1.How to make money on cryptocurrencies?
2. Analysis of Bitcoin futures volume on Chicago Mercantile Exchange
3. Trend analysis.
4. Japanese candlestick analysis.
5. Conclusion. Statistics.
1. How to make money on cryptocurrencies?
Risk management is very important if you want to become a professional trader. In trading, everything starts with risks. It does not matter how much a trader makes in a year. The ratio of profit to maximum drawdown comes first. If a trader has earned 100% per annum, this is a good result. At the same time, if the drawdown has reached 90%, such statistics are unlikely to attract investors. A good profit-to-risk ratio is considered to be 2 to 1. For example, if the annual return was 20% per annum with a risk of 10%, this is pretty good. Such statistics can be attractive to investors. In order to achieve such results, the risk management algorithm must price in all possible risks. In the previous article, we considered the risk per trade. Further, we will discuss other risks.
Day trading risk. This risk determines how much you can lose in one trading day. This risk should be small, for example 3-5%. What is the point? Sometimes there are exceptional events in the world such as terrorist attacks, floods, man-made disasters, etc. This can make the market highly volatile and, accordingly, lead to losses. Therefore, on such days, it is better to close positions at a 5% loss than to continue trading and suffer huge losses. When reaching this maximum risk level, it is worth stopping trading.
This secure approach will protect your deposit and open up opportunities for large capital management.
2. Analysis of Bitcoin futures volume on Chicago Mercantile Exchange.
Apparently, the market has entered a downward correction. Let's consider the levels of the maximum traded volumes based on the Chicago Mercantile Exchange. These indicators show the activity of major market players.
13.05.21 - The level of the maximum traded volume (POC - Point Of Control) - 50040
14.05.21 - The level of the maximum traded volume (POC - Point Of Control) - 49230
The POC has moved down, the price is below the maximum traded volume. The market is moving in a downward trend. In such a situation, according to the volume analysis, you can open short positions.
3. Trend analysis.
The second step in this analysis is to determine the short-, medium-, and long-term trend. It is worth opening trades when the direction of all three trends coincides. Trend analysis is carried out with the help of an exponential moving average:
EMA 1152 (blue) shows the long-term trend on the H1 chart, which is similar to EMA 48 on the D chart;
EMA 288 (red) shows the medium-term trend on the H1 chart, which is similar to EMA 48 on the H4 chart;
EMA 48 (black) shows the short-term trend on the H1 chart.
The price is below all three EMAs. The trends are downward. Therefore, according to the trend analysis, it is possible to open short positions today.
4. Japanese candlestick analysis.
Market analysis with the help of Japanese candlesticks is the third step in this trading system. Let's analyze yesterday's daily candlestick:
The candlestick has closed downwards, the candlestick is black. The low is below the low of the previous candlestick. The candlestick pattern matches the trend. It has a long body and small shadows. According to the Japanese candlestick analysis, it is worth considering sell orders.
5. Conclusion. Statistics.
Volume analysis - SELL.
Long-term trend - SELL.
Medium-term trend - SELL.
Short-term trend - SELL.
Japanese candlestick analysis - SELL.
Conclusion: On May 17, 2021, you can open short positions on bitcoin as different types of analysis provide the same forecasts.
To analyze the effectiveness of this trading approach, you should use statistics. Based on these forecasts, we track the data on completed transactions and open new deals in a separate account. Transactions are made on four instruments: Bitcoin, Ethereum, Litecoin, and BCHUSD. They are analyzed in the same way. Gains for three months amounted to 9.1%, with a maximum drawdown of 4.88% Statement:
We continue to keep the short position on bitcoin open. The stop-loss order has been moved beyond the extreme point of the previous session. Part of the profit has already been locked in.
The risk is not more than 1% per trade, this approach is conservative. According to this system, a stop-loss order is placed beyond the daily low or high, depending on the direction of the trade. We do not set take-profit orders, enabling the price to grow without limits. We follow the trade, moving SL beyond the extreme points of the future sessions.
Since trading is carried out on the daily charts, this recommendation remains relevant throughout the day.
Trade along the trend and you will make a profit!
