Hybrid HMA strategy and a simpler portfolio

Hybrid HMA Strategy

In the last article we saw that the two pure rule based HMA strategies applied to alts and BTC were showing promising results. The next question is: what happens when we combine both strategies? Very good things happens!

I developed the following strategy:

  • If HMA Alts and BTC signals are short we stay 100% in USD
  • If HMA Alts is long and BTC is short we stay 100% in Alts 
  • If HMA Alts is short and BTC is long we stay 100% in BTC

And when both are long? What we do? Inspired by the great “Dual Momentum” book from Gary Antonacci I decided to apply something similar to my strategy.

To decide what to do we look at the BTC dominance. If in the last 20 days the dominance is decreasing we stay in alts, because they are showing stronger momentum than BTC. If the dominance is increasing we stay in a BTC position.

How performant is this strategy? Much higher than the single HMA strategy! The HMA hybrid yield an incredible 178’300x, performing more than ten times better than the pure HMA Alts strategy.

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Strategy performance comparison

Everybody is genius during a bull market. Let’s have a look at the behaviour during the 2018 bear market. The strategy stay a lot in USD and switch to BTC and alts just enough to catch the ride.

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HMA Hybrid behaviour during 2018 bear market

 

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HMA Hybrid Phases

 

TOP 30 Altcoins Cap Weighted Index

In my work toward simple and automated portfolio strategy I was happy to discover that Shrimpy introduced in the last days an index feature.

I decided to use this feature when my HMA hybrid strategy signals a ALTS position. The index I’m using is following this rules:

  • Current TOP 30 Altcoins, the index is always in the top 30 coins ranked my marketcap. The single altcoin position is weighted by the marketcap, the bigger the cap, the bigger the position.
  • Max 10% for every position, this reduce the risk factor associated to every coin (do you remember BitConnect?)
  • Min 1% for every position.
  • Excluded coins: BTC, USDT and TUSDT
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Current TOP 30 Altcoins Index Positions

During the Alts phase Shrimpy will continue to rebalance every 1h the portfolio to follow the index rules. If some coins enter/exit the TOP 30, Shrimpy will also auto follow that.

Simplified Portfolio Strategy

HMA hybrid strategy can substitute the old HMA Alts and HMA BTC strategies. I propose the following simplified portfolio.

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Simplfied General Portfolio Strategy

The change from the original are:

  • 40% is allocated to the HMA Hybrid Strategy
  • 20% is allocated to the BMP Strategy

The new HMA strategy, in combination with Shrimpy’s Index feature is now a pure rule-based approach. This strategy is optimized for and applied to the big cap altcoins.

Now our mind is free to be applied to the slower BMP strategy. We will use this strategy for FA work and accumulate positions on promising micro/low caps at the best times.