Trade identification: Using bitcoin as an example

thesharkke Mod Updated   

Trade identification is the process through which you are able to identify setups that can be actioned on in the markets. For this example, I shall be using the BTCUSD chart to chant my path as I look for tradeable setups.

1: Structure drawing
Identifying the structure of trades is very key since it creates a sense of knowing where the market is at from a greater point of view.

The structure on a 2 weeks chart shows that the crypto is at the top of the chart. This shows that it might not be a good time to buy since it is advisable to buy at the bottom and sell at the top. However, we can always look for smaller trades using lower timeframes and get better setups.

2: Move to lower time frames & identify patterns.

Patterns are very key in helping you identify tradeable assets. For my asset I moved to the 6h timeframe to zone in and identify tradeable opportunities. This helped me identify the Expanding triangle setup on a bigger scale.

This is a sideways move that will help me trade on the asset for the short term. In the expanding triangle I was able to identify other smaller correction patterns that guide me on how the market is moving.

3: Entry identification
After you have determined where you are at in the eco cycle, very key is now to identify the next causes of action. You must never trade at the top (buying overpriced assets). Very important is to always note that there will always be more opportunities in the future and never to chase trades that have already gone. The ideal situation is to look for corrections as entry points and buy/sell with them.

Next now will be to look for areas where you can enter on an even lower timeframe.

The chart shows that a correction is happening on a lower timeframe (1hour). Now have an alert at the bottom of the correction also coupled with indicators.

Thats the entry point of the trade.

4: Target setting
The exit target shall be set using the 6 hour chart and will be at the top. A stop loss will be just behind the trendline as shown below. This is very key for risk management.

Now wait for the price to come close to your entry points and good luck. We shall follow this trade to end.
Trade active:
Trade active:
Trade active:
Trade closed: target reached:



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