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1. Analysis of bitcoin futures volume on Chicago Mercantile Exchange (CME).
2. Analysis of the long-term trend.
3. Analysis of the medium-term trend.
4. Analysis of the short-term trend.
5. Analysis of Japanese candlestick
6. Conclusions.
7. Statistics.
1. Analysis of bitcoin futures volume on Chicago Mercantile Exchange (CME).
Bitcoin is the flagship of the cryptocurrency market. For this reason, we will first analyze its trajectory. To do so, we will use the data on volume from the Chicago Futures Exchange on daily charts. The analysis is based on the Footprint Profile theory where the movement of the level with the highest traded volume during the day can indicate the possible direction of the trend. The level with the highest traded volume is the level where the maximum number of trades was made. This is the level of big market players. So, if the maximum volume level goes higher, it signals an uptrend. If the maximum volume level declines, it indicates a downtrend. The chaotic movement of the maximum volume levels indicates that the market is trading flat.
02.02.21 - The level of the maximum traded volume (POC - Point Of Control) - 34580
03.02.21 – The level of the maximum traded volume (POC - Point Of Control) - 36990
POC moved up, and the price reacted with an increase after the volume injection. The upward movement is likely to go on.
2. Analysis of the long-term trend.
A trend is your friend. Many traders are familiar with this saying but do not know how to apply it. However, the answer is simple. Trade only with the direction of the trend. By doing this, your trades will have more profit potential with less risk. The classic Dow Theory states that there are three main trends:
long-term;
medium-term;
short-term.
You need to analyze these trends before opening any deal. This is what we are going to learn how to do it in the analysis below.
The long-term trend in the analysis is the daily trend. Trades will be made on a daily timeframe and held for several days. The daily trend is analyzed using the EMA (48), an exponential moving average with a period of 48. If the daily candle closed above the EMA (48), then we have an uptrend and should open long deals. If the daily candle closed below the EMA (48), we have a downtrend and should open short deals.
On the chart, we can see the beginning of an uptrend as the price is holding above the EMA (48). Therefore, we should only consider long deals.
3. Analysis of the medium-term trend.
In this analysis, the medium-term trend will be the trend on the 4-hour chart (H4). EMA (48), an exponential moving average with a period of 48, will also be used for analysis. If the H4 candlestick closes above the EMA (48), then we have an uptrend and we should open buy positions. If the H4 candlestick closes below the EMA (48), then there is a downtrend and we should go short.
Several H4 candles closed above the EMA (48) and they are holding higher. This means that the medium-term trend is upward and coincides with the long-term trend. So, you should open long deals.
4. Analysis of the short-term trend.
A short-term trend that can also show an entry point into the market is considered a trend on the H1 time frame. Here, we will again use the EMA (48), an exponential moving average with a period of 48. If the H1 candlestick closes above the EMA (48), then there is an uptrend and you should open buy positions. If the H1 candlestick closes below the EMA (48), then there is a downtrend and you should go short.
The price fell below the EMA (48). The correction has begun. The long - term, medium-term and short-term trends do not coincide, there is a channel in the market where you can both open long and short positions.
5. Japanese candlestick analysis.
Classic Japanese candlestick analysis is applied to the daily time frame. In this analysis, we will also study the daily candlestick.
Yesterday, the candlestick marked with white closed higher. The current high is above the high of the previous candlestick which indicates an upward movement.
6. Conclusion
1. Volume analysis: POC has moved up, the price reaction is up - BUY.
2. Long-term trend: up - BUY.
3. Medium-term trend: up - BUY.
4. Short-term trend: up - SELL.
5. Japanese candlestick analysis - BUY.
General conclusion: On February 4, there is a channel being formed in the market, so you can buy and sell.
7. Statistics.
To analyze the effectiveness of this approach, statistics on completed transactions will be kept. It is recommended to open long deals on the pair.
03.02.21 BCHUSD BUY: 150.70; SL: 129.63; Risk on a trade:1% from a deposit. The deposit is 10 000$ with 2.7 lots.
The stop loss is placed behind the daily extremes. We do not set a take profit, as we will execute the deal by moving the stop loss beyond the extremes of the new days. Since trading is conducted on daily charts, this recommendation is relevant throughout the day.
Trade with the trend and you will multiply your profit!
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