OBV & RSI & Moving Average Crossover Bitcoin Trading Best Strategy
This learn bitcoin tutorial will show an example of a Best Bitcoin Strategy that swing traders can use to come up with a profitable Bitcoin Trading Best Bitcoin Trading Strategy. Based on the popular stocks strategy, where stock investors use volumes to predict bitcoin price direction, based on the concept "Volumes always precede bitcoin price", in cryptocurrency market, there is no central clearing house where volumes are aggregated, so in we use an indicator that will estimate the volumes. This btcusd indicator is known as On Balance Volume.
This btcusd indicator is then combined with RSI & Moving Average Crossover Best Bitcoin Trading Strategy to form a Bitcoin Trading Best Bitcoin Strategy. Indicator settings are:
- 5 and 7 Linear Weighted Moving Average, Linear Weighted Moving Averages
- RSI 14
- OBV
Time frame: 4 H chart
Entry Signal
Buy
- Both Moving Average pointing up
- RSI above 50
- OBV is in an upwards bitcoin trend-line or it has broken downward trend-line
Sell
- Both Moving Average pointing down
- RSI below 50
- OBV is in a downward bitcoin trend-line or it has Broken upward Trend-line
Exit Trading Signal
OBV bitcoin trend line is broken
RSI gives an opposite signal - 50 center mark crossover
You can study more about writing a Best Bitcoin Trading Strategy rules Writing Best Bitcoin Trading Strategy Rules and Generating Signals
You can also Read about other Bitcoin Trading Strategies: Strategies List
Examples of How to generate Signals with This Best Strategy
Before looking at example below, using the 138 pips and 177 pips profit examples, you need to learn the concept of volumes precedes bitcoin price & On Balance Volume technical indicator.
The On Balance Volume trading indicator uses volumes to measure money flowing into bitcoin or money flowing out of bitcoin crypto.
OBV indicator most popularly used for stocks analysis. The concept behind On Balance Volume is that Volume precedes bitcoin price always and when it comes to analyzing the direction of a financial instrument whether a stock or a trading instrument nothing is more crucial to this analysis as understanding the volumes that are flowing in and out of bitcoin crypto. These volumes can be in terms of money, in Bitcoin Trading because charts moves in ticks data, the more flow of money in bitcoin the more the ticks data, therefore volumes in Bitcoin Trading will measure number of tick data participating in cryptocurrency trading.
On Balance Volume acts as a leading indicator giving a one an idea of how much buying pressure or selling pressure is moving into a bitcoin crypto. And because volumes precedes bitcoin price then this can be used as a good technical indicator to show the general investor sentiment.
For a Bitcoin Trading Best Bitcoin Strategy a one requires indicators are calculated differently. For example our Best Bitcoin Trading Strategy is based on
RSI - momentum indicator
MA - direction based indicator
OBV - volume based technical indicator
A Best Bitcoin Strategy like this give a good overall picture of the btcusd trading market movement by taking into account three different calculation methods as opposed to using Three oscillators that give signals based on same calculation method.
The OBV will measure the tick volume of a bitcoin trading instrument, for every candlestick. If you use the 1H chart time frame, then the volumes will measure the total volume for the 1 hour. If you use daily charts then the volume will measure the total volumes for the crypto instrument for the whole day.
However, the volumes indicator doesn't show the direction of the volumes, only differentiating by colors for the different candlesticks, Green for Bullish Candles and Red for Bearish Candles.
This is where the On Balance Volume comes in & adds a direction to the volumes and shows the overall direction that the volumes are flowing, whether into or out of bitcoin crypto.
Volume Precedes BTCUSD Price
Volumes always precede bitcoin price, this makes volumes a leading technical indicator. Knowing how to analyze this helps a trader make better decisions when it comes to predicting where the btcusd market direction is going to be moving to next.
When the volume rises it shows that money is starting to flow into a bitcoin crypto. Because volumes will precede the bitcoin price, the next thing is that the value of bitcoin will then go up. When the OBV is going up it shows there are more buyers buying bitcoin than the sellers selling it.
When the volume falls it shows that money is starting to flow out of bitcoin crypto. Because volumes will precede the bitcoin price, the next thing is that the value of bitcoin will then go down. When the OBV is going down it shows more trading volume is going short than long.
Subsequently when a downward bitcoin trend line of the OBV is broken it shows that sellers are starting to take profit and close their bitcoin orders.
Likewise when the upwards bitcoin trend line of the OBV is broken it shows that the buyers are starting to close their long positions and take their profits.
Because the On Balance Volume will add direction to the volume and form a general direction, a trader can compare the two, the bitcoin price direction and the OBV direction. The direction of these two should correspond but when there is a disconnect between these two then one should pay attention to know when to exit the btcusd market or when to open an order.
On Balance Volume is a leading indicator and a trader using this indicator can avoid entering a market when it is too late. This Indicator is also a good indicator to show when to take a profit early enough before the btcusd market takes away all your profit.
Bitcoin Indicator Formation
The OBV is the cumulative addition and subtraction of volume based on bitcoin price direction.
Upwards direction - adds volume/ technical indicator moves up
Downwards direction - subtracts volume/ technical indicator moves up
Sideways market/Range market - technical indicator moves Sideways
Because bitcoin price moves in a zigzag manner, the OBV indicator will also form in zigzag manner
Bitcoin Price Trend-lines
Most Traders will use these to generate buy & sell bitcoin signals.
For our Best Bitcoin Trading Strategy we shall use the OBV indicator to confirm these buy sell bitcoin trading signals from bitcoin price trend-lines.
We shall draw a Trend-line on both the bitcoin price and Indicator. If both give the same signal we buy or sell depending on the direction.
This strategy will be used to determine two things.
Continuation of the current market direction
Reversal of the current market direction
