Bitcoin Trading Generate Bitcoin Trading Signals with a Strategy
How Do You Trade Bitcoin and Generate Bitcoin Trading Signals with a Bitcoin Trading Strategy?
This bitcoin tutorial will show an example of a Best Bitcoin Strategy that swing traders can use to come up with a profitable Bitcoin Best Bitcoin Trading Strategy. Based on the popular stocks strategy, where stock investors use volumes to predict bitcoin trading price direction, based on the concept "Volumes always precede bitcoin trading price", in Bitcoin 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 Best Bitcoin Strategy. Indicator settings are:
- 5 and 7 Linear Weighted Moving Average, Linear Weighted Moving Averages
- RSI 14
- OBV bitcoin technical trading indicator
Time frame: 4 H chart
Entry Signal
Buy
- Both Moving Average pointing up
- RSI above 50
- OBV cryptocurrency indicator is in an upwards bitcoin trend line or it has broken downwards bitcoin trend line
Sell
- Both Moving Average pointing down
- RSI below 50
- OBV cryptocurrency indicator is in a downward bitcoin trend line or it has Broken upward Trend line
Exit Trading Signal
OBV cryptocurrency indicator 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 Bitcoin Signals
You can also Read about other Bitcoin Strategies: Strategies List
Example of Trading Cryptocurrency 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 and On Balance Volume technical indicator.
The On Balance Volume trading indicator uses volumes to measure the money flowing into a crypto instrument or money flowing out of a bitcoin crypto.
OBV cryptocurrency indicator most popularly used for stocks analysis. The concept behind On Balance Volume is that Volume precedes bitcoin trading price always and when it comes to analyzing the direction of a financial instrument whether or a crypto instrument nothing is more crucial to this bitcoin analysis as understanding the volumes that are flowing in and out of a bitcoin crypto. These volumes can be in terms of money, in Bitcoin because charts moves in ticks data, the more money in a crypto instrument the more the ticks data, therefore volumes in Bitcoin will measure number of tick data participating in a bitcoin crypto.
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 technical indicator to show the general investor sentiment.
For a Bitcoin 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 cryptocurrency indicator - 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 cryptocurrency indicator will measure the tick volume of a crypto 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 Bitcoin Candlesticks and Red for Bearish Cryptocurrency Candlesticks.
This is where the On Balance Volume comes in and adds a direction to the volumes and shows the overall direction that the volumes are flowing, whether into or out of a bitcoin crypto.
Volume Precedes Bitcoin Price
Volumes always precede bitcoin trading 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 trading price, the next thing is that the value of a crypto instrument will then go up. When the OBV cryptocurrency indicator is going up it shows there are more buyers buying a crypto instrument than the sellers selling it.
When the volume falls it shows that money is starting to flow out of a bitcoin crypto. Because volumes will precede the bitcoin trading price, the next thing is that the value of a crypto instrument will then go down. When the OBV cryptocurrency indicator is going down it shows more trading volume is going short than long.
Subsequently when a downward bitcoin trend line of the OBV cryptocurrency indicator is broken it shows that sellers are starting to take profit and close their bitcoin trade orders.
Likewise when the upwards bitcoin trend line of the OBV cryptocurrency indicator is broken it shows that the buyers are starting to close their buy cryptocurrency trades 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 trading price direction and the OBV cryptocurrency indicator 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 bitcoin 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.
BTCUSD Indicator Formation
The OBV cryptocurrency indicator is the cumulative addition and subtraction of volume based on bitcoin trading 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 trading price moves in a zigzag manner, the OBV cryptocurrency indicator will also form in a zigzag manner
Bitcoin Price Trend lines
Most Traders will use these to generate buy & sell bitcoin trade signals.
For our Best Bitcoin Trading Strategy we shall use the OBV cryptocurrency indicator to confirm these buy sell bitcoin trading signals from bitcoin trading price trend lines.
We shall draw a Bitcoin trend line on both the bitcoin trading price and Indicator. If both give the same signal we buy or sell depending on the direction.
This bitcoin strategy will be used to determine two things.
Continuation of the current market direction
Reversal of the current market direction
Example of this Strategy
1. Downwards Bearish Market
In the above chart the first half of this crypto instrument is bearish. This can be shown by the bitcoin trading price trend line that shows a downward direction. This bitcoin price downward bitcoin trend line is also confirmed by the downward bitcoin trend line on the indicator - as long as these two move in the same direction then the direction of the crypto instrument remains decisively downwards.
Because volumes precede bitcoin trading price, a trader can hold on to his sell cryptocurrency trades because the btcusd trading market direction will not reverse, before OBV cryptocurrency indicator gives a warning.
2. Bitcoin Trend Change
Halfway through this chart there was a bitcoin market reversal marked by the vertical line. This reversal cryptocurrency signal was generated when there was a trendline break as shown on the bitcoin chart.
From the cryptocurrency chart you can see that the OBV cryptocurrency indicator gave the reversal cryptocurrency signal just before the bitcoin trading price trend line was broken generating a reversal crypto signal. If you had opened a sell this is where you would have closed all your trades.
3. Upward Bullish Market
Trading a bitcoin market reversal can be sometimes tricky, but the reversal cryptocurrency signal generated above was generated at the optimum time and bitcoin trading price continued to move up after this reversal cryptocurrency signal was generated.
For this you would have just bought the crypto instrument when the two trend lines were broken to the up side giving a buy crypto signal. This buy was also a good signal in that the On Balance Volume had already formed an upward bitcoin trend line by the time the downward bitcoin trend line was broken.
The new OBV cryptocurrency indicator upwards bitcoin trend line confirmed the direction of the market as a buy and more bitcoin traders will open buy bitcoin orders and as long as it holds, as it did in the above example then the bitcoin trading price will continue moving upwards.
After this cryptocurrency signal was given you can see that later the bitcoin trading price formed a decisive upward bitcoin trend line that matched the OBV cryptocurrency indicator upwards bitcoin trend line. As long as the two kept moving upwards then the btcusd trading market was firmly upwards.
Bitcoin Trading Whipsaws
4. At the end of this upwards direction, OBV cryptocurrency indicator gave a bitcoin whipsaw as if to break the upward bitcoin trendline. However, even if you had opened a short trade because of this new signal that had formed as shown above you would have quickly closed your sell bitcoin orders before they reversed because the OBV cryptocurrency indicator soon broke this downward bitcoin trend line as shown above and therefore the sell bitcoin trade which was forming is now not valid.
One thing which a trader must learn to avoid as with any other bitcoin trading strategy is that whipsaws might be generated. The best way to avoid this is to exit as soon as the OBV cryptocurrency indicator trend line is broken especially when you're trading the reversal bitcoin trade signals.
For the above example once you exit the short trade, after the new OBV cryptocurrency indicator downward bitcoin trend line was broken it shows there were still more buyers in this cryptocurrency and it is better to exit any reversal trades that you might have opened, this is because the bitcoin trading price might as will move further upwards as shown by the cryptocurrency indicator moving upwards.
Because the OBV cryptocurrency indicator still went up even after touching & breaching it a little, the OBV cryptocurrency indicator upwards bitcoin trend line still held therefore the upward bullish direction is still intact according to our bitcoin technical analysis and any further trades here are still buy.
Bitcoin Trading Generate Bitcoin Trading Signals with a Bitcoin Trading Strategy?
