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1.How to make money on cryptocurrencies?
2. Analysis of Bitcoin futures volume on Chicago Mercantile Exchange
3. Trend analysis.
4. Japanese candlestick analysis.
5. Conclusion. Statistics.
1. How to make money on cryptocurrencies?
There is a great correction in the cryptocurrency market. Yesterday, bitcoin lost $10,000 in value in three hours. Time will tell whether it is a temporary correction or a protracted bearish movement. However, during such periods, risk management can protect your deposit. Today, we will discuss the last and most important risk in the risk management algorithm.
Maximum risk. This risk implies the maximum permissible drawdown in a trading account. This is the most important point in risk management. After reaching this risk, the trading system should be completely stopped and then revised. What is the optimal size for the maximum drawdown? The drawdown size of less than 30% of the deposit can be considered optimal. Such a drawdown can be psychologically comfortable for both a trader and an investor, since they understand that in any situation, most of the deposit will not be lost. Drawdowns of 40% or above are not acceptable to investors. That is why it is too difficult to attract investments using such trading systems. Another issue of great account drawdowns is a long and complex recovery process.
For example, the initial deposit is $1,000. If the drawdown is 50%, the deposit will decrease to $500. To get out of the drawdown, you need to earn $500, which is a 100% profit to the current $500 deposit.
The greater the drawdown, the longer and more difficult the recovery process is. Trading with minimal risk is the only way to be successful in trading.
2. Analysis of Bitcoin futures volume on Chicago Mercantile Exchange.
Apparently, the market has entered a downward correction. Let's consider the levels of the maximum traded volumes based on the Chicago Mercantile Exchange. These indicators show the activity of major market players.
18.05.21 - The level of the maximum traded volume (POC - Point Of Control) - 43335
19.05.21 - The level of the maximum traded volume (POC - Point Of Control) - 40135
The POC has moved down, the price is above the maximum traded volume. The market is moving in a downward trend. In such a situation, according to the volume analysis, you can open short positions.
3. Trend analysis.
The second step in this analysis is to determine the short-, medium-, and long-term trend. It is worth opening trades when the direction of all three trends coincides. Trend analysis is carried out with the help of an exponential moving average:
EMA 1152 (blue) shows the long-term trend on the H1 chart, which is similar to EMA 48 on the D chart;
EMA 288 (red) shows the medium-term trend on the H1 chart, which is similar to EMA 48 on the H4 chart;
EMA 48 (black) shows the short-term trend on the H1 chart.
The price is still below all three EMAs. All the trends coincide. Therefore, according to the trend analysis, it is possible to go short today.
4. Japanese candlestick analysis.
Market analysis with the help of Japanese candlesticks is the third step in this trading system. Let's analyze yesterday's daily candlestick:
The candlestick has closed downwards, the candlestick is black. The low is below the low of the previous candlestick. The candlestick pattern is uncertain, with a long body and long lower shadow. According to the Japanese candlestick analysis, it is worth considering sell orders.
5. Conclusion. Statistics.
Volume analysis - SELL.
Long-term trend - SELL.
Medium-term trend - SELL.
Short-term trend - SELL.
Japanese candlestick analysis - SELL.
Conclusion: On May 20, 2021, you can open short positions on bitcoin as different types of analysis provide the same forecasts.
To analyze the effectiveness of this trading approach, you should use statistics. Based on these forecasts, we track the data on completed transactions and open new deals in a separate account. Transactions are made on four instruments: Bitcoin, Ethereum, Litecoin, and BCHUSD. They are analyzed in the same way. Gains for three months amounted to 9.1%, with a maximum drawdown of 4.88% Statement:
We continue to keep the short position on bitcoin. The stop-loss has been moved beyond the extreme point of the previous trading session. Part of the profit has already been locked in.
The risk is not more than 1% per trade, this approach is conservative. According to this system, a stop-loss order is placed beyond the daily low or high, depending on the direction of the trade. We do not set take-profit orders, enabling the price to grow without limits. We follow the trade, moving SL beyond the extreme points of the future sessions.
Since trading is carried out on the daily charts, this recommendation remains relevant throughout the day.
Trade along the trend and you will make a profit!
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