1.How to make money on cryptocurrencies?
2. Analysis of Bitcoin futures volume on Chicago Mercantile Exchange
3. Trend analysis.
4. Japanese candlestick analysis.
5. Conclusion. Statistics.
1. How to make money on cryptocurrencies?
Risk management is an important factor for profitable trading in the volatile cryptocurrency market. What impact could risk management have on trading?
The figure shows an example of the trading system's growing yield curve based on tight risk management. Traders periodically lock in losses, and we can see falls on the chart. However, trading limits do not allow the system to suffer huge losses. Moreover, further trading allows market participants to get out of drawdowns.
The figure shows the statistics of the same trading system. The maximum drawdown is 23.13%, which is within the normal range. The profit of the trading system for 18 months is 73.52%, which is several times higher than the maximum risks. You can also achieve similar results in trading if you trade systematically and control risks. So let's take stock of the risk management topic:
- Trading without a risk management algorithm is not recommended.
- The risk management algorithm should include: risk per trade, daily risk, weekly risk, monthly risk, maximum risk.
- Risk management will protect your deposit from huge losses and will allow you to gain experience for a long time.
2. Analysis of Bitcoin futures volume on Chicago Mercantile Exchange.
Bitcoin continues to decline. It is possible to open short positions amid price corrections.
Let's consider the levels of the maximum traded volumes based on the Chicago Mercantile Exchange. These indicators show the activity of major market players.
20.05.21 - The level of the maximum traded volume (POC - Point Of Control) - 39890
21.05.21 - The level of the maximum traded volume (POC - Point Of Control) - 39410
The POC has moved down, the price is below the maximum traded volume. The market is moving in a downward trend. In such a situation, according to the volume analysis, you can open short positions.
3. Trend analysis.
The second step in this analysis is to determine the short-, medium-, and long-term trend. It is worth opening trades when the direction of all three trends coincides. Trend analysis is carried out with the help of an exponential moving average:
EMA 1152 (blue) shows the long-term trend on the H1 chart, which is similar to EMA 48 on the D chart;
EMA 288 (red) shows the medium-term trend on the H1 chart, which is similar to EMA 48 on the H4 chart;
EMA 48 (black) shows the short-term trend on the H1 chart.
The downtrend has slowed down. The price is in line with the short-term EMA but below the medium-term and the long-term EMAs. The trends do not coincide. Therefore, according to the trend analysis, it is possible to open both short and long positions today.
4. Japanese candlestick analysis.
Market analysis with the help of Japanese candlesticks is the third step in this trading system. Let's analyze yesterday's daily candlestick:
The candlestick has closed downwards, the candlestick is black. The low is below the low of the previous candlestick. The candlestick pattern matches the trend. It has a long body and small shadows. According to the Japanese candlestick analysis, it is worth considering sell orders.
5. Conclusion. Statistics.
Volume analysis - SELL.
Long-term trend - SELL.
Medium-term trend - SELL.
Short-term trend - BUY SELL.
Japanese candlestick analysis - SELL.
Conclusion: On May 24, 2021, you can open both long and short positions on bitcoin as different types of analysis provide different forecasts.
To analyze the effectiveness of this trading approach, you should use statistics. Based on these forecasts, we track the data on completed transactions and open new deals in a separate account. Transactions are made on four instruments: Bitcoin, Ethereum, Litecoin, and BCHUSD. They are analyzed in the same way. Gains for three months amounted to 9.1%, with a maximum drawdown of 4.88% Statement:
We continue to keep the short position on bitcoin open. The stop-loss order has been moved to the extreme point of the previous session. Part of the profit has been already locked in.
The risk is not more than 1% per trade, this approach is conservative. According to this system, a stop-loss order is placed beyond the daily low or high, depending on the direction of the trade. We do not set take-profit orders, enabling the price to grow without limits. We follow the trade, 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!