TOP30 Strategy 1.1

Introduction

The TOP30 Strategy 1.1 is a revised and simplified version of my pure and hybrid HMA strategies. Since the publication I did additional research that helped me to refine it. 

You can easily follow my strategy on the homepage and automatically through Shrimpy. Or be a Patron and receive daily status update via telegram (and support my work).

The strategy

In my quest of a simpler and fully automatic trading strategy I tried to backtest simple strategies based only on the fast and slow HMA signals on BTC and and Alt index. The first results I got were promising.

The next question was: what happens when we combine both strategies? Very good things happens! The alt index is created by selecting the TOP30 alts by market cap.

I developed the following strategy:

  • If HMA TOP30 and BTC signals are short we stay 100% in USD
  • If HMA TOP30 is long and BTC is short we stay 100% in TOP30 
  • If HMA TOP30 is short and BTC is long we stay 100% in BTC

And when both are long? What we do? Inspired by the great ā€œDual Momentumā€ book from Gary Antonacci I decided to apply something similar to my strategy.

To decide what to do we look at the USD relative gains. If the USD gains were higher in the TOP30 index during the last 29 days we stays in TOP30. We are doing that because they are showing stronger momentum than BTC and we expect this should continue in the following days. Viceversa we stay in a BTC position.

ADX as choppy markets filter

The TOP30 strategy is a trend following strategy. Unfortunately, the markets are not always trending. A possible indicator to evaluate the trend strength is the ADX. ADX values help traders identify the strongest and most profitable trends to trade. The values are also important for distinguishing between trending and non-trending conditions. To protect capital the strategy will remain in USD during choppy markets when the ADX value is under 23.

TOP 30 Altcoins Cap Weighted Index

In my work toward simple and automated portfolio strategy I was happy to discover that Shrimpy offers an index feature. Shrimpy is an automatic rebalancing tool. Shrimpy will automatically sell and buy tiny portions of your alts in order to keep them at a prefixed value. Accordingly to their research the optimal performance is achieved by having a 20+ alts portfolio which is rebalanced every hour.

I decided to use this feature when my TOP30 Strategy 1.0 signals a TOP30 position. The index Iā€™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, TUSDT and other stable coins.
screenshot_01
Current TOP 30 Altcoins Index Positions

During the TOP30 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.

Backtesting

The strategy is backtested through a powerful open-source engine: backtrader, a feature-rich Python framework for backtesting and trading.

Optimization

The best parameters are found with a Particle Swarm Optimizer (PSO), a robust evolutionary strategy inspired by the social behaviour of animal species living in large colonies like birds, ants or fish. The optimal parameters are searched in the period from 01.01.2014 to 01.06.2020, a long period spanning through macro bear and bull markets.

Example of a particle swarm optimization

Conclusions

The TOP30 Strategy 1.1 is a completely automated strategy, results are similar to the BMP Strategy 1.0 but they are achieved through a more active and technical approach.

The BMP Strategy 1.1 is slower and less time-critical. I believe this strategy is more suitable for trading on micro/low caps coins. These markets can be very profitable but they are very illiquid. A slower strategy that allows time for accumulation, in my opinion, is very important for these kinds of coins.

You can easily follow my strategy on the homepage and automatically through Shrimpy. Or be a Patron and receive daily status update via telegram (and support my work).