1. Analysis of Bitcoin futures volumes on Chicago Mercantile Exchange.
2. Long-term trend analysis.
3. Medium-term trend analysis.
4. Short-term trend analysis.
5. Japanese candlestick analysis.
6. Conclusions.
7. Statistics.
1. Analysis of Bitcoin futures volumes on Chicago Mercantile Exchange.
Bitcoin gained in value on the Fed's statements. In the United States, the central bank announced that it would keep monetary policy loose and continue to inject money into the economy and financial markets. This triggered an increase in many financial assets, including bitcoin.
Let's consider the volumes from the Chicago Mercantile Exchange show us. Bitcoin futures traded on the CME are used by large institutional players. Therefore, the accumulation and distribution of horizontal volumes could be a good indicator to determine the market's further possible movement. According to footprint-profile theory, the movement of the level with the highest traded volume during the day can indicate a possible direction of the trend. The key element of the horizontal volume analysis is the level with the maximum traded volume or:
POC - Point Of Control.
The level with the highest traded volume is the level of a major market player. It is very important for a private trader to understand where a major player is selling or buying. Following large market participants, a trader can have steady income. If major players are moving the level with the maximum number of transactions down, this indicates a downtrend and vice versa. A chaotic movement of POC levels signals that the market is trading in a sideways trend.
Let's consider the dynamics of the POC level of bitcoin futures over the past two days:
16.03.21 - The level of the maximum traded volume (POC - Point Of Control) - 55990
17.03.21 - The level of the maximum traded volume (POC - Point Of Control) - 54975
The POC level moved down, but strong accumulation in the shadow of yesterday's candlestick led to a strong upward rebound in the price. At the moment, the price is above the areas with large volumes for several days. If the price moves up following massive injections of liquidity, this indicates a continued upward movement. In this case, traders can open long positions.
2. Long-term trend analysis.
What will allow a trader to generate stable income for an extended period of time? Trend trading. The reason is that the trend makes it possible to increase unlimited profits with limited losses.
How to combine trading courses with your current job or business? Trade on the daily chart. You can devote 5 minutes a day to analyzing the market, opening a trade, and placing a stop-loss order.
In this analysis, I trade on daily charts, describing the entry price as well as the price for placing a stop-loss order and keeping statistics of the trading efficiency. You can check how trend trading actually works by monitoring statistical changes.
The classic Dow Theory describes three main trends:
long-term; medium-term; short.In trading, I use all these trends. The long-term trend in this analysis is a daily trend (D). This time frame shows the long-term trend of the last two months. I will seek points to enter the market in the direction of this long-term trend. 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), this will mean that the quotes are moving in an uptrend and we should open long positions. If the daily candlestick closes below the EMA(48), this will mean that the quotes are trading downwards and we should go short.
Let's analyze the previous trading day on the daily chart:
According to the chart, the trend is upward. The price is above the EMA(48). Moreover, the price is holding high at the top without even trying to get close to the moving average. For the last two months, the price has been growing. The trend is strong and it has not yet been broken by sellers. Therefore, traders should go long.
3. Medium-term trend analysis.
To analyze the medium-term trend, I use the four-hour chart (H4). This time frame shows the trend of the last two weeks. The EMA(48), an exponential moving average with a period of 48, is also used in analysis. If the candlestick closes above the EMA(48) on H4, this means that the quotes are moving in an uptrend and we should buy. If the candlestick closes below the EMA(48) on H4, this means that we have a downtrend and we should sell.
Let's analyze yesterday's price dynamics on the H4 chart:
Yesterday the price rose above the EMA(48) and it is currently trying to consolidate at these levels. Recently, the price has repeatedly crossed the EMA(48). This indicates that bulls are becoming weaker, but the struggle continues. The medium-term trend is upward, so you can open long positions.
4. Short-term trend analysis.
The short-term trend analysis will provide us with a good entry point to the market. The long-term trend shows the dynamics of the last two months. The medium-term trend checks whether the movement matches the trend of the last two weeks. The short-term trend shows points to enter the market. The short-term trend in this analysis is a trend on the H1 chart. Here, we will again use the EMA(48) - an exponential moving average with a period of 48 which will help us understand the dynamics of the last two days. If the candlestick closes above the EMA(48) on H1, this means that the quotes are trading upwards and we should buy. If the candlestick closes below the EMA(48) on H1, this indicates that the trend is downward and we should go short.
Let's analyze yesterday's price dynamics on the H1 chart:
The price has been in line with the EMA(48) or below it for several consecutive days. There was a correction in the market. However, yesterday, the price made a strong rally, breaking above the EMA (48). The short-term trend is upward. Therefore, it is possible to buy.
The long-term, medium-term, and short-term trends coincide.
5. Japanese candlestick analysis.
The Japanese candlestick analysis makes it possible to understand the psychology of most market participants. The analysis is carried out on the daily chart.
Let's analyze yesterday's daily candlestick:
The daily candlestick closed upwards, the candlestick is black. This means that bulls are taking the lead within the day. The high is above the high of the previous candlestick, as the price has been able to hit a new high. The candlestick pattern is a hammer directed upwards. It has a short body with a long shadow. An upward movement is highly likely.
6. Conclusions.
Volume analysis - BUY.
Long-term trend - BUY.
Medium-term trend - BUY.
Short-term trend - BUY.
Japanese candlestick analysis - BUY.
Conclusion: On March 18, you can open long positions.
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:
Gains for two months amounted to 12.21%.
Statement:
Today, I have opened a new position:
18.03.2021 Bitcoin BUY: 58066; SL: 53800; Risk: 1% of a $10,000 deposit with a trading volume of 0.02 lot
The low risk will protect you from excessive anxiety but will allow you to earn a tangible profit. A stop-loss order is placed beyond the low or high of the signal day, depending on the direction of a trade. Profits are unlimited, since I do not place a take-profit order. I will follow the market by moving SL beyond the extreme points of the future sessions.
Since trading is carried out on the daily charts, this recommendation remains relevant throughout the day.
Trade along the trend and you will make a profit!