what you know and what the price already reflects, and a scheduled event dated seventeen days in advance, and announced as a plan at the end of October, is in the price. The mechanism the launch actually introduced was the ability to sell.
What you will be able to answer
- →What are the three families of entry model?
- →Why is a dated public catalyst weak?
- →How does entry quality change size?
- →What test must an entry model pass?
Orientation and Year One are open: anyone can read them without an account. From Year Two onward the lessons are for enrolled learners, because progress through the later years only means anything if it is tracked against a record.
It is free. We do not sell the list and there is nothing to buy at the end of it.
Sources and review
- https://www.frbsf.org/research-and-insights/publications/economic-letter/2018/05/how-futures-trading-changed-bitcoin-prices/
- https://www.cmegroup.com/media-room/press-releases/2017/12/01/cme_group_self-certifiesbitcoinfuturestolaunchdec18.html
- https://www.cnbc.com/2017/12/17/worlds-largest-futures-exchange-set-to-launch-bitcoin-futures-sunday-night.html
- https://www.cnbc.com/2017/10/31/cme-plans-to-launch-bitcoin-futures-by-year-end.html
- https://mondovisione.com/media-and-resources/news/cme-group-self-certifies-bitcoin-futures-to-launch-dec-18-new-contract-to-pro-2017121/
- https://techcrunch.com/2018/07/24/bitcoin-slowly-surpasses-8000-after-two-months/
Confidence medium·Volatility low·Reviewed 2026-08-07·Owner unassigned
Contested
Peak prices for December 2017 differ by venue, with roughly $19,511 and roughly $19,783 both widely cited depending on the exchange and the index. The date of 17 December and the coincidence with the launch are consistent across sources and the exact figure is not load bearing. The $19,511 peak is the San Francisco Fed's; over $10,000 from 1 December and the 6 February 2018 low of $6,465 are TechCrunch's, and other indices put the 2018 low later and somewhat lower. CME trading opened on the evening of Sunday 17 December for a trade date of 18 December, per CME's own release, which is why the Fed letter dates the start to 17 December.
The San Francisco Fed Letter argues that the run-up and fall are 'consistent with' a model in which optimists bid a price up until an instrument to short it exists (Fostel and Geanakoplos 2012). It does not test a causal claim, and it notes itself that the CME market started thin and that why the price fell gradually rather than at once is 'difficult' to answer. Per P6 this lesson presents it as an argued reading of a documented event rather than a settled cause, and the entry argument holds whether or not the launch caused the reversal.
The 1 December price is given here only as 'over $10,000', which is how TechCrunch reports it (over $10,000 from 1 December to 31 January). The worked example uses $10,000 as a round starting level, so the 95 percent rise it computes is an upper bound on the move from 1 December, not a measured figure. CME's self-certification is dated 1 December 2017 and the plan was announced on 31 October 2017 (CNBC); the CME release on cmegroup.com refuses automated requests, and its text was read in Mondo Visione's verbatim republication.
R405 owns strategy development and the statistical testing of any rule. This lesson owns the taxonomy of entry models and the question of where an edge comes from. Keep the split and do not derive a backtest here.