Bitcoin (BTCUSD) is exhibiting characteristics of a rising wedge pattern. This chart is designed to illustrate the key features of the rising wedge, as well as discuss potential trading plans around the pattern.
1. The Eye Test: First and foremost, we can clearly observe a narrowing channel moving in an ascending direction which would ultimately form an acute triangle. The wedge formation is a secular movement, meaning that the price trend prior to it's formation is irrelevant.
2. Finding a Trend: The upper and lower boundaries are defined by two rising trend lines displaying a minimum of 5 total touches between the two.
3. It's About Time: The duration is another key characteristic; a rising wedge should take a minimum of 3 weeks to form, which Bitcoin has fulfilled with 70+ days in the current pattern...
I know what you're saying: "but, but, can't rising wedges occur on hourly, or minute long charts?" Of course, but for this idea, I'm relying on the statistical research of Thomas Bulkowski's "ThePatternSite.com" - his work on the Rising Wedge analyzed over 1,400 occurrences.
4. Speaking Volumes: In 79% of occurrences, volume trends downward until the time of breakout.
As demonstrated by the chart, we can see that Bitcoin fits the bill - so what now? The probabilities associated with the pattern dictate a 60% chance of a bearish move vs. 40% of a bullish one. For my trading style, these aren't great odds, but it could certainly be worse. If I were going to place a trade based off of this idea, I would normally look to do so with a defined risk options position such as a vertical spread or even just a long put. Unfortunately, Bitcoin doesn't have yet an options market with adequate volume to employ such a strategy - but all is not lost...
If I were going to trade this idea, I would use FTX's 1x Bitcoin Hedge (HEDGE). I have found these to be pretty cool instruments to trade. It's almost like buying a Put option in the sense that it offers a purely directional trade with defined risk, but since they are ERC20 tokens, you don't have to worry about decay or volatility. Anyway, since the odds aren't demonstrably strong in either direction, this isn't an idea that I'd be particularly excited about trading but a relatively small, defined risk position could yield some nice results.
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If you're not on FTX yet, what are you doing with your life!? They have a lot of really cool products and are rapidly increasing they're trading volumes. Check them out and please consider using my referral code to join if you like what's going on there.
1. The Eye Test: First and foremost, we can clearly observe a narrowing channel moving in an ascending direction which would ultimately form an acute triangle. The wedge formation is a secular movement, meaning that the price trend prior to it's formation is irrelevant.
2. Finding a Trend: The upper and lower boundaries are defined by two rising trend lines displaying a minimum of 5 total touches between the two.
3. It's About Time: The duration is another key characteristic; a rising wedge should take a minimum of 3 weeks to form, which Bitcoin has fulfilled with 70+ days in the current pattern...
I know what you're saying: "but, but, can't rising wedges occur on hourly, or minute long charts?" Of course, but for this idea, I'm relying on the statistical research of Thomas Bulkowski's "ThePatternSite.com" - his work on the Rising Wedge analyzed over 1,400 occurrences.
4. Speaking Volumes: In 79% of occurrences, volume trends downward until the time of breakout.
As demonstrated by the chart, we can see that Bitcoin fits the bill - so what now? The probabilities associated with the pattern dictate a 60% chance of a bearish move vs. 40% of a bullish one. For my trading style, these aren't great odds, but it could certainly be worse. If I were going to place a trade based off of this idea, I would normally look to do so with a defined risk options position such as a vertical spread or even just a long put. Unfortunately, Bitcoin doesn't have yet an options market with adequate volume to employ such a strategy - but all is not lost...
If I were going to trade this idea, I would use FTX's 1x Bitcoin Hedge (HEDGE). I have found these to be pretty cool instruments to trade. It's almost like buying a Put option in the sense that it offers a purely directional trade with defined risk, but since they are ERC20 tokens, you don't have to worry about decay or volatility. Anyway, since the odds aren't demonstrably strong in either direction, this isn't an idea that I'd be particularly excited about trading but a relatively small, defined risk position could yield some nice results.
----------------------------------------------------------------------------------------------------------------------------------------------------------
If you're not on FTX yet, what are you doing with your life!? They have a lot of really cool products and are rapidly increasing they're trading volumes. Check them out and please consider using my referral code to join if you like what's going on there.