1. Analysis of bitcoin futures volumes from the Chicago Futures Exchange (CME).
2. Analysis of the long-term trend.
3. Analysis of the medium-term trend.
4. Analysis of the short-term trend.
5. Japanese candle analysis.
6. Conclusions.
7. Statistics.
1. Analysis of bitcoin futures volumes from the Chicago Futures Exchange (CME).
Bitcoin is the flagship of the cryptocurrency market, so we will first analyze its movement. The analysis uses data on horizontal volumes from the Chicago Futures Exchange on daily charts. The analysis is based on the "Footprint Profile" theory, in which the movement of the maximum volume level for the day can indicate the likely direction of the trend. The maximum volume level is the level at which the maximum number of transactions was made, that is, the level of a large player. Accordingly, the displacement of the maximum amount of levels up indicates an upward trend. Moving the maximum volume level down indicates a downtrend. The chaotic movement of the maximum volume levels indicates a flat in the market.
02.02.21 – Maximum horizontal volume level (POC - Point Of Control) - 34580
03.02.21 – Maximum horizontal volume level (POC - Point Of Control) - 36990
POC moved up, the price reaction after the infusion of this volume is upward. There is a possibility of continuing the upward movement.
2. Analysis of the long-term trend.
The trend is a friend of a trader. Many traders know this saying, but do not know how to use it. The answer is simple: trade only in the direction of the trend. This way your trades will have more profit potential with less risk. According to the classical Dow theory, there are three main trends:
- long-term;
- medium-term;
- short-term.
These trends need to be analyzed before opening any transaction. This is what we will do in this analysis.
The long-term trend in this 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), it means that we are facing an upward trend and should buy. If the daily candle closed below the EMA(48), it means that the trend is down and you should sell.
The chart shows an upward trend, the price is higher than the EMA (48), ergo in this situation, you should only consider purchases.
3. Analysis of the medium-term trend.
In this analysis, the medium-term trend will be the trend on the 4-hour chart (H4). The EMA (48), an exponential moving average with a period of 48, will also be used for the analysis. If the H4 candle closed above the EMA (48), then the trend is upward and you should buy. If the H4 candle closed below the EMA (48), it means that the trend is downward and should be sold.
The price is holding above the EMA (48), but it seems that a correction is beginning. The medium-term trend is still up and coincides with the long-term trend, so you should buy.
4. Analysis of the short-term trend.
The short-term trend, which can show well the entry point to the market, will be considered a trend on the H1 timeframe. The EMA (48), an exponential moving average with a period of 48, will help us. If the H1 candle closed above the EMA (48), then the trend is upward and you should buy. If the H1 candle closed below the EMA (48), then the trend is downward and you should sell.
The first H1 candle closed below the EMA (48). The short-term upward trend is over. Long-term, medium-term, and short-term trends do not coincide, there are signs of corridor movement in the market, you can both buy and sell.
5. Japanese candle analysis.
The classic Japanese candlestick analysis is used for the daily timeframe. In this analysis, we will also analyze the daily candle.
Closing the daily candle upwards, the candle is white. The high is above the high of the previous candle, which indicates an upward movement. The candlestick shape is trendy, large body and small shadows. Upward movement is likely, so you should buy.
6. Conclusions.
- Volume analysis: POC moved up, price reaction is up - BUY.
- Long-term trend: up - BUY.
- Medium-term trend: up - BUY.
- Short-term trend: up - SELL.
- Japanese Candlestick Analysis - BUY.
- General conclusion: 04.02.21 – there is a corridor in the market, you can both buy and sell.
7. Statistics.
To analyze the effectiveness of this approach, statistics on completed transactions will be kept. We continue to be in this transaction:
03.02.21 Litecoin BUY: 150.70; SL: 129.63; Risk per trade: 1% of the deposit. With a deposit of $ 10,000, lot 0.05
The stop loss is located behind the daily extreme. We do not set a take profit, as we will accompany the transaction 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.
