- How to make money on cryptocurrencies?
- Analysis of volumes for Bitcoin futures from the Chicago Mercantile Exchange (CME).
- Analysis of the trend.
- Japanese candlestick analysis.
- Conclusions. Statistics.
1. How to make money on cryptocurrencies?
A good trading result is obtained when all the important components of a trading algorithm are taken into account:
- Trading system - when to enter and exit the market.
- Capital management - how much to enter the market,
- Risk management - how to control risks.
Ignoring any of these points can lead to dire consequences. We have already considered the trading system and money management in previous articles, now we will dwell on risk management in more detail.
Risk management is a set of rules, an algorithm that describes what risks and losses can be tolerated on an account. Also, the risk management should describe the actions in case of reaching the marginal risks. It is not worth trading until the risk management is clearly described, as this may result in a loss of the deposit.
Why is clearly defined risk management so important? Because during trading, the trader is exposed to strong emotions. When there is profit on the account, a novice trader can feel a sense of euphoria, greed, and a desire to earn even more. When there is a loss on the account, the trader may get upset and there will be a desire to recoup, the fear of new losses arises. All these emotions are very strong, and a novice trader can start breaking the rules of the trading system. Breaking the rules will inevitably lead to losses. Risk management can serve as a defense in such a situation. If a trader knows that he will not lose more than a predetermined amount, if the risk in one transaction is small, then it becomes easier to control emotions.
Tough risk management is a defense against "tilt" when rash and emotional decisions are made. Risk management should be spelled out in such a way that trading does not cause strong emotions. Then the trader will be able to trade stably over long periods of time.
2. Analysis of volumes for Bitcoin futures from the Chicago Mercantile Exchange (CME).
The sideways correction of bitcoin continues. Consider the levels of maximum horizontal volumes from the Chicago Mercantile Exchange. These volumes show the activity of major players.
05/10/21 - Maximum horizontal volume level (POC - Point Of Control) - 57370
05/11/21 - Maximum horizontal volume level (POC - Point Of Control) - 55880
The POC moved down, the price is above the maximum volume level. Sideways movement in the market. In such a situation, you can buy and sell in terms of volume analysis.
3. Analysis of the trend.
The second step in the analysis is to check the short-term, medium-term, and long-term trends. It is worth making deals when the direction of all three trends coincides. To analyze the trend in these forecasts, an exponential moving average is used:
- Long-term trend - EMA 1152 (blue) on the H1 timeframe, which is an analogue of EMA 48 on the D timeframe;
- Medium-term trend - EMA 288 (red) on the H1 timeframe, which is an analogue of EMA 48 on the H4 timeframe;
- Short-term trend - EMA 48 (black) on the H1 timeframe.
The price is on the short-term and medium-term EMA, but above the long-term EMA. Trends don't match. Therefore, from the point of view of trend analysis, you can buy and sell today.
4. Japanese candlestick analysis.
Market analysis using Japanese candlestick analysis is the third step in this trading system. Let's analyze yesterday's daily candlestick:
The daily candlestick closed upwards, the candlestick is white. Extremes are inside the extremes of the previous candle. Candlestick configuration - Inner candlestick, small body, small lower shadow. From the point of view of Japanese candlestick analysis, buying is worth considering.
5. Conclusions. Statistics.
- Volumetric analysis - BUY SELL.
- Long-term trend - BUY.
- Medium-term trend - BUY SELL.
- Short-term trend - BUY SELL.
- Japanese candlestick analysis - BUY.
General conclusion: On May12, 2021, you can buy and sell bitcoin, since different types of analysis give different forecasts.
Only statistics can show the effectiveness of any trading approach. According to these forecasts, transactions are made on a separate account and open statistics of these transactions are provided. Transactions are made in four instruments: Bitcoin, Ethereum, Litecoin, and BCH/USD, which are analyzed in the same way. The yield is 11.1% for 3 months with a maximum drawdown of 4.88%. Statement:
I do not open new deals in the market uncertainty.
The risk per trade is not more than 1%, this approach is conservative. Stop loss for this system is set behind the low or high of the signal day, depending on the direction of the deal. Profit is given the opportunity to grow without restrictions, since I do not set take profit. I accompany the trade by moving the stop loss beyond the extreme points of the upcoming sessions.
Since trading is carried out on daily charts, this recommendation is relevant throughout the day.
Trade with the trend and you will gain profits!
