1. Analysis of BCH/USD trading volumes on the Binance 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. Conclusion
7. Statistics
1. Analysis of BCH/USD trading volumes on the Binance Exchange
In this analysis, we will use the data on daily horizontal volumes traded at the Binance Exchange. 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.
05.02.2021 - The level of the maximum traded volume (POC - Point Of Control) – 444.7
06.02.2021 - The level of the maximum traded volume (POC - Point Of Control) – 474.8
POC moved higher, and the price dropped after the volume injection. The upward movement is likely to stop, so you can both buy and sell.
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 states that there are 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.
The long-term trend is the daily trend. Trades will be opened on the daily time frame and held for several days. The analysis of the daily trend is carried 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.
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 opening buy positions.
3. Analysis of the medium-term trend.
In our 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.
On the chart, the price is above the EMA (48). The medium-term trend is moving up and coincides with the long-term trend. This means that you should open buy positons.
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.
On the chart, the price is holding below the EMA (48). The long-term, medium-term and short-term trends are moving in different directions. This may signal the formation of a channel in the market.
5. Japanese candlestick analysis.
The Japanese candlestick analysis is applied on the daily time frame. In this analysis, we will also analyze the daily candlestick.
The daily candlestick marked with black closed lower. The current low is below the minimum point of the previous candlestick. The candlestick pattern is in the form of a hammer with a long lower shadow. The upward movement may continue, but the bullish momentum is likely to finish soon.
6. Conclusions
1. Volume analysis: POC has moved higher, the price went up as well – BUY SELL.
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 8, you can both buy and sell.
7. Statistics.
To analyze the effectiveness of this approach, we will keep the data on completed transactions. A the moment, we keep our long positions open.
08.02.21 BCH/USD BUY: 150.70; SL: 129.63; the risk management is 1% of the deposit when the deposit is $10,000, and trading volume is 2.7 lots.
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 of 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!