Perfect 10 Points for Perfect Bitcoin (BTC) / Altcoin Crypto
# 10 Points Strategy to Master Crypto:-
(More the points confirmation more may be the accuracy).
1. Market Cycle - Know the Bigger Picture - Establish a Bias - Its Bullish or Bearish.
2. Market Cap Dominance Percentage chart - Interest Increasing in Bitcoin or Altcoin.
3. Open Interest - Total Buyer & Seller Increasing or Decreasing.
4. Long/Short Ratio - Dominance of Buyers or Sellers.
5. Strong and Weak Crypto - Strong Crypto for Buying & Weak Crypto for Selling.
6. Bitcoin Follower Coins & Independent Coins - Against or along Bitcoin.
7. Order Block - Big players entry in the market along with volume and price correlation to know Breakout or Rejection.
8. Price Imbalance Candle - Long Bullish or Bearish candle for entry.
9. Importance of Fibonnaci Level.
10. Risk Management & Chart Time frame - Importance of Stoploss and Risk Reward along with Chart Timeframe.
(How many points do you follow in your entry ? 0 out of 10 ? or 1 out of 10 ? ..... or 10 out of 10 ? )
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LETS LEARN ABOUT A FEW BASICS OF CRYPTO FIRST:-
# What is a BITCOIN ?
Bitcoin is a decentralised digital currency, often referred to as cryptocurrency.
It operates on a technology called blockchain, which is a distributed ledger that records all transactions across a network of computers.
Created in 2009 using the pseudonym Satoshi Nakamoto, Bitcoin allows peer-to-peer transactions without the need for a central authority.
It's known for its limited supply of 21 million coins and the process of mining, where powerful computers solve complex mathematical problems to validate transactions and add them to the blockchain.
# What are Altcoins ?
Any cryptocurrency other than Bitcoin is called Altcoin.
These coins aim to offer variations or improvements on Bitcoin's features or provide different use cases.
Each altcoin typically has its unique blockchain and may introduce innovations such as smart contracts, faster transaction times, or enhanced privacy features.
Investors and users may choose altcoins based on specific functionalities or characteristics they find appealing beyond what Bitcoin offers.
Some examples of altcoins include Ethereum, Ripple, Litecoin, Cardano etc.
# Few differences between Bitcoin & Altcoins :-
* Origin and Popularity:
- Bitcoin was the first cryptocurrency, created in 2009 by Satoshi Nakamoto, and remains the most well-known and widely used.
- Altcoins are any cryptocurrencies other than Bitcoin and were introduced later to address perceived limitations or offer additional features.
* Blockchain Technology:
- Bitcoin operates on its blockchain, a decentralized ledger recording all transactions.
- Altcoins have their own blockchains, each with unique features. Some may use different consensus mechanisms, governance models, or focus on specific functionalities like smart contracts.
* Purpose and Use Cases:
- Bitcoin is primarily designed as a digital currency for peer-to-peer transactions and as a store of value.
- Altcoins often have diverse purposes, including smart contracts (Ethereum), faster transactions (Litecoin), cross-border payments (Ripple), and various other applications depending on the specific altcoin.
* Mining Algorithms:
- Bitcoin uses the SHA-256 mining algorithm, requiring significant computational power.
- Altcoins may use different mining algorithms, such as Scrypt (Litecoin) or Ethash (Ethereum), providing alternatives to Bitcoin's proof-of-work mechanism.
* Supply Limits:
- Bitcoin has a capped supply of 21 million coins, creating scarcity.
- Altcoins may have different maximum supplies, and some may not have a capped limit.
* Community and Development:
- Bitcoin has a large and active community, with ongoing development focused on security and scalability.
- Altcoins vary in community size and development activity, depending on factors like use case and popularity.
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LETS DISCUSS EACH POINT IN DETAIL:-
1. Market Cycle - Know the Bigger Picture - Establish a Bias - Its Bullish or Bearish.
A "market cycle" refers to the recurring stages of price movements that financial markets, including stocks, cryptocurrencies, and commodities, go through over time.
These cycles are driven by a combination of various factors, including economic conditions, investor sentiment, and market participants' behavior.
The typical market cycle consists of four main phases:
* Accumulation Phase: In this phase institutional investors start accumulating positions.
Prices are often at their lowest.
* Bullish Phase: In this phase buying pressure increases & prices start to rise.
Improving sentiment attract more investors leading to an uptrend.
* Distribution Phase: In this phase early investors and institutions begin to take profits, leading to a slowing of the upward momentum.
Prices might consolidate or experience slight corrections.
* Bearish Phase: In this phase selling pressure increases & prices start to fall.
Understanding market cycles can help traders and investors to establish a Bearish or Bullish Bias by recognising the broader context of market conditions.
Analysing market cycles is an important aspect of both technical and fundamental analysis.
So if the Market Cycle indicates a Bearish Phase, it means Bearish Bias is established, you may find sharp fall and big red candles, Shorting Crypto may give quick & huge profits and vice versa for Bullish Phase.
Inshort during Bearish Phase focus on Shorting crypto and in Bullish Phase focus on making Long Positions in Crypto. Remember - "Trend is your friend".
Point 1 Conditions:
-Accumulation Phase & Distribution phase - wait for Breakout or Breakdown for confirmation (No entry - May get trapped).
-Bullish Phase - Long Entry may fetch good return.
-Bearish Phase - Short Entry may fetch good return.
2. Market Cap Dominance Percentage chart - Interest Increasing in Bitcoin or Altcoin.
"Market Cap Dominance Percentage Chart" shows percentage of a specific cryptocurrency compared to total cryptocurrency market capitalization.
Like Bitcoin's market capitalization is $1 trillion & total cryptocurrency market capitalization is $2 trillion, So Bitcoin's market cap dominance percentage would be 50% (1 trillion/2 trillion x 100).
With this chart relative strength of a particular cryptocurrency can be seen in the broader market.
Changes in market cap dominance can indicate shifts in investor sentiment and preferences among different cryptocurrencies.
It's important to note that a declining dominance percentage for a major cryptocurrency might suggest increased interest in alternative cryptocurrencies (altcoins).
while a rising dominance percentage may indicate a stronger focus on the leading cryptocurrency in the market.
So if BITCOIN dominance % decline it means interest in Altcoins is increasing. Shorting Bitcoin and focusing on Altcoins may give good profits and vice versa for BITCOIN dominance % increasing.
Point 2 Conditions:
-Percentage Chart shows Interest in Bitcoin Increasing - Long Entry in Bitcoin or Altcoins which follow Bitcoin may fetch good return.
-Percentage Chart shows Interest in Bitcoin decreasing - Short Entry in Bitcoin or Altcoins which follow Bitcoin may fetch good return.
3. Open Interest - Total Buyer & Seller Increasing or Decreasing.
"Open interest" is a term used in the context of futures and options trading.
It is to measure the total number of open contracts at any given time.
- Increasing Open Interest means New contracts are created.
- Decreasing Open Interest means contracts are closed.
High open interest is often associated with increased market activity and liquidity, while low open interest may suggest a lack of interest or declining market participation.
Open interest is one of many factors to read market trends and sentiment.
Analysing Open interest with price and volume can give insight into market moves.
More Open interest simply means more interest in crypto. But which side is the interest - can be seen with the help of Long/Short Ratio.
So if Bitcoin or Altcoin Open Interest is increasing - You may think of entering and making position in this liquid market. If Open Interest is decreasing - you may avoid the dull market.
For Eg:- on 1 Day Graph
BTC Future Open Interest on 21 Jan is 75000
BTC Future Open Interest on 22 Jan is 72000
It indicates that 7000 Open Interest are decreased.
now these 7000 Open Interest are of Long or Short, this can be identified with Long/Short Ratio.
Point 3 Conditions:
- More Open Interest - Look for Entry in Crypto - Due to liquidity moves may be good.
- Less Open Interest - Avoid Entry in Crypto - Less liquidity may lead to Dull Market.
4. Long/Short Ratio - Dominance of Buyers or Sellers.
The "long-short ratio" is a measure used to assess the sentiment of market participants.
- Long Positions: Traders who expect the price to rise take long positions, buying the asset with the intention of selling it later at a higher price.
- Short Positions: Traders who expect a decline in the price take short positions. They borrow the asset, sell it at the current market price, and aim to buy it back later at a lower price.
The long-short ratio is calculated as the total number of long positions divided by the total number of short positions. The resulting ratio can provide insights into market sentiment.
- Long-Heavy Ratio (Greater than 1.8): Indicates a higher proportion of traders are taking long positions, suggesting bullish sentiment.
- Short-Heavy Ratio (Less than 1.8): Indicates a higher proportion of traders are taking short positions, suggesting bearish sentiment.
So in bitcoin if its Short-Heavy Ratio & is Greater than 1.8. It may be good opportunity to Short Bitcoin and vice versa for Long-Heavy Ratio (Greater than 1.8).
Point 4 Conditions:
-Long-Heavy Ratio in Bitcoin (Greater than 1.8) - Long Entry in Bitcoin or Altcoins which follow Bitcoin may fetch good return.
-Short-Heavy Ratio in Bitcoin (Greater than 1.8) - Short Entry in Bitcoin or Altcoins which follow Bitcoin may fetch good return.
5. Strong and Weak Crypto - Strong Crypto for Buying & Weak Crypto for Selling.
There are various kind of Altcoins. some are weak and some are strong.
Coins which falls sharply in Bearish Market are generally Weak Coins and Coins which doesnt fall or fall little only in bearsish Market are generally Strong Coins.
Point 5 Conditions:
- Long Entry in Strong Altcoins during a Bull phase may fetch good return.
- Short Entry in Weak Altcoins during a Bear phase may fetch good return.
6. Bitcoin Follower Coins & Independent Coins - Against or along Bitcoin.
There are altcoins which follow bitcoin and there are altcoins which moves against the bitcoin.
which means when you see bitcoin chart rising a few altcoins rise with bitcoin and a few can be seen falling when bitcoin is rising.
In similar way you can see a few altcoins falling with bitcoin falling and a few can be seen rising when bitcoin is falling.
this can be a good hint in selecting the right altcoin to enter in correlation with Bitcoin.
For eg: and are weak Altcoins, vice versa is also true.
Point 6 Conditions:
- If overall Bias is Bearish, But Bitcoin is rising, we may short Altcoin which moves against the bitcoin or are independent - it may fetch good return.
- If overall Bias is Bearish, and Bitcoin is falling, we may short Altcoin which follow bitcoin - it may fetch good return.
- If overall Bias is Bullish, But Bitcoin is falling, we may Long Altcoin which moves against the bitcoin or are independent - it may fetch good return.
- If overall Bias is Bullish, and Bitcoin is rising, we may Long Altcoin which follow bitcoin - it may fetch good return.
7. Order Block - Big players entry in the market along with volume and price correlation to know Breakout or Rejection.
Its a part of Technical analysis (Price Action).
"Order Block" refers to a price zone on a chart where large buying or selling activity occurred.
These zones as areas of strong supply or demand.
- Area with significant buying orders is a potential support zone or Bullish order block.
- Area with substantial selling orders is a potential resistance zone or Bearish order block.
Crypto Traders may use order blocks as part of their analysis to identify key levels for potential reversals or continuation of price trends.
Generally on a smaller timeframe Order Blocks are weak so these order blocks are used for Breakout or Breakdown trades along with volume for confirmation, On higher timeframe they act as supply and demand zones.
Volume and price - Volume correlation with price to know Breakout or Rejection.
Decreasing volume with an increasing price - is a potential weakening of trend.
Increasing volume with an increasing price - is a potential strengthing of trend.
* Rising price without strong supporting volume may indicate a lack of confirmation for the upward movement.
In healthy trends, increasing volume typically accompanies rising prices, signaling strong market UpTrend.
* Decreasing volume during a price increase might be a signal that buyers are becoming interested in the current upward move.
This as a warning sign of a potential trend reversal.
* Price is breaking above a Resistance level with decreasing volume - suggest that breakout might lack the strength needed for a sustained upward move.
* Decreasing volume indicate a period of market indecision or consolidation, where buyers and sellers are in equilibrium.
This may precede a more significant move in either direction.
Example 1 - Like on Lower timeframe if price is rising and face resistance near a bearish order block but volume on buying side is more it may give a breakout and this may be a good entry for long posn.
Example 2 - But on Higher timeframe if price is rising and face resistance near a bearish order block but volume on buying side is less it may not give a breakout and this may be good entry for Short posn.
So Order Block and volume correlation is equally important to analyse entry point. Volume increasing indicates a trend strength is increasing and volume decreasing means a trend strength is decreasing.
Point 7 Conditions:
- Lower Timeframe - Price rising & Near Bearish Order block (Supply zone) Facing Resistance - But Volume is more (Strong trend) - Likely Bull Breakout point - Long Position may fetch good results.
- Lower Timeframe - Price rising & Near Bearish Order block (Supply zone) Facing Resistance - But Volume is Less (Weak trend) - Not Likely a Bull Breakout point - Long Position may Trap you so wait for confirmation or no trade.
- Lower Timeframe - Price falling & Near Bullish Order block (Demand zone) Getting Support - But Volume is more (Strong trend) - Likely Bear Breakout point - Short Position may fetch good results.
- Lower Timeframe - Price falling & Near Bullish Order block (Demand zone) Getting Support - But Volume is Less (Weak trend) - Not Likely a Bear Breakout point - Short Position may Trap you so wait for confirmation or no trade.
- Higher Timeframe - Price rising & Near Bearish Order block (Supply zone) Facing Resistance - But Volume is more (Strong trend) - Avoid a Long/Short Position - it may Trap you so wait for confirmation or no trade.
- Higher Timeframe - Price rising & Near Bearish Order block (Supply zone) Facing Resistance - But Volume is Less (Weak trend) - Likely a Bear Reversal point - Short Position may fetch good results.
- Higher Timeframe - Price falling & Near Bullish Order block (Demand zone) Getting Support - But Volume is more (Strong trend) - Avoid a Long/Short Position - it may Trap you so wait for confirmation or no trade.
- Higher Timeframe - Price falling & Near Bullish Order block (Demand zone) Getting Support - But Volume is Less (Weak trend) - Likely a Bull Reversal point - Long Position may fetch good results.
8. Price Imbalance Candle - Long Bullish or Bearish candle for entry.
"Price Imbalance Candle" refers to a specific type of candles on a chart that suggests an imbalance between buying and selling pressure in the market.
This is a candle with a relatively long body and small or no wicks, indicating a strong directional move.
Bullish price imbalance candle may have a long bullish body- Indicating strong buying pressure and weak selling pressur in that time frame.
Bearish price imbalance candle may have a long bearish body- Indicating strong selling pressure and weak buying pressure in that time frame.
Generally its accuracy is more on higher timeframes.
Point 8 Conditions:
- When big Bullish candle is seen - mark its 50% level - let price retrace to this 50% level for Bull entry - Stoploss may be Slightly below this Candles Low.
- When big Bearish candle is seen - mark its 50% level - let price retrace to this 50% level for Bear entry - Stoploss may be Slightly above this Candles High.
9. Importance of Fibonnaci Level:
Its a vast topic to cover in itself. I am covering it in short here. In future i may post a detailed study on this topic.
Fibonacci trading is a technical analysis approach that involves using Fibonacci retracement and extension levels to identify potential areas of support and resistance in financial markets.
This method is based on the Fibonacci sequence, a mathematical concept where each number is the sum of the two preceding ones (e.g., 0, 1, 1, 2, 3, 5, 8, 13, ...).
Fibonacci can be drawn on chart using fib from tradingview tools - its in many forms like fib channel, fib time zone, fib spiral, fib wedge etc.
There are various fib indicators also available on the tradingview.
Point 9 Conditions:
Fibonacci trading is done in two ways:
* Fibonacci Retracement Levels:Reversal zones in Bearish or Bullish trend.
- Traders draw horizontal lines on a price chart at key Fibonacci levels, such as 23.6%, 38.2%, 50%, 61.8%, and 78.6%.
- These levels represent potential retracement zones where a price might reverse temporarily before continuing in the primary trend.
- Traders use Fibonacci retracement to identify potential entry points in the direction of the overall trend.
* Fibonacci Extension Levels: Targets in Bearish or Bullish trend.
- Extension levels are used to identify potential price targets in the direction of the prevailing trend.
- Common extension levels include 127.2%, 161.8%, and 261.8%.
- Traders may use these levels to set profit targets or to identify where a trend might encounter significant resistance.
10. Risk Management & Chart Time frame - Importance of Stoploss and Risk Reward along with Chart Timeframe.
Again its a vast topic to cover in itself and a very important topic also. I am covering it in short here. In future i may post a detailed study on how risk may be managed in any trade.
- Portfolio Diversification: Spread your investments across different cryptocurrencies to reduce the impact of poor performance in one asset on your overall portfolio.
- Position Sizing:nDetermine the amount of capital to allocate to each trade based on your risk tolerance. Avoid putting all your funds into a single trade.
- Stop-Loss Orders: Set predetermined price levels at which you will automatically sell to limit potential losses. This helps prevent significant downturns in your portfolio.
- Risk-Reward Ratio: Establish a clear risk-reward ratio before entering a trade. Ensure the potential reward justifies the risk taken. This helps in making more informed decisions.
- Research and Analysis: Stay informed about market trends, news, and fundamental analysis.
- Use of Technical Analysis: Indicators and charts may be used to identify potential entry and exit points. This can help in predicting market movements and adjusting your strategy accordingly.
- Limit Leverage: Be cautious with leverage, as it can amplify both gains and losses. High leverage increases the risk of liquidation and significant portfolio fluctuations. As a beginner maint Zero leverage.
- Regular Review and Adjust: Periodically reassess your portfolio and trading strategy. Market conditions change, and adjusting your approach can help adapt to new trends and risks.
- Stay Disciplined: Stick to your predefined trading plan and avoid impulsive decisions. Emotional reactions can lead to poor choices and increased risks.
- Remember, Risks can't be zero. there's no foolproof strategy, but combining these risk management techniques may help mitigate potential losses in crypto trading.
Chart Timeframe:-
On 5 Min and 15 Min timeframe - Scalping Trades - for Breakout & Breakdown trades.
On 4 Hour timeframe - Swing Trade - for Supply (Bearish OrderBlock) & demand (Bullish OrderBlock) trades.
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NOW LETS TAKE AN EXAMPLE TO COMBINE ALL ABOVE 10 POINTS:-
(More the points confirmation - More the accuracy)
Point 1. Market Cycle shows Bullish Phase = So My Bias is Bullish (Long).
Point 2. Market Cap Dominance Percentage chart Shows Interest is Increasing in Bitcoin = So Bitcoin or Altcoin which follow Bitcoin are my pick.
Point 3. Open Interest Shows Total Open Interests Increasing, means Liquidity increasing = So right time to Enter in crypto market for me.
Point 4. Long/Short Ratio shows Dominance of Buyers = So i will look for an opportunities in Long Position.
Point 5. Strong Crypto for Buying = So i will choose Bitcoin or Fundamentally Strong Altcoin which dip less in bear Market.
Point 6. Bitcoin Follower Coins = So Bitcoin or Altcoin which follow Bitcoin are my pick.
Point 7. Order Block with volume and price correlation = So i will look for Demand Zone means Bullish Order Block for entry near support.
Point 8. Price Imbalance Long Bullish Candle = So near that support zone i will look for a Price Imbalance Long Bullish Candle, i will mark its 50% level for entry.
Point 9. Fibonnaci Levels for entry and exit = If this support and 50% imbalance candle mark is near Fib Retracement Levels it gives further confirmation of bull entry.
Point 10. Risk Management & Chart Time frame = Now i may book Profit or Loss, keeping above risk management points in mind.
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Notes:-
Adding a few good indicators along with above 10 Points May further increase the accuracy.
It's important to note that above points are just an idea of a comprehensive crypto trading strategy.
Successful trading typically involves combining multiple indicators, risk management techniques, and a thorough understanding of market conditions.
Like other many Strategies in the Market, Above Strategy also is not a holy grail. It can only assist you in building a good strategy for yourself.
You can only succeed with proper position sizing, risk management and following correct trading Psychology (No overtrade, No greed, No revenge trade etc).
ABOVE SHARED EXPLANATION AND STRATEGY IS FOR EDUCATIONAL PURPOSE ONLY. YOU MAY PAPER TRADE TO GAIN CONFIDENCE AND BUILD FURTHER ON THESE.
This is for educational purpose only. Please consult your financial advisor before investing. we are not SEBI registered.
Hope you like it
Happy trading :-)
(More the points confirmation more may be the accuracy).
1. Market Cycle - Know the Bigger Picture - Establish a Bias - Its Bullish or Bearish.
2. Market Cap Dominance Percentage chart - Interest Increasing in Bitcoin or Altcoin.
3. Open Interest - Total Buyer & Seller Increasing or Decreasing.
4. Long/Short Ratio - Dominance of Buyers or Sellers.
5. Strong and Weak Crypto - Strong Crypto for Buying & Weak Crypto for Selling.
6. Bitcoin Follower Coins & Independent Coins - Against or along Bitcoin.
7. Order Block - Big players entry in the market along with volume and price correlation to know Breakout or Rejection.
8. Price Imbalance Candle - Long Bullish or Bearish candle for entry.
9. Importance of Fibonnaci Level.
10. Risk Management & Chart Time frame - Importance of Stoploss and Risk Reward along with Chart Timeframe.
(How many points do you follow in your entry ? 0 out of 10 ? or 1 out of 10 ? ..... or 10 out of 10 ? )
===========================================================================================================================================
LETS LEARN ABOUT A FEW BASICS OF CRYPTO FIRST:-
# What is a BITCOIN ?
Bitcoin is a decentralised digital currency, often referred to as cryptocurrency.
It operates on a technology called blockchain, which is a distributed ledger that records all transactions across a network of computers.
Created in 2009 using the pseudonym Satoshi Nakamoto, Bitcoin allows peer-to-peer transactions without the need for a central authority.
It's known for its limited supply of 21 million coins and the process of mining, where powerful computers solve complex mathematical problems to validate transactions and add them to the blockchain.
# What are Altcoins ?
Any cryptocurrency other than Bitcoin is called Altcoin.
These coins aim to offer variations or improvements on Bitcoin's features or provide different use cases.
Each altcoin typically has its unique blockchain and may introduce innovations such as smart contracts, faster transaction times, or enhanced privacy features.
Investors and users may choose altcoins based on specific functionalities or characteristics they find appealing beyond what Bitcoin offers.
Some examples of altcoins include Ethereum, Ripple, Litecoin, Cardano etc.
# Few differences between Bitcoin & Altcoins :-
* Origin and Popularity:
- Bitcoin was the first cryptocurrency, created in 2009 by Satoshi Nakamoto, and remains the most well-known and widely used.
- Altcoins are any cryptocurrencies other than Bitcoin and were introduced later to address perceived limitations or offer additional features.
* Blockchain Technology:
- Bitcoin operates on its blockchain, a decentralized ledger recording all transactions.
- Altcoins have their own blockchains, each with unique features. Some may use different consensus mechanisms, governance models, or focus on specific functionalities like smart contracts.
* Purpose and Use Cases:
- Bitcoin is primarily designed as a digital currency for peer-to-peer transactions and as a store of value.
- Altcoins often have diverse purposes, including smart contracts (Ethereum), faster transactions (Litecoin), cross-border payments (Ripple), and various other applications depending on the specific altcoin.
* Mining Algorithms:
- Bitcoin uses the SHA-256 mining algorithm, requiring significant computational power.
- Altcoins may use different mining algorithms, such as Scrypt (Litecoin) or Ethash (Ethereum), providing alternatives to Bitcoin's proof-of-work mechanism.
* Supply Limits:
- Bitcoin has a capped supply of 21 million coins, creating scarcity.
- Altcoins may have different maximum supplies, and some may not have a capped limit.
* Community and Development:
- Bitcoin has a large and active community, with ongoing development focused on security and scalability.
- Altcoins vary in community size and development activity, depending on factors like use case and popularity.
===========================================================================================================================================
LETS DISCUSS EACH POINT IN DETAIL:-
1. Market Cycle - Know the Bigger Picture - Establish a Bias - Its Bullish or Bearish.
A "market cycle" refers to the recurring stages of price movements that financial markets, including stocks, cryptocurrencies, and commodities, go through over time.
These cycles are driven by a combination of various factors, including economic conditions, investor sentiment, and market participants' behavior.
The typical market cycle consists of four main phases:
* Accumulation Phase: In this phase institutional investors start accumulating positions.
Prices are often at their lowest.
* Bullish Phase: In this phase buying pressure increases & prices start to rise.
Improving sentiment attract more investors leading to an uptrend.
* Distribution Phase: In this phase early investors and institutions begin to take profits, leading to a slowing of the upward momentum.
Prices might consolidate or experience slight corrections.
* Bearish Phase: In this phase selling pressure increases & prices start to fall.
Understanding market cycles can help traders and investors to establish a Bearish or Bullish Bias by recognising the broader context of market conditions.
Analysing market cycles is an important aspect of both technical and fundamental analysis.
So if the Market Cycle indicates a Bearish Phase, it means Bearish Bias is established, you may find sharp fall and big red candles, Shorting Crypto may give quick & huge profits and vice versa for Bullish Phase.
Inshort during Bearish Phase focus on Shorting crypto and in Bullish Phase focus on making Long Positions in Crypto. Remember - "Trend is your friend".
Point 1 Conditions:
-Accumulation Phase & Distribution phase - wait for Breakout or Breakdown for confirmation (No entry - May get trapped).
-Bullish Phase - Long Entry may fetch good return.
-Bearish Phase - Short Entry may fetch good return.
2. Market Cap Dominance Percentage chart - Interest Increasing in Bitcoin or Altcoin.
"Market Cap Dominance Percentage Chart" shows percentage of a specific cryptocurrency compared to total cryptocurrency market capitalization.
Like Bitcoin's market capitalization is $1 trillion & total cryptocurrency market capitalization is $2 trillion, So Bitcoin's market cap dominance percentage would be 50% (1 trillion/2 trillion x 100).
With this chart relative strength of a particular cryptocurrency can be seen in the broader market.
Changes in market cap dominance can indicate shifts in investor sentiment and preferences among different cryptocurrencies.
It's important to note that a declining dominance percentage for a major cryptocurrency might suggest increased interest in alternative cryptocurrencies (altcoins).
while a rising dominance percentage may indicate a stronger focus on the leading cryptocurrency in the market.
So if BITCOIN dominance % decline it means interest in Altcoins is increasing. Shorting Bitcoin and focusing on Altcoins may give good profits and vice versa for BITCOIN dominance % increasing.
Point 2 Conditions:
-Percentage Chart shows Interest in Bitcoin Increasing - Long Entry in Bitcoin or Altcoins which follow Bitcoin may fetch good return.
-Percentage Chart shows Interest in Bitcoin decreasing - Short Entry in Bitcoin or Altcoins which follow Bitcoin may fetch good return.
3. Open Interest - Total Buyer & Seller Increasing or Decreasing.
"Open interest" is a term used in the context of futures and options trading.
It is to measure the total number of open contracts at any given time.
- Increasing Open Interest means New contracts are created.
- Decreasing Open Interest means contracts are closed.
High open interest is often associated with increased market activity and liquidity, while low open interest may suggest a lack of interest or declining market participation.
Open interest is one of many factors to read market trends and sentiment.
Analysing Open interest with price and volume can give insight into market moves.
More Open interest simply means more interest in crypto. But which side is the interest - can be seen with the help of Long/Short Ratio.
So if Bitcoin or Altcoin Open Interest is increasing - You may think of entering and making position in this liquid market. If Open Interest is decreasing - you may avoid the dull market.
For Eg:- on 1 Day Graph
BTC Future Open Interest on 21 Jan is 75000
BTC Future Open Interest on 22 Jan is 72000
It indicates that 7000 Open Interest are decreased.
now these 7000 Open Interest are of Long or Short, this can be identified with Long/Short Ratio.
Point 3 Conditions:
- More Open Interest - Look for Entry in Crypto - Due to liquidity moves may be good.
- Less Open Interest - Avoid Entry in Crypto - Less liquidity may lead to Dull Market.
4. Long/Short Ratio - Dominance of Buyers or Sellers.
The "long-short ratio" is a measure used to assess the sentiment of market participants.
- Long Positions: Traders who expect the price to rise take long positions, buying the asset with the intention of selling it later at a higher price.
- Short Positions: Traders who expect a decline in the price take short positions. They borrow the asset, sell it at the current market price, and aim to buy it back later at a lower price.
The long-short ratio is calculated as the total number of long positions divided by the total number of short positions. The resulting ratio can provide insights into market sentiment.
- Long-Heavy Ratio (Greater than 1.8): Indicates a higher proportion of traders are taking long positions, suggesting bullish sentiment.
- Short-Heavy Ratio (Less than 1.8): Indicates a higher proportion of traders are taking short positions, suggesting bearish sentiment.
So in bitcoin if its Short-Heavy Ratio & is Greater than 1.8. It may be good opportunity to Short Bitcoin and vice versa for Long-Heavy Ratio (Greater than 1.8).
Point 4 Conditions:
-Long-Heavy Ratio in Bitcoin (Greater than 1.8) - Long Entry in Bitcoin or Altcoins which follow Bitcoin may fetch good return.
-Short-Heavy Ratio in Bitcoin (Greater than 1.8) - Short Entry in Bitcoin or Altcoins which follow Bitcoin may fetch good return.
5. Strong and Weak Crypto - Strong Crypto for Buying & Weak Crypto for Selling.
There are various kind of Altcoins. some are weak and some are strong.
Coins which falls sharply in Bearish Market are generally Weak Coins and Coins which doesnt fall or fall little only in bearsish Market are generally Strong Coins.
Point 5 Conditions:
- Long Entry in Strong Altcoins during a Bull phase may fetch good return.
- Short Entry in Weak Altcoins during a Bear phase may fetch good return.
6. Bitcoin Follower Coins & Independent Coins - Against or along Bitcoin.
There are altcoins which follow bitcoin and there are altcoins which moves against the bitcoin.
which means when you see bitcoin chart rising a few altcoins rise with bitcoin and a few can be seen falling when bitcoin is rising.
In similar way you can see a few altcoins falling with bitcoin falling and a few can be seen rising when bitcoin is falling.
this can be a good hint in selecting the right altcoin to enter in correlation with Bitcoin.
For eg: and are weak Altcoins, vice versa is also true.
Point 6 Conditions:
- If overall Bias is Bearish, But Bitcoin is rising, we may short Altcoin which moves against the bitcoin or are independent - it may fetch good return.
- If overall Bias is Bearish, and Bitcoin is falling, we may short Altcoin which follow bitcoin - it may fetch good return.
- If overall Bias is Bullish, But Bitcoin is falling, we may Long Altcoin which moves against the bitcoin or are independent - it may fetch good return.
- If overall Bias is Bullish, and Bitcoin is rising, we may Long Altcoin which follow bitcoin - it may fetch good return.
7. Order Block - Big players entry in the market along with volume and price correlation to know Breakout or Rejection.
Its a part of Technical analysis (Price Action).
"Order Block" refers to a price zone on a chart where large buying or selling activity occurred.
These zones as areas of strong supply or demand.
- Area with significant buying orders is a potential support zone or Bullish order block.
- Area with substantial selling orders is a potential resistance zone or Bearish order block.
Crypto Traders may use order blocks as part of their analysis to identify key levels for potential reversals or continuation of price trends.
Generally on a smaller timeframe Order Blocks are weak so these order blocks are used for Breakout or Breakdown trades along with volume for confirmation, On higher timeframe they act as supply and demand zones.
Volume and price - Volume correlation with price to know Breakout or Rejection.
Decreasing volume with an increasing price - is a potential weakening of trend.
Increasing volume with an increasing price - is a potential strengthing of trend.
* Rising price without strong supporting volume may indicate a lack of confirmation for the upward movement.
In healthy trends, increasing volume typically accompanies rising prices, signaling strong market UpTrend.
* Decreasing volume during a price increase might be a signal that buyers are becoming interested in the current upward move.
This as a warning sign of a potential trend reversal.
* Price is breaking above a Resistance level with decreasing volume - suggest that breakout might lack the strength needed for a sustained upward move.
* Decreasing volume indicate a period of market indecision or consolidation, where buyers and sellers are in equilibrium.
This may precede a more significant move in either direction.
Example 1 - Like on Lower timeframe if price is rising and face resistance near a bearish order block but volume on buying side is more it may give a breakout and this may be a good entry for long posn.
Example 2 - But on Higher timeframe if price is rising and face resistance near a bearish order block but volume on buying side is less it may not give a breakout and this may be good entry for Short posn.
So Order Block and volume correlation is equally important to analyse entry point. Volume increasing indicates a trend strength is increasing and volume decreasing means a trend strength is decreasing.
Point 7 Conditions:
- Lower Timeframe - Price rising & Near Bearish Order block (Supply zone) Facing Resistance - But Volume is more (Strong trend) - Likely Bull Breakout point - Long Position may fetch good results.
- Lower Timeframe - Price rising & Near Bearish Order block (Supply zone) Facing Resistance - But Volume is Less (Weak trend) - Not Likely a Bull Breakout point - Long Position may Trap you so wait for confirmation or no trade.
- Lower Timeframe - Price falling & Near Bullish Order block (Demand zone) Getting Support - But Volume is more (Strong trend) - Likely Bear Breakout point - Short Position may fetch good results.
- Lower Timeframe - Price falling & Near Bullish Order block (Demand zone) Getting Support - But Volume is Less (Weak trend) - Not Likely a Bear Breakout point - Short Position may Trap you so wait for confirmation or no trade.
- Higher Timeframe - Price rising & Near Bearish Order block (Supply zone) Facing Resistance - But Volume is more (Strong trend) - Avoid a Long/Short Position - it may Trap you so wait for confirmation or no trade.
- Higher Timeframe - Price rising & Near Bearish Order block (Supply zone) Facing Resistance - But Volume is Less (Weak trend) - Likely a Bear Reversal point - Short Position may fetch good results.
- Higher Timeframe - Price falling & Near Bullish Order block (Demand zone) Getting Support - But Volume is more (Strong trend) - Avoid a Long/Short Position - it may Trap you so wait for confirmation or no trade.
- Higher Timeframe - Price falling & Near Bullish Order block (Demand zone) Getting Support - But Volume is Less (Weak trend) - Likely a Bull Reversal point - Long Position may fetch good results.
8. Price Imbalance Candle - Long Bullish or Bearish candle for entry.
"Price Imbalance Candle" refers to a specific type of candles on a chart that suggests an imbalance between buying and selling pressure in the market.
This is a candle with a relatively long body and small or no wicks, indicating a strong directional move.
Bullish price imbalance candle may have a long bullish body- Indicating strong buying pressure and weak selling pressur in that time frame.
Bearish price imbalance candle may have a long bearish body- Indicating strong selling pressure and weak buying pressure in that time frame.
Generally its accuracy is more on higher timeframes.
Point 8 Conditions:
- When big Bullish candle is seen - mark its 50% level - let price retrace to this 50% level for Bull entry - Stoploss may be Slightly below this Candles Low.
- When big Bearish candle is seen - mark its 50% level - let price retrace to this 50% level for Bear entry - Stoploss may be Slightly above this Candles High.
9. Importance of Fibonnaci Level:
Its a vast topic to cover in itself. I am covering it in short here. In future i may post a detailed study on this topic.
Fibonacci trading is a technical analysis approach that involves using Fibonacci retracement and extension levels to identify potential areas of support and resistance in financial markets.
This method is based on the Fibonacci sequence, a mathematical concept where each number is the sum of the two preceding ones (e.g., 0, 1, 1, 2, 3, 5, 8, 13, ...).
Fibonacci can be drawn on chart using fib from tradingview tools - its in many forms like fib channel, fib time zone, fib spiral, fib wedge etc.
There are various fib indicators also available on the tradingview.
Point 9 Conditions:
Fibonacci trading is done in two ways:
* Fibonacci Retracement Levels:Reversal zones in Bearish or Bullish trend.
- Traders draw horizontal lines on a price chart at key Fibonacci levels, such as 23.6%, 38.2%, 50%, 61.8%, and 78.6%.
- These levels represent potential retracement zones where a price might reverse temporarily before continuing in the primary trend.
- Traders use Fibonacci retracement to identify potential entry points in the direction of the overall trend.
* Fibonacci Extension Levels: Targets in Bearish or Bullish trend.
- Extension levels are used to identify potential price targets in the direction of the prevailing trend.
- Common extension levels include 127.2%, 161.8%, and 261.8%.
- Traders may use these levels to set profit targets or to identify where a trend might encounter significant resistance.
10. Risk Management & Chart Time frame - Importance of Stoploss and Risk Reward along with Chart Timeframe.
Again its a vast topic to cover in itself and a very important topic also. I am covering it in short here. In future i may post a detailed study on how risk may be managed in any trade.
- Portfolio Diversification: Spread your investments across different cryptocurrencies to reduce the impact of poor performance in one asset on your overall portfolio.
- Position Sizing:nDetermine the amount of capital to allocate to each trade based on your risk tolerance. Avoid putting all your funds into a single trade.
- Stop-Loss Orders: Set predetermined price levels at which you will automatically sell to limit potential losses. This helps prevent significant downturns in your portfolio.
- Risk-Reward Ratio: Establish a clear risk-reward ratio before entering a trade. Ensure the potential reward justifies the risk taken. This helps in making more informed decisions.
- Research and Analysis: Stay informed about market trends, news, and fundamental analysis.
- Use of Technical Analysis: Indicators and charts may be used to identify potential entry and exit points. This can help in predicting market movements and adjusting your strategy accordingly.
- Limit Leverage: Be cautious with leverage, as it can amplify both gains and losses. High leverage increases the risk of liquidation and significant portfolio fluctuations. As a beginner maint Zero leverage.
- Regular Review and Adjust: Periodically reassess your portfolio and trading strategy. Market conditions change, and adjusting your approach can help adapt to new trends and risks.
- Stay Disciplined: Stick to your predefined trading plan and avoid impulsive decisions. Emotional reactions can lead to poor choices and increased risks.
- Remember, Risks can't be zero. there's no foolproof strategy, but combining these risk management techniques may help mitigate potential losses in crypto trading.
Chart Timeframe:-
On 5 Min and 15 Min timeframe - Scalping Trades - for Breakout & Breakdown trades.
On 4 Hour timeframe - Swing Trade - for Supply (Bearish OrderBlock) & demand (Bullish OrderBlock) trades.
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NOW LETS TAKE AN EXAMPLE TO COMBINE ALL ABOVE 10 POINTS:-
(More the points confirmation - More the accuracy)
Point 1. Market Cycle shows Bullish Phase = So My Bias is Bullish (Long).
Point 2. Market Cap Dominance Percentage chart Shows Interest is Increasing in Bitcoin = So Bitcoin or Altcoin which follow Bitcoin are my pick.
Point 3. Open Interest Shows Total Open Interests Increasing, means Liquidity increasing = So right time to Enter in crypto market for me.
Point 4. Long/Short Ratio shows Dominance of Buyers = So i will look for an opportunities in Long Position.
Point 5. Strong Crypto for Buying = So i will choose Bitcoin or Fundamentally Strong Altcoin which dip less in bear Market.
Point 6. Bitcoin Follower Coins = So Bitcoin or Altcoin which follow Bitcoin are my pick.
Point 7. Order Block with volume and price correlation = So i will look for Demand Zone means Bullish Order Block for entry near support.
Point 8. Price Imbalance Long Bullish Candle = So near that support zone i will look for a Price Imbalance Long Bullish Candle, i will mark its 50% level for entry.
Point 9. Fibonnaci Levels for entry and exit = If this support and 50% imbalance candle mark is near Fib Retracement Levels it gives further confirmation of bull entry.
Point 10. Risk Management & Chart Time frame = Now i may book Profit or Loss, keeping above risk management points in mind.
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Notes:-
Adding a few good indicators along with above 10 Points May further increase the accuracy.
It's important to note that above points are just an idea of a comprehensive crypto trading strategy.
Successful trading typically involves combining multiple indicators, risk management techniques, and a thorough understanding of market conditions.
Like other many Strategies in the Market, Above Strategy also is not a holy grail. It can only assist you in building a good strategy for yourself.
You can only succeed with proper position sizing, risk management and following correct trading Psychology (No overtrade, No greed, No revenge trade etc).
ABOVE SHARED EXPLANATION AND STRATEGY IS FOR EDUCATIONAL PURPOSE ONLY. YOU MAY PAPER TRADE TO GAIN CONFIDENCE AND BUILD FURTHER ON THESE.
This is for educational purpose only. Please consult your financial advisor before investing. we are not SEBI registered.
Hope you like it
Happy trading :-)
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