1. How to make money on cryptocurrencies?
2. Volume analysis of BTC from the Chicago Mercantile Exchange (CME).
3. Trend analysis
4. Japanese candlestick analysis
5. Conclusion. Statistics
1. How to make money on cryptocurrencies?
Profitable trading begins with risk management. We discussed the types of risks in our previous articles. Let us now turn to the actual examples.
Examples of the risk management algorithm
1. Risk per trade/ series of trades. This risk should be relatively small, within 0.25-1% of a deposit. When you reach the 1% risk, trading continues. Ex.: The risk of 1% per trade of a $20,000 deposit is $200.
2. Risk per day. This is an up to 5% risk of a deposit. Having reached the 5% risk, trading stops. Ex.: The 5% risk per day of a $20,000 deposit is $1,000.
3. Risk per week. This risk should be up to 10% of a deposit. When you reach this level of risk, trading stops until the end of the week. Ex.: The 10% risk per week of a $20,000 deposit is $1,000.
4. Risk per month. This is an up to 20% risk of a deposit. Having reached the 20% risk, you stop trading until the end of the month. Ex.: The 20% risk per month of a $20,000 deposit is $4,000.
5. Highest risk. This risk should be up to 30% of a deposit. After reaching this level of risk, you stop trading by using this trading strategy. Ex.: The highest 30% risk of a $20,000 deposit is $6,000.
Such a risk management approach can guarantee you stabler and calmer trading.
2. Volume analysis of BTC from the Chicago Mercantile Exchange (CME)
After a strong bear run, the price of bitcoin has stopped falling. It currently looks like a correction in terms of the bearish trend. Let us consider the levels of the highest traded volume from the Chicago Mercantile Exchange (CME). These levels indicate activity of bulls.
19.05.21 – the level of the highest traded volume (POC – PointOfControl) – 40,100
20.05.21 – the level of the highest traded volume (POC – PointOfControl) – 40,100
The POC has not moved. The price is at the level of the highest traded volume. The market is in the sideways trend. You can open short and long positions based on volume analysis.
3. Trend analysis
Our second step is to check the short-term, the mid-term, and the long-term trends. You can enter positions when all three trends are in line. In this forecast, the trend is analyzed with the help of an exponential moving average:
Long-term trend – a blue EMA 1152 on the H1 chart, which is an alternative to EMA 48 on the D1 chart;
Mid-term trend – a red EMA 288 on the H1 chart, which is an alternative to EMA 48 on the H4 chart;
Short-term trend – a black EMA 48 on the H1 chart.
The price remains below the mid-term and long-term EMAs. At the same time, the price is in line with the short-term EMA. All three trends are not in line. So, based on trend analysis, you can enter short and long positions today.
4. Japanese candlestick analysis
Japanese candlestick analysis is the third step of this trading strategy. Let us analyze yesterday's daily candlestick:
The white daily candlestick has closed upward. Its extreme points are within the previous candlestick's extreme levels. It is the Inside Bar pattern, yesterday's candlestick is within the previous one. Based on Japanese candlestick analysis, entering long positions can be considered.
5. Conclusion. Statistics
Volume analysis – BUY/SELLLong-term trend – SELLMedium-term trend – SELLShort-term trend – BUY/SELLJapanese candlestick analysis – BUYConclusion: You can buy and sell bitcoin on May 21, 2021, since different types of analyses provide different forecasts.
Only statistics can reveal how efficient a trading strategy is. In this forecast, trades are carried out in a separate account. Trades are conducted in four instruments: Bitcoin, Ethereum, Litecoin, and BCH/USD. 3-months gains: 9.1%. Drawdown: 4.88%. Statement:
I keep holding my short position in bitcoin. A Stop Loss has been moved beyond yesterday's extreme point.
The risk per trade is no more than 1% of a deposit. A Stop Loss is placed beyond the high/low of the day, depending on the direction of the trade. A Take Profit is not set. A Stop Loss is moved 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 yield profits!