February 8th, 2022, Crypto Chartbook — Stacking bitcoins winning edges
As consultants, we get asked: “What’s your secret sauce, the holy grail, your special algorithm, your indicator settings?” A typical response would point out the importance of psychology and a low-risk approach. Nevertheless, system development and technical analysis have their place. And yet again, it isn’t about secrets and special tools. The future is unknown to everybody, and individual trades’ outcome is random. Consequently, the goal needs to be an edge over a sample size of transactions. It will skew the overall result in your favor. Stacking bitcoins winning edges.
It is not the number of edges that get it low risk. And again, there are no hidden magic formulas. What works well is covering multiple aspects in stacking one’s edges:
- Market behavior
- Time of day
- Oscillators for ranging markets
- Indicators for trending markets
- Supply/demand zone identification (VWAP=volume weighted average price, in addition to support and resistance lines)
- Inter-market relationships
- Leading/lagging (relative strength within a sector or group)
- Candlestick pattern
- Time frame relationships
- Action-reaction principle
- Day of the week
- Swing leg count
- MAE(=maximum adverse excursion)
- Mathematical/statistical edges like standard deviation
Your list might look vastly different but should include tools that cover the principal variants of market behavior (ranging, trending, slow/fast price action, liquidity, time, volume, transactions). Investopedia is a good research tool for finding definitions and explanations of the various available technical tools.
BTC in US-Dollar, daily chart, how we stack odds in our favor:
Our previous chart book release described fundamental reasons for being bullish on bitcoin, which we stack in a similar principled fashion. We pointed out that we were looking for low-risk entry points to build up a long-term position for bitcoin. Such a low-risk opportunity arose on February 3rd, last week. We had the following edges stacked at the time of entry (green arrow):
- General price strength (directional yellow line channel)
- Previous day retracement (action-reaction principle)
- Small range Doji for tight stop and possible reversal indication
- VWAP (blue histogram to the right of the chart) indicating a supply zone
- Scheduled ECB news item out of the way
- Time of week
- Time of day(we entered near the close of the daily candle)
- Extended from the mean(blue line, standard deviation)
- Commodity Channel Index(CCI). A momentum-based oscillator useful in congested sideways channels, gave the prior day to execution indication of a long entry(yellow arrow)
We posted our entry in real-time in our free Telegram channel. Within a 24-hour period, we could profit on half of the position size for a gain of 8.73%. We also posted this first profit-taking target in real-time in our free Telegram channel. Our quad exit strategy provides income-producing revenues like this but, even more, eliminates risk. Consequently, this approach supports trading the remaining position with psychological ease for the intended long-term holding period. Hence, even starting out as a a short-term trade, the last 25% of the initial position can become a long-term invest.
BTC in US-Dollar, weekly chart, well-positioned:
With previous entries at recent lows established in much the same manner, we are now exposed to the market with seven remaining rest positions at zero risk. Such an approach can afford to negate whether this will be the long-term turning point or not. Profits have been made. Should our plan pan out, then the remaining exposed capital will lead to further profits. Otherwise this remaining position size will stop out at breakeven entry level.
The weekly chart shows now a confirmed situation of a weekly bar takeout. For most traders this is an entry signal while we were already well established. We are playing with the market’s money and profits banked. With this time frame alignment more money is expected to join the long side.
The chart also illustrates the favorable risk/reward-ratio to the right of the chart.
BTC in US-Dollar, monthly chart, early bird:
A glance at the monthly chart shows we are positioned very early and aggressively for this time frame. Nevertheless, as soon as prices might reach US$48,000, we will find ourselves here as well time frame aligned with a bar takeout. Green numbers show our entry prices for January with two entries and February with five entries. Should prices move upwards in our favor, we would take again partial profits near the red horizontal trend line slightly below all-time highs. The remaining positions stays in place for a possible breakout to all-time new highs.
Too late if you are not positioned yet? No! This continuous flow of adding low-risk entry trades followed by partial profit-taking allows participating at all stages of market swings.
Stacking bitcoins winning edges:
In short, you want to have a clear instruction sheet on what to do in whatever market condition bitcoin throws at you. With a set of tools broadly covering all these variants and measuring them, you will be able to act without hesitancy. Then you can hope for the best, since you planned for the worst. Risk control is the core of each advanced trading approach!
We aim to keep it simple, like a card counter, which supports executing high probability winning trades. At the same time, the crowd is confronted by surprising news or fast-moving markets. They use reactionary, inappropriate execution, which in turn creates losing trades.
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Disclosure: This article and the content are for informational purposes only and do not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.