Mayer Multiple calculation
The Mayer Multiple is a ratio used to evaluate the price of Bitcoin in relation to its historical performance. It is calculated by dividing the current price of Bitcoin by the 200-day moving average (200 DMA) of its price:
\[ \text{Mayer Multiple} = \frac{\text{Current Price}}{\text{200 DMA}} \]
The logic for using the Mayer Multiple in trading decisions is simple:
- If the Mayer Multiple is greater than 2.4, it signals that Bitcoin is overbought and a potential sell signal.
- If the Mayer Multiple is less than 1.0, it indicates that Bitcoin is underbought and might be a good opportunity to buy.
- Otherwise, it suggests holding the position.
Create a function calculate_mayer_multiple(bitcoin_price, dma_200) to calculate the Mayer Multiple given the current price of Bitcoin and the 200-day moving average. Your function should:
- Receive the current price of Bitcoin and the 200-day moving average as arguments.
- Calculate the Mayer Multiple using the formula provided.
- Return the Mayer Multiple.
Then, create three functions to determine the trading decision based on the Mayer Multiple:
sell_signal(mayer_multiple): ReturnsTrueif the Mayer Multiple is greater than 2.4.buy_signal(mayer_multiple): ReturnsTrueif the Mayer Multiple is less than 1.0.hold_signal(mayer_multiple): ReturnsTrueif the Mayer Multiple is between 1.0 and 2.4.
Test your functions with different values to ensure they are working correctly.