1. Bitcoin volume analysis on the Chicago Mercantile Exchange.
2. Analysis of the long-term trend.
3. Analysis of the medium-term trend.
4. Analysis of the short-term trend
5. Japanese candlestick analysis.
6. Conclusions.
7.Statistics.
1. Bitcoin volume analysis on the Chicago Mercantile Exchange.
In this analysis, we will use the data on horizontal trading volumes from the Chicago Mercantile Exchange on the daily charts. The analysis is based on the footprint-profile theory. According to it, the direction 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 transactions was made. This is the level of major market players. Accordingly, if the maximum volume level moves higher, this indicates an uptrend. A downward movement of this level indicates a downtrend. Chaotic movement signals that the market is trading flat.
16.02.21 – The level of the maximum traded volume (POC – PointOfControl) – 49800
17.02.21 – The level of the maximum traded volume (POC – PointOfControl) – 51685
POC has moved higher, and the price is holding above the POC level. An uptrend is likely to start, so it is better to open long positions.
2. Analysis of the long-term trend.
A trend is your friend. 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. The classic Dow Theory describes three main trends:
long-term;
medium-term;
short-term.
You need to analyze these trends before opening any trade. This is what we are going to do in the analysis below.
A long-term trend is a trend on the daily chart. Trades will be opened on the daily time frame and held for several days. The analysis of the daily trend is carried out with the help of the EMA(48), an exponential moving average with a period of 48. If the daily candlestick closes above the EMA (48), then we have an uptrend and we should open buy positions. If the daily candlestick closes below the EMA (48), then there is a downtrend and we should go short.
We can clearly see an uptrend on the chart. The price is holding above the EMA(48). So, we recommend opening buy positions.
3. Analysis of the medium-term trend.
In our analysis, a 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.
The price is located above the EMA(48). This means that the medium-term trend and the long-term trend have the same direction. Therefore, you should open buy positions.
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 is holding above the EMA(48). The short-term trend is moving up. All the three trends are moving in the same direction which confirms buy positions.
5. Japanese candlestick analysis.
The Japanese candlestick analysis is applied to the daily time frame. In this analysis, we will also analyze the daily candlestick.
The daily candlestick marked with white closed higher. Its high is located above the high of the previous candlestick. The candlestick pattern coincides with the trend, The candlestick has a long body and short shadows. The uptrend is very likely.
6. Conclusion:
1. Volume analysis - BUY
2. Long-term trend - BUY
3. Medium-term trend - BUY
4. Short-term trend - BUY
5. Japanese candlestick analysis - BUY
General conclusion: On February 18, 2021, you should consider opening long positions.
7. Statistics
To analyze the effectiveness of this approach, we will keep the data on completed transactions. We prepare forecasts and open our trades on four major instruments: Bitcoin, Ethereum, Litecoin, and BCH/USD. Please, check other articles regarding this topic.
We gained +4.95% in February 2021
We opened a new position:
18.02.21 Bitcoin BUY: 51678 SL: 48229; the risk management is 1% of the deposit of $10,000, with trading volume of 0.03 lot.
When opening new positions, Stop Loss should be placed beyond the daily extreme points. Do not place Take Profit, as we will continue to move Stop Loss beyond the extreme points in the future sessions. Since the trade is carried out on the daily charts, the recommendation remains relevant throughout the day.
Trade with the trend and you will gain profit!
