1. Analysis of BTS volume from Chicago Mercantile 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 candlestick analysis
6. Conclusions
7. Statistics
1. Analysis of BTS volume from Chicago Mercantile Exchange (CME)
The analysis is based on the horizontal volumes data on daily charts from the Chicago Mercantile Exchange. The analysis is carried out based on the footprint-profile theory. According to the theory, the direction of the level with the highest trade volume within a day can indicate the likely direction of the trend. The highest trade volume is the level with the largest number of transactions carried out. That is, it is the level of major market players. Accordingly, if the highest trade volume level goes up, it indicates an upward trend. Otherwise, if the highest trade volume level goes down, it indicates a downward trend. Chaotic movements signal that the market is trading flat.
February 12, 2021 – the highest horizontal volume level; point of control (POC) = 48,105
February 15, 2021 – the highest horizontal volume level; point of control (POC) = 49,515
The point of control has moved up. Meanwhile, the price level is below POC. The market is correcting sideways. Therefore, one can open both long and short positions.
2. Analysis of 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: to trade only in the direction of a trend. Thus, your trades will have more profit potential with less risk. According to the classic Dow theory, there are three main trends:
long-term
medium-term
short-term
These are the trends you should analyze before entering the market. Now, let's take a closer look at these trends.
The long-term trend is the daily trend. In this case, deals are made in the daily time frame and are held for several days. The analysis of the daily trend is made with the help of the 48-period exponential moving average (EMA(48)). If the daily candlestick closes above EMA(48), it will indicate the upward trend. Therefore, you should enter long. If the daily candlestick closes below EMA(48), then it is the downward trend and you should enter short.
The chart indicates the upward trend. The price level is above EMA(48). That is why you should consider entering long.
3. Analysis of medium-term trend
The medium-term trend is the trend on the 4-hour chart (H4). In this case, we will also turn to EMA(48). If the candlestick closes above EMA(48) on the 4-hour chart, it will indicate the upward trend. Thus, you should enter long. Otherwise, if the candlestick closes below EMA(48) on the H4 chart, it will indicate the downward trend. Consequently, you should enter short.
The price is above EMA(48). The medium-term trend is the upward one. Apart from that, it coincides with the long-term trend. Therefore, one should open long positions.
4. Analysis of short-term trend
A short-term trend is the trend in the H1 time frame. Moreover, it can show an entry point into the market well. We will turn to EMA(48) again. If the candlestick closes above EMA(48) on the H1 chart, it will indicate the upward trend. Thus, you should enter long. Alternatively, if the candlestick closes below EMA(48), it will indicate the downward trend. This means you should enter short.
The price is above EMA(48). The trend reversed. Thus, we have a short-term upward trend. The long-term, the medium-term, and the short-term trend coincide. Therefore, you can both buy and sell the pair.
5. Japanese candlestick analysis
A classic Japanese candlestick analysis is applied to the daily timeframe. In this particular analysis, we will also look at the daily candlestick.
Thus, we have a black downward daily candlestick. Its extreme low is below the low of the previous candlestick. It is a hammer candlestick pattern with a long lower shadow. The price is likely to move within a corridor.
6. Conclusion
1. Volume analysis: POC moved up -> BUY/SELL
2. Long-term upward trend –> BUY.
3. Medium-term upward trend –> BUY
4. Short-term upward trend –> BUY
5. Japanese candlestick analysis –> SELL
General conclusion: On February 16, 2021 one can both sell and buy the pair
7. Statistics.
To analyze how effective this approach is, the data on completed transactions is tracked. The forecast is made for four instruments: Bitcoin, Ethereum, Litecoin, and BCHUSD. Trading account monitoring:
One should refrain from opening new positions due to market uncertainty.
A Stop Loss for new orders should be placed beyond the daily extreme points. We do not set a Take Profit order because we will continue to move the Stop Loss above 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 generate profits!