The BMP Strategy 1.0 is a revised and improved version of my original strategy on altcoins position trading. Since the publication I had very interesting discussions and I did additional research that helped me to refine it.
The strategy is resumed by the following workflow schema.
The strategy distinguishes six specific phases:
1. USD —Bear Market
When we are in a BTC bear market on the BTC daily (SuperGuppy is red) it’s too dangerous to be in alts. The strategy will therefore stay in USD to reduce risk and conserve capital.
2. ACC — Accumulate alts
The ACC phase occurs when the BMP is under 8%. This is the right moment to accumulate alts using your hard-earned BTC and USD. In this phase alts are over-sold, people are desperate and they capitulated on their bags. This phase offers the best risk/reward. You basically want to buy the fear.
But how to accumulate alts?
Performing a single all-in with market buys is never an effective strategy for alts, especially the ones with paper thin order book.
In last three years the median duration of ACC phase was around 23 days. An effective strategy should be to accumulate by dollar-cost averaging (DCA). Every day you buy alts using 5% of your allocated funds. This reduces the risk to buy a local top.
3. HOLD — Hold alts
After you accumulated the alts you will start the HOLD phase when BMP is over 8%. During HOLD you just need to do nothing and wait.
Seems easy? Wrong, it is is very difficult. In the HOLD phase the hype will increase and you will be tempted to enter new bags and trade more frequently. Don’t do that. Resist the temptation because in the HOLD phase the risk/reward for new bags is already less optimal than ACC.
Note: after HOLD phase you could go back to ACC. In this case don’t sell your portfolio. If you have additional USD and BTC you can try to average down the more promising alts in this second ACC phase.
4. TRIG — Hold alts and get ready to sell
After the HOLD phase you will reach the TRIG phase when BMP is over 60%. Usually the hype on alts is reaching the maximum level, everybody believes his coins will flip BTC and will talk about lambos, moon, etc. In this phase you still don’t need to do anything, but you need to mentally prepare to sell your alts portfolio. This is also hard, there is a high risk you got attached to your altcoin. It’s crucial you get mentally ready to sell.
5. USD — Sell to fiat & 6. BTC — Sell to BTC
In this phase you will sell your altcoins directly to fiat or BTC. The sell signal is given when BMP is under 25%.
It is vital that the selling action is promptly performed. In your mind these signals should be interpreted as a “get the fuck out” signals. When alts start dumping is usually a savage move.
You will then use the HMA strategy on BTC to decide if to sell to fiat or BTC. You will sell to fiat if HMA BTC is short or to BTC if HMA BTC is long.
Sometimes it is better to sell to fiat because the alt dumping is triggered by falling price of BTC. Remember: BTC is the king.
You will then switch between phase 5 and 6 until the conditions are met to reaccumulate the altcoins and start again the cycle.
Buy Market Percentage Indicator
The core of the strategy is based on an indicator developed by TurtleBC, the Buy Market Percentage (BMP).
TurtleBC calculates high timeframes trend following signals for every altcoin pair. The graph shows the percentage of coins that are a “buy”. We will use this graph to buy the fear (when BMP is low) and sell the greed (when BMP is high).
BTC SuperGuppy 1D
The BTC SuperGuppy 1D is used to detect the macro BTC market view. SuperGuppy is an indicator made by combining together 15 slow Exponential Moving Averages (EMAs). It paints green when all the averages confirms a bull trend and red with a confirmed bear trend. When we are in a bear market on the BTC daily it’s too dangerous to be in alts. The strategy will stay in USD and avoid to accumulate alts.
BTC Hull Moving Averages Indicator
The BMP indicator performance is then augmented by using a strategy based on Hull Moving Average (HMA). Hull Moving Average reduces lag compared to other moving averages (like SMA and EMA) by giving more weight to latest price movements.
The strategy is very simple, you just need to check the daily close of the price compare to the two HMA signals. Rules are the following:
- Long signal: if the daily candle closes over both Fast HMA and Slow HMA trend line a long signal is generated.
- Short signal: if the daily candle closes under the Fast HMA or Slow HMA trend line a short signal is generated.
On my website you’ll find a performance backtesting of the strategy. The strategy performed around 500x compared with a simple BTC hold since Jan 1st 2014.
This strategy is using high time frames. You will never catch bottoms and tops but you should be able to follow it with minimal daily time investment.