Taiwan_Bear

Bitcoin is boring, so let's.....

BITSTAMP:BTCUSD   Bitcoin / U.S. Dollar
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As $7900 weekly resistance is not yet broken we have nothing to trade at the moment. What we can do is to use the time wisely and try to learn more about trading.

Although I have explained why I consider $7900 weekly resistance as significant, many people still asked me why that is. Here I will explain it in more detail.


First, you need to know about top-down analysis. Top-down analysis begins with looking at a chart from a broader picture (ie higher timeframe) to a lower chart time frame. The higher timeframe is considered to be more reliable and less noise. As a trader, we should use the higher timeframe to determine the primary market trend and market sentiment. After the primary trend is established we then need to lower the timeframe to refine entries and stop loss to achieve a better risk reward.

But which timeframe is considered high and which is low? Well, it varies according to each individual’s personality and situation (for eg, whether you can handle stress, or you have limited time to trade) and the trading style (whether you are day trader, swing trader, or position trader). Some may consider 4-hour as the higher timeframe while some may refer daily as the higher timeframe. Regardless, the rule of thumb is that your primary trend shouldn’t be more than 2 timeframe higher than your trading timeframe. If you are trading the 4-hour timeframe, then you should only be looking up to the weekly timeframe to determine the primary trend. (The logic process is shown in the chart above)

What I mean 2 timeframe higher above is of a factor of 4 to 6. For example, one timeframe higher than 15min is 60min (x4), 60min is 4hour (x4), 4hour is daily (x6), and daily is weekly (x5).

Now, you should have a better understanding of what top-down analysis is. Let’s apply it into analysing the current BTC price movement.

I am mainly a swing trader and thus my trading timeframe is mainly the 4hour timeframe. This means that I refer up to the weekly timeframe to determine the primary trend. On the weekly chart, we can see the major 2018 resistance (around 6k) was broken in 2019. This means that there is a possibility the current pullback from $13.8k to $6.5k is the second wave of a new bull market. For that reason, I am looking at which price level I would be interested to buy. Then, I draw a fib retracement between $3.1k to $13.8 to see if the 0.618/0.65 or 0.786 retracement is in confluence with any significant support. And bingo! - the 0.65 retracement happens to be where the significant support is at around $6.8k. (Below is where I told you the 0.618/0.65 fib is in confluence with the structure)

In Nov 19 the weekly support of $7900 was broken. The used-to-be support has turned into resistance. I then drew a range that reminds me of the resistance. Now, we have a confirmed resistance around $7900 and a possible support around $6800. At this stage, I am expecting a possible range happens between $7900-$6800 due to both price levels are significant. Remember, they are WEEKLY resistance/support, and not 15mins. (Below is where I showed you the possible ranging market)

Now I have defined the primary trend and structures so I know at which price level I would be interested to buy. The next step is to lower the timeframe to one or two degree lower (daily or 4hour) to see whether there is a trade setup to enter a position. There wasn’t any obvious signal on the daily timeframe so I narrowed it down to the 4hour. Then after the 25th of November, I can see $6600 is an important support and if price ever goes there again, I would be interested in buying. (Below is where I told you how to trade using the 4hr timeframe)

Can you see how I use the top-down analysis to determine the primary trend and refine my entry points using a lower timeframe? This is how you should be trading, certainly not comparing between gold and Bitcoin , or a prediction for BTC to go to $10k or higher without knowing where to set your stop loss. If you have not yet learnt a lesson from the 2018 Bitcoin crash, I suggest you leave trading as you will be paying more fees to the market.

If you have learnt something and would love to see more of education posts from me on how to trade, make sure you press that like button for me to continue giving these trading insights to you for free.
⚡️Bybit - exchange I use
https://partner.bybit.com/b/taiwan_bear

⚡️Binance - https://www.binance.com/en/register?ref=GH2HZ2VM

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最近更新都在Youtube上 - "大熊交易學院"

Comments

Thanks!
+1 Reply
Nice explain, thank you a lot
+1 Reply
Yeah, trading should be simple. Well done TB!!
+1 Reply
@LjBabic simple is the key! Cheers
Reply
Best "Top Down" explanation, with charts, on TradingView, I have seen. Trade what you see, not what you hope to see. Appreciate your effort and experience, TB!
+1 Reply
@Ydnar No worries. Glad you got my point! And thanks for the continuous “like” on every of my posts.
Reply
BTC is not Bitcoin. Its segwit coin. BSV is real Bitcoin from White Paper.
+1 Reply
What usefull and amazing post.... clever and sharp as ever, Tks !!!
+1 Reply
Taiwan_Bear DiggerClouds
@DiggerClouds glad you found it useful! Will try to do more educational post if time allows me (each time took me around 4-5hrs)
Reply
Incredible, you should have the most amount of views on TV
+1 Reply
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