Bitcoin Puzzle. Use of Tech/Sent/Fundamental Analysis for timing
In this trading Idea, I will study Technical, Sentimental Analysis for finding trend reversals/continuations with swing/position trading.
Part 1. Technical Analysis
Indicators (I do not take decisions just watching indicators)
The idea behind indicators is simple - everybody watch and make decision with them. There are tons of indicators and all they are pretty cool but I believe that it doesn't matter what indicators you use, but how you use them. If an indicator has proved to be reliable in past over the period of time, it might be reliable in future.
I have found that RSI, BolingerBands, 20 wma and 200 wma might be pretty useful for further analysis:
RSI levels with value of 30 and 54 on weekly charts are of big interest whenever price approach these levels.
20 wma worked great as support in the uptrend and as resistance in the downtrend. It's irrelevant in consolidation period.
200 wma worked as support for the previous bear market.
Deep penetration into the lower BolingerBand were immediately followed by the pullback. Smooth touches of the lower BolingerBand were also followed by pullbacks. At December 18 of 2018 the price keeps staying under lowerBB for almost 4 weeks which might be useful for BB reentry setup that I will cover later.
Part 1. Technical Analysis
Indicators (I do not take decisions just watching indicators)
The idea behind indicators is simple - everybody watch and make decision with them. There are tons of indicators and all they are pretty cool but I believe that it doesn't matter what indicators you use, but how you use them. If an indicator has proved to be reliable in past over the period of time, it might be reliable in future.
I have found that RSI, BolingerBands, 20 wma and 200 wma might be pretty useful for further analysis:
RSI levels with value of 30 and 54 on weekly charts are of big interest whenever price approach these levels.
20 wma worked great as support in the uptrend and as resistance in the downtrend. It's irrelevant in consolidation period.
200 wma worked as support for the previous bear market.
Deep penetration into the lower BolingerBand were immediately followed by the pullback. Smooth touches of the lower BolingerBand were also followed by pullbacks. At December 18 of 2018 the price keeps staying under lowerBB for almost 4 weeks which might be useful for BB reentry setup that I will cover later.
Comment:
There is a pretty good book on chart patterns by Thomas Bulkovski and I will base my decisions his studies --- libgen.io/book/index.php?md5=6A06B9...
Comment:
3. Sentimental Analysis
Interesting that 90% of my friends lost money over the period of the time and I am not sure if there are successful day traders. 99% of them lose money while gold 1% pick pennies and chronicle nerve-diseases. I encourage everybody to become a rational swing trader who may hold his position from 1 week to 1 year. I think that sentimental analysis might be useful for aggressive traders (all in, all out) like for predicting both break outs and reversal points.
I believe that all markets are like casinos where large institutions who are running the show and establish the rules by manipulating the market and retail traders like us are just gamblers. More on market manipulation read here - stockcharts.com...schoos/doku.php?id=chart_s...
From Sentimentrader: “When public opinion reaches a consensus, it is usually wrong - they get too bullish after prices have risen, and too bearish after they have already fallen. Because of that tendency, we very often see extremes in opinion right before major changes in trend. When the public reaches a bullish extreme - a great majority thinks prices will keep rising - then we most often see prices decline going forward instead. And when they become too bearish, then prices tend to rise. --- Jesse Stine. In other words - the public is often right during the trend, but wrong at the both end.
To calculate this gauge of public opinion, we should use indexes based on what do people do.
Interesting that 90% of my friends lost money over the period of the time and I am not sure if there are successful day traders. 99% of them lose money while gold 1% pick pennies and chronicle nerve-diseases. I encourage everybody to become a rational swing trader who may hold his position from 1 week to 1 year. I think that sentimental analysis might be useful for aggressive traders (all in, all out) like for predicting both break outs and reversal points.
I believe that all markets are like casinos where large institutions who are running the show and establish the rules by manipulating the market and retail traders like us are just gamblers. More on market manipulation read here - stockcharts.com...schoos/doku.php?id=chart_s...
From Sentimentrader: “When public opinion reaches a consensus, it is usually wrong - they get too bullish after prices have risen, and too bearish after they have already fallen. Because of that tendency, we very often see extremes in opinion right before major changes in trend. When the public reaches a bullish extreme - a great majority thinks prices will keep rising - then we most often see prices decline going forward instead. And when they become too bearish, then prices tend to rise. --- Jesse Stine. In other words - the public is often right during the trend, but wrong at the both end.
To calculate this gauge of public opinion, we should use indexes based on what do people do.
Comment:
3.1 Amount of Long/Short Positions Bitfinex (Never base decisions just by Sentimental Analysis. Instead use it with tech Analysis).
---- How to use it to find a trend reversal.
---- How to use it for trend continuation.
---- How to use it to spot a consolidation.
---- How to use it to find a trend reversal.
---- How to use it for trend continuation.
---- How to use it to spot a consolidation.
Comment:
The 3 stage model above will explain you how to use Short/Longs in order to exploit retail traders while following smart money. We may apply this model everywhere and it doesn't have to be so precise.
Retails are short-term oriented and I have never seen that a looser studied weekly charts or even monthly. Retails use popular technical analysis techniques like trendlines, candlesticks, indicators, elliotwave, whatever that doesn't make any logical sense and smart money will use it against them. By the way, false break outs through the trendline or support may be done for stop hunting or even scarring the shit out of everybody.
Conclusion: Anything popular is shit even your favorite singer. There are tones of better singers.
Retails are short-term oriented and I have never seen that a looser studied weekly charts or even monthly. Retails use popular technical analysis techniques like trendlines, candlesticks, indicators, elliotwave, whatever that doesn't make any logical sense and smart money will use it against them. By the way, false break outs through the trendline or support may be done for stop hunting or even scarring the shit out of everybody.
Conclusion: Anything popular is shit even your favorite singer. There are tones of better singers.
Comment:
In the example above I used only BTCLongs chart. See BTCShorts and if the chart is doing completely the opposite - then you have a great time to apply this strategy.
Comment:
Now, when both short and longs have risen - this simply means the continuation.
Comment:
3.2 BTCShort/Longs (%) (Can't be used by itself)
Good tool to see Short/Longs in percentage --- datamish.com/d/...00000004/btcusd?refresh=20...
How do I use this?
1. 60/40 levels is usually support/resistance levels and I try to find reversals when the value approaches to 60/40.
2. Spike of Longs in an Uptrend I consider as confirmation. The same with shorts.
3. In anticipation of the break out. Say we have a symTriangle with a downtrend and then we see that right at the end of the triangle longs has entered dramatically. Thats would be a perfect clue for anticipation.
Good tool to see Short/Longs in percentage --- datamish.com/d/...00000004/btcusd?refresh=20...
How do I use this?
1. 60/40 levels is usually support/resistance levels and I try to find reversals when the value approaches to 60/40.
2. Spike of Longs in an Uptrend I consider as confirmation. The same with shorts.
3. In anticipation of the break out. Say we have a symTriangle with a downtrend and then we see that right at the end of the triangle longs has entered dramatically. Thats would be a perfect clue for anticipation.
Comment:
How to use short/price + longs/price data in order to predict the price? Use these 4 additional rules.
1. Spike in longs + weak/average bullish candlestick = bullish exhaustion.
2. Spike in shorts + weak/average bearish candlestick = bearish exhaustion.
3. Spike in longs + Strong Bullish move in early stage of a trend = reversal
4. Spike in shorts + Strong Bearish move in early stage of a trend = reversal
1. Spike in longs + weak/average bullish candlestick = bullish exhaustion.
2. Spike in shorts + weak/average bearish candlestick = bearish exhaustion.
3. Spike in longs + Strong Bullish move in early stage of a trend = reversal
4. Spike in shorts + Strong Bearish move in early stage of a trend = reversal
Comment:
3.3 Social Sentiment
I use some good tools to gauge overall market mood from social media:
activetrader.cm...cts/EquityIndex?dt=ohlc&am...
enroyd.com/BTC_Sentiment/
www.coindesk.com/
I use some good tools to gauge overall market mood from social media:
activetrader.cm...cts/EquityIndex?dt=ohlc&am...
enroyd.com/BTC_Sentiment/
www.coindesk.com/
No guarantees exist that any pattern will act according to textbook rules. For this reason, I will trade chart patterns only if I understand what is behind the fundamental and sentimental scene and make decision combining them altogether and according to strict planning that encompasses both breakout and failure strategies.
Perhaps, the only one thing that I do not understand about any chartpatterns trading strategy are targets. Why in descending triangle the height of the triangle is the next target? I do not believe that smart money will buy a these points just because there are popular ideas about targets. Instead, they will do completely the opposite of what the cannon fodder do.