Bitcoin 1-Year Running ROI Risk MetricOverview
The Bitcoin 1-Year Running ROI Risk Metric is a macro-analysis oscillator designed to evaluate the current stage of Bitcoin's market cycle. By analyzing the 1-year rolling Return on Investment (ROI) and applying regression models to historical peaks and troughs, it translates raw market data into a normalized Risk score ranging from 0 to 1.
How it Works
Historically, due to the law of diminishing returns, Bitcoin's cycle peaks yield a progressively lower ROI each macro cycle. This indicator accounts for this phenomenon by fitting bounding regression curves to historical cycle extremes.
The script calculates the natural logarithm of the 1-year ROI. It then normalizes this value between a fitted bottom line (representing historical bear market bottoms) and a fitted top line (representing historical bull market peaks).
A Risk value near 0 (or inside the Buy Zone) indicates historical bear market lows, representing minimal macro risk and potential accumulation zones.
A Risk value near 1 (or inside the Sell Zone) suggests the market is approaching the historical limits of diminishing returns, indicating maximum macro risk and potential cycle tops.
Settings & Customization
Users can customize the indicator's behavior and visuals through the settings menu:
Top Line: Select the mathematical model used for the upper boundary of the market cycle. Choose between a Log Fit (logarithmic regression, which best captures all historical tops) or a Linear Fit (a more conservative straight line that excludes the 2011 peak).
View: Switch between the Normalized mode (displays the Risk metric as a clean 0 to 1 oscillator) and the Fit Lines mode (displays the raw logarithmic ROI values along with the upper, middle, and lower regression bands).
Sell / Buy Zone Levels: Adjust the thresholds that define the extreme risk areas. By default, the Sell Zone starts at 0.90 and the Buy Zone at 0.10. These values dictate when the oscillator and the main chart price line change colors.
Plot on the Main Pane: A simple toggle to turn the colored price line overlay on your main chart on or off.
💡 Visualization Tip
The script projects a colored price line directly onto your main chart (Green for Buy Zone, Red for Sell Zone).
To see this colored indicator line clearly without visual clutter, you can hide the standard Bitcoin price candles using the chart's object tree or settings.
Conversely, if you prefer a clean main chart and only want to view the risk oscillator in the lower pane, simply uncheck the "Plot on the Main Pane" option in the indicator's settings.
Limitations & Disclaimers
Please keep the following points in mind when using this tool:
Asset Specific: This indicator is strictly designed for Bitcoin. It internally fetches data using the INDEX:BTCUSD ticker. While you can load it on any other asset's chart, the oscillator in the lower pane will always display Bitcoin's data.
Timeframe Dependency: Although the indicator will calculate on any timeframe, it is highly recommended to use the Weekly (1W) chart. The regression curve fitting was performed using weekly closes. On other timeframes, the regression boundaries may not align perfectly with the exact global tops and bottoms.
Hardcoded Coefficients: The curve fitting was calculated based on Bitcoin's global tops and bottoms up to the year 2023. The resulting mathematical coefficients are hardcoded into the script. Future macro cycles may require a new approximation and an update to these coefficients.
Linear Fit Outlier: If you select the "Linear Fit" option for the Top Line in the settings, note that this model intentionally ignores the 2011 global top, treating it as a statistical outlier. This linear boundary is guaranteed to be broken by future price action, but it can serve as a "conservative" macro target in the meantime.
No Guarantees: There is no guarantee that Bitcoin's price or ROI will reach the upper or lower boundaries in the future, nor is it guaranteed to remain within them. This indicator is for educational and macro-analysis purposes only and does not constitute financial advice.
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Commitments of Traders % Rate Of Change (%ROC):
The COT %ROC indicates the momentum of trader positions over a specified period. This measure is crucial for understanding shifts in market sentiment and potential future price movements.
Unique Polyline Plotting Technique:
Unlike traditional line or bar charts, the polyline plotting technique used in Indexogram offers a more nuanced and detailed view of the %ROC data.
Multiple Ticker Monitoring:
Indexogram allows the setup of up to five different tickers. Traders can assign different weightages to these tickers, enabling a customized and weighted view of their %ROC data. This feature is beneficial for tracking a diversified portfolio or comparing different assets.
Average ROI Plot:
An additional feature is the Average ROI plot, which provides the average return on investment (ROI) of the five selected tickers. This plot helps traders quickly assess the overall performance of their monitored assets.
Strategy for Traders
Diversified Monitoring:
By setting up five different tickers with varying weightages, traders can diversify their monitoring efforts across different assets or markets. This diversification helps in reducing risk and identifying opportunities in different sectors or asset classes.
Weightage Customization:
Assign weightages based on market conditions or personal trading strategy. For example, if a trader believes that commodities are likely to outperform equities in the near term, they can assign a higher weightage to commodities-related tickers.
Analyzing %ROC Trends:
Use the polyline plots to identify significant %ROC trends. A rising %ROC might indicate increasing momentum and a potential buying opportunity, while a falling %ROC could signal decreasing momentum and a potential selling opportunity.
Average ROI Analysis:
Use the Average ROI plot to gauge the overall performance of the selected assets. If the average ROI is positive and trending upwards, it indicates a generally favorable market condition for the monitored assets.
Tactical Adjustments:
Regularly review and adjust the selected tickers and their weightages based on changing market conditions, news, and personal insights. This flexibility allows traders to adapt their strategy in response to new information.
Important Notes:
Indexogram is a tool to identify potential tradings, not a guaranteed predictor of future price movements. Indicator
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1. When the major uptrend is over and we are able to make the desired profit, we will sell our holdings outright.
2. Selling in the middle of a down trend and buying less than that amount again
3. When a small uptrend is over, sell the ones you bought at a lower price and make a small profit.
The other important thing is that the average cost is gradually reduced. Also, those who sell at a loss will reduce their profit (winning rate), so knowing that we will have a chance to calculate our loss and recover it. I used this to write a strategy in Trading View. I have put the link below it. From that we can see how this idea works. What I did was I made the signal by taking some technical indicators as I did in the previous one (all the indicators I got in this case were directional indicators, then I was able to get a good correlation and a standard deviation. I multiplied the correlation and the standard deviation by both and I took the signal as the time when the graph went through zero, and I connected it to the volume so that I could see some of the volume supported by it.)
Now let me tell you a little bit about what I see in this strategy. In this I used the compound effect. That is, the strategy, the profit he takes to reinvest. On the other hand, the strategy itself can put a separate stop loss value on each trade and avoid any major loss from that trade. I also added to this strategy the ability to do swing trading. That means we can take the small profits that come with going on a big up trend or a big down trend. Combined with Compound Effect, Stop Loss and Swing Trading, I was able to make a profit of 894% per annum (1,117.62% for 15 months) with a winning rate of 80%. Winning rate dropped to 80% because I added stop loss and swing trading. The other thing is that I applied DCA to this in both the up trend and the down trend (both). That was another reason for me to make a good profit. The orange line shows how to reduction of costly trade. The yellow line shows the profit and you can see that the profit line does not go down during the loss trades. That's because I want to absorb the loss from that trade. Strategy
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