I only trade Bitcoin and Bitcoin has many variables. I assume you’re experienced with the many variables. If you’re just starting this article isn’t for you.
Technical analysis generally tells me what other traders are thinking. For me just TechnicalAnalysis isn’t enough for me to confidently pull the trigger. I do factor in various variables. Prior weekly-monthly-close, open-interest and funding rates, CME gaps, network-difficulty, orderbook-depth etc, volume profile -POC, LVN, HVN’s. All these variables do increase you probability. I don’t know what is going to happen with 100% certainty. With 70% + probability and excellent risk-management that factor in R-multiple. You can be profitable long-term.
I will explain in the next post, why trading Altcoins is pretty much gambling.
There are other forces in the markets that make Technical Analysis often doesn’t account for… For example, Network difficulty will affect the profitability rate for bitcoin miners. If the hashrate is high and network difficulty increases.. a percentage of the network will mine at a loss. When miners go out of business, it can generally results in 10-50% drops. (Miners have to sell their newly mined Bitcoin for Fiat to cover the mining-expenses.) The market must absorb 27000 newly mined bitcoins per month or price will tank and break support. We’ve seen 52 difficulty drops in difficulty since 2009 and I am expecting one soon. Price has a major effect on where miners exits. This is all I am willing to share.
[PAID] Tradingview Pro (contains referral) – This is your bread and butter for charting. $155 to $600 a year. Only useful for telling you majority of the traders are thinking.
Tools for measuring the combined (aggregated orderbook depth) from all the spot-exchanges. Meaning combined depth of the market. This data should be measured in real-time near key support and resistance levels. Depth of market indicates pending price-levels with large amount of buyers-sellers. This data is important for large players, their key-concern is slippage. Orderbook-depth should be combined with orderflow and volume-deltas. A candle may print green but you can’t see the delta or difference between buyer and selling power. What you want to look for is how much selling was absorbed by buyers at key-support-key-resistance levels. If you see supply-absorption, a reversal is imminent.
[FREE] https://vcdepth.io/coins/bitcoin-btc Market Depth Ratio is very limited. (No referral link)
[PAID]https://www.trdr.io $200 a year for the pro version. This is my favorite tool so far. (No referral link)
Thanks, to whalepool for proving what I had suspected for a long-time. Volume Validation.
Take my advice, disable all exchanges and only leave kraken bitstamp bitfinex, gemini visible. Filter out all the exchanges that execute fake orders.
If you’re gonna switch to Bitfinex, please be so kind to my referral thanks.
Liquidity analysis tools.
Software that allows you to see inside the candle. Useful for seeing strength at key support/resistance levels. Compare the Volume Delta’s to measure the strength of a bearish or bullish candle.
MTGOX ColdWallet Monitor
I’ve listened to dozens of podcast from top traders around the world and all the top-traders have 1 thing in common, they are masters of a particular trading-system. They are specialists, not generalist. They trade under very specific conditions. This is incredible useful information because it allows you to understand how they deal with the emotions that comes with trading big sizes. Trading big positions is no joke, thousands of dollars are made or lost every second. Some traders remain rational and unshaken, some freeze and capitulate to their emotions.
I think their confidence comes from repetition and trading the same system over and over again and expecting the same results. Confidence is important to scale your position-size. Every time you adds zero’s to your notional value (total position-size) your wins and losses are amplified.
Personality ? Analyst types do well in the markets and analyst types like INTP, INTJ make up 1-2% of the population. I know large portion of the top traders on bitmex have a background in either Engineering or Software-development. A field dominated by logicians, architects…. logic and rational reasoning prevail in the markets and the markets aren’t random. There is a method to the madness.
Foundation (The core)
Realistically speaking, to become a consistently profitable trader will take months or even years. Youtube ,instagram, twitter traders make it look easy just trade with ”indicators”.. but they are most likely phonies trying to sell you a trading course. There were a few good altruistic Samaritans like white-wolf-trader on youtube, giving people free solid knowledge about price action, candle-closes swing failure patterns, liquidity-grabs. I think, he removed the videos because the knowledge was effective. This market is zero-sum and we need losers to pay for our wins.
Remember that ALL Indicators are derived from price-action and candle Open-Close-High and Lows anyone who is selling you a trading course that revolves around indicators is telling me that he doesn’t really understand the importance of pure price-action. (inside bars, bump and runs, outside bars etc) Therefore, I highly doubt that this person who is selling you course, actually makes money in the markets. Why even sell courses when you can make potentially $1k-$5k day just trading futures. Caught few of these ”salesman” selling signals before the candle closed then wonder why their indicator isn’t reliable. Just basic shit like this, tells me you’re faking the funk. Signals often change prior to candle-close, this is called repainting, common knowledge.
Munehisa Homma invented Japanese Candlestick charting 400 years ago in Japan, we still use his system today and they work.
Start with price-action as your foundation. al brooks bar by bar is a good book.
The importance of CandleStick Charting
The following topics are very board and books can be written about them. Smart money orderflow (how institutions trade), risk-management, price-action. You should buy books about them and read them.
Funding rate + Open Interest
There is a debate whether funding-rates forecast dumps or pumps. When open-interest is high and the funding-rate is high (above 0.1%), The probability of shorts or longs covering their position is high, period. Hence, why I always take partial or full profit and so should you. If shit goes down, high open-interest and slippage can take a large chunk of your gains. The ADL auto-deleveraging system on bybit and bitmex prioritize liquidations before marketstops. There also added risk that Bitmex will go offline ”server problems” when liquidity runs dry, instead of taking liquidity from the fucking insurance fund bitmex goes down and blames it on DDOS attacks.
I think CME gaps are self-fulling prophecy. More than 90% of the gaps get filled, when they get filled is another question. The probability of a gap-fill is HIGH. Look under stocks for the ticker BTC1! to see the CME chart and count how many times gaps got filled.
CME Monthly Closes
I am inactive, 12-24-hours before the CME Monthly Close. I only trade the hours after the Monthly Close. It’s just a safety pre-caution. I fear some rogue traders could be banging the close. CME futures expire every last friday of the month.
Mainly used for scalping…
https://tensorcharts.com includes features like footprint data, volume delta’s, cumulative volume delta’s, honestly I don’t know it can be used together to for forming a strategy. I still haven’t invested the time to learn this, neither will I. Spoofing is illegal but this happens every minute in the cryptospace, I don’t see the point of scalping with orderflow when most of the orders are just bait and pulled within split seconds. Happy to be proven wrong. Comment section down below.
Expect above average volume/momentum during daily–weekly closes. Especially with bullish/bearish engulfing closes above/beneath prior bars. When the daily closes in Europe, the daily opens in Asia. Study price-action to take advantage of the daily-weekly closes. They are money-makers.
You cannot be profitable long-term without understanding R Multiple, R multiple represents the dollar amount that you risked for each trade. Search for edgewonk math cheat-sheet to plan your campaign. Study R-multiple/win-rate.
Always use some sort of hedge. Bitmex is often misunderstood as a trading platform, it’s not. It’s actually a hedging platform for semi-professional traders.
bookmark and study it.
Scaled orders are used to average out your entry price at key support and resistance levels. It’s also known as Dollar Cost Averaging DCA for short. All professional traders scale in their orders to get the best price. To do it like a boss, you need 3 things wide-spreads, very high scale coefficient, and capital management skills.
Use wide-spreads and very high scale coefficient if you’re unsure. I generally have a idea where support ”might” be, when I scale in buy-orders, I only use 25% of my entire trading capital so I leave enough ”wiggle” room in case I need to average down more and I also use wide spreads with very high scale coefficient. High scale coefficient is important so your averaged out entry price keeps up with the mark-price.
Candle closes on higher-time frames are very important, they often signify important Support –Resistance Levels.
Linecharts provide clarity. Line-charts ignore wicks (shadows) and only plot closing prices of the candle. Line charts allow you to see Support And resistance levels clearly.
This is my go-to system for trading. Been trading this system for 3-4 years. I want to save you $5000-$10000 from fake-trading gurus on youtube like crypto-ernie that sells volume-profile courses. I will only cover 70% of this subject. The other 30% will not be shared publicly. That is my edge and I would like to keep it.
Volume profile plots the amount of volume traded at a price level. If you think in probability and statistics, this is your go-to-indicator. Visualize the Volume Profile in terms of
- Mean = average value –
- Median = middle value
- Mode = the most frequent value
- Range = the difference between the lowest and high value.
Any deviation away from the mean is a opportunity to sell or buy. Markets revolves around value, mean, fairprice. I trade mean reversions, betting that the price eventually returns to the mean or fair-value, average. This is not a law, this is not guaranteed, hence why I say betting as in gambling but the probability is high. Proper risk-management is required to ensure you don’t get rekt. The probability is high around 70%.
Volume Profiles reveal price levels with high levels of interest. The market deems these levels as fair-price, fair value. From a statistics point of view.
- POC (point of control) = Mode (price-range with the highest amount of volume traded)
- Value area = IQR interquartile-range (price-range with the highest amount of volume)
- ValueAreaHigh – ValueAreaLow represent Standard Deviations from the mean (average-price) Basicly it comes down to this concept. Is the asset over or under valued. The amount of volume traded at a certain price can be viewed as a proxy for market interest.
This isn’t a free indicator. You need tradingviewPro and should be combined with price-action concepts, Japanese candlestick reading, Note : We are making educated bets on probability. In trading there is no 100% guarantee with the exception of insider-trading.
VALUE AREA LOW – VALUE AREA HIGH
If price surpasses ValueAreasLow or ValueAreaHigh (StandardDeviation 2.0-3.0 of the bellcurve. Price is either undervalued or overvalued. The market will react by selling or buying.
In rare cases price will keep on rallying beyond VAL or VAH. Beyond VAL is further downside, beyond VAH is further upside in other words a trend is formed. The foundation for a down or up trend is a supply-demand imbalance.
- Uptrend – demand greater than supply
- Downtrend – supply greater than demand
Supply/Demand imbalances cannot form without a auction process also known as consolidation.
Point of control and high volume nodes
The POC (point of control) would the equivalent of mode as in (median, mode, mean, range statistics) This price-level has the highest amount of volume traded at price. This price level is considered fair value, hence why most of of the volume occur at POC and HighVolumeNodes. Think of fair value of a price level with high market interest.
Price always returns to POC after being rejected by ValueAreaLow or ValueArea High. Then bounce off POC or rotates around POC.
HVN’s (HighVolumeNodes) and POC’s (Point of Control) are price levels which the market deems as ”fair value”. When price comes in contact with HVN or POC, price rallies will often halt. In a few very rare occasions price breaks through a POC or HVN caused by massive long-short liquidations.
- POC = point of control
- HVN = high volume node.
Back to the topic of a HVN or POC. When Price comes in contact with a HVN or POC. Any price advance will be temporary halted. You will often see icebergs, hidden orders at these levels. The market deems these levels as fair value. Retail liquidity is fairly active at HVN’s and POC’s.
Expect price congestion, chop, sideways price action around POC and HVN’s in rare occasions whipsaw’s. Price rotates around fair value, market is in equilibrium (balance). Demand is meeting supply, supply is meeting demand, hence why price is congested stuck in a range. Market is in balance, so to speak. Buyers and Sellers both agree on fair value. Market has found a agreeable price.
Lots of passive liquidity in the form of marketstops is collected at POC, HVN both distribution profiles can become hotspots for massive breakouts or break downs if market-stops gets triggered through stophunting.
”can” because not all breakouts are true, they can be false ofcourse. How I can tell whether a breakout is most likely true or false is hidden-in-plane-sight in my articles. Hint : Outer-deviations of the bolllingerbands on incrementally higher timeframes.
- HVN’s and POC’s act like price magnets because these levels shows high levels of market interest. Price has the tendency to return to POC and HVN’s .
- Fair price is also the average price is the price that the market deems as fair value. The expressions Fair value and the average price and static mean are interchangeable. Not to be confused with dynamic mean, which is the moving average. Price often returns to price-levels deemed as fair-value.
- When price comes in contact with a HVN or POC price rallies often come to a halt. HVN’s or POC represent a price level with high levels of market interest. Lots of volume is being traded at these levels. So it makes sense for a rally to come to a halt at price levels with high market interest. Both buyers and sellers deem these price levels as Fair Value. The market is in balance so to speak, imbalances between supply/demand ignite trends.
- On a LowerTimeFrames, HVN’s and POC’s are not formed immediately, this process takes time. A new range starts off platykurtic or mesokurtic then slowly transform into leptokurtic distribution. To make sense of this phenomenon. Correct me if I am wrong. Market revolve around fair value, when a price enters a new range, market consensus on fair value has to be decided. This is the price discovery stage aka Mesokurtic distribution. Lots of volatility… (unfinished auction) Price will rotate between Value Area High and Value Area Low. During the auction process also known as finding market consensus process, the buyers and sellers are looking for ”fair value”. During the auction process, the range slowly contracts, it gets tighter. Buyers/Sellers are front-running each other, competing for the best sell/buy price because the market is double-auction. Buyers and Sellers are ”front-running” each other before consensus fair price is found. When buyers and sellers agree on a price, we call that fair-value. When fair value is found, volatility decreases, price range gets tighter, market is in balance. Apply a bolllinger-band to see this process in action. Hence I am extremely confident in longing and shorting in mesokurtic accumulation-distribution ranges. Mesokurtic distribution is a fancy word for the auction-process, price discovery stage, finding fair value stage, market-consensus on fair value stage. Why is this information so important? During mesokurtic distribution, price will not breakout or breakdown yet. Hence, why you can safely scalp these ranges. A brief window of opportunity to make a few extra bucks. Price will be stuck in the range. Long and short the fake-outs. To do this like a pro, you need to analyze multiple timeframes. I will not get into the exact details, that is my edge.
Kurtosis is great for revealing what type of distribution, you’re gonna get.
Mesokurtic distribution– great for swing trading, price is in discovery mode, high volatility, price doesn’t stay in 1 place but oscillates upside down.
Platykurtic distribution– price levels with no interest from buyers or sellers – liquidity voids. Price levels devoid of any liquidity. Price moves through these levels very fast.
Leptokurtic distribution– distribution or accumulation levels, lots of volume in a tight-range, market is balanced, buyers-sellers agree on price, low volatility, congested price movements. Breakout or breakdown is imminent. Don’t fuck around with OneCancelsTheOther order types, SwingFailurePatterns will fuck you up, they happen so often.
Mesokurtic distribution. Price will not spend alot of time on 1 price level. Market hasn’t found fair value and the market revolves around ”consensus or fair value” both buyers and sellers agree on. Mesokurtic distribution is great because of the high-volatility, minimal congestion. It’s fair to say price is in discovery-mode.
The market will eventually find fair value or consensus. When that happens a Mesokurtic distribution profile will slowly transform into a Leptokurtic distribution profile. Price will spend alot of time in leptokurtic price ranges, the range will be tight, lots of passive-liquidity is being collected in the form of marketstops. When you see a leptokurtic distribution profile – breakdown-breakout is imminent. Depending on the timeframe, higher-timeframes produce bigger breakdowns or breakouts.
LVN – LOW VOLUME NODES
LVN – LowVolumeNodes are price levels devoid of historical volume traded at price. Price either breaks through price levels with high velocity or you see a rejection. In ranging markets, the probability of a rejection of LVN’s is high. Meaning price is likely to bounce from these levels.
When price rallies towards LVN and you are expecting a bounce or rejection from the LVN. Volume should decrease, Momentum should decrease, Switch to a lower-timeframe and observe how the candles are closing, if you are expecting a rejection from the LVN. The candle-bodies should consecutively become smaller.
Around LVN’s is where you would want to scale in or ladder in your limit-buys if you’re trading the range.
Low Volume Nodes – advanced
Reverals at LVN’s are high probability to increase probability.
Check how it was closed (doji, inverted or normal hammer etc) if you have access to footprint charts. then look inside the candle with footprint charts and look for strength with volume delta information.
Unrealized profit = Imaginary profit
Very misleading article from wallstreet-coindesk. Fact is, less than 10% of people who call themselves ”crypto-investors” take (full) or (partial) profit during bull-bear cycles. Unrealized profit is imaginary profit. Always secure profit during distribution campaigns. Use the capital gains to re-accumulate during accumulation campaigns or hedge against future losses.
The 2017 crypto-boom was a outlier.
Common-sense? Yes, but how many ”investors” who think and call themselves investors know how to properly chart. Hurrdurr Technical Analysis doesn’t work. That is what the Big-Funds wants you the believe. Retail volume doesn’t call the shots. Never did, never will. Take this data with a grain of salt. But it provides you a idea, how the market works.
Less 4% of the bitcoins in circulation are being traded. The other 96% of the supply are withheld to enforce scarcity and used to manipulate the prices. The institutions who control the supply will control the price. For traders this is heaven.
Bitcoin will be halved around May 2020. We will see a small bully rally before the halving. I am expecting a sell-off before the halving event. Similar to the Litecoin Halving in 2019. Be prepared for a massive bull-trap. When Litecoin broke support, media was hyping up the halving event. Handful of people got super-rich in 2017, more than 90% of the people who didn’t sell got financially ruined. Expect some fuckery leading up to the halving-event. I am guessing 2020 will be a bearish year.
Expect resistance around $10,000 (rough number) . Orderblock at $10,000 needs to be cleared, may take few retest to fully absorb the supply. With supply. I mean disgruntled left-behind bagholders who didn’t sell above $10,000. If these blocks get taken out, price will rally higher. But I don’t think it happen this year. We haven’t seen capitulation yet.
I am not expecting halving-mania parabolic phase that will launch bitcoin to $20,000 in 1 wave. A more realistic scenario would be a slow grind, multiple retest around $10000 to fully absorb the supply.
Two types of money left in this space. Traders and baghodlers.
Traders took profit above $10,000. Bagholders held on above $10,000, expect some break-even selling at $10,000.
Price will just rotate between $10,000 (realisticly $8000) and $6500 through out 2020.