BITCOIN (BTC/XBT) DAILY LONG&SHORT TRADE SETUPS 2021/01/01
Updated
MARKET OVERVIEW
- Price Action: Bitcoin established a new ATH @ 29.5K before rapidly retracing, which gave us a profitable short trade.
- Chart Patterns: We seem to be moving up in an upwards trending channel, so we will need to pay attention when price reaches either the top or the bottom of the channel, and be extra alert should the bottom break.
- Areas of Interest: The area(s) of interest for us are the highs @ 29.3K and the 200MAs @ 28.7K. Once price reaches one of our areas of interest and gives us a valid entry signal, I will update the trade, so make sure you follow me to get the trade entry signals in real time.
- TRADES(S) RECAP
- Yesterday we had a winning trade! We entered short @ 29.3K, with a Stop Loss @ ~29.5K, and price reached a low of 28.8K, giving us a risk reward ratio of 2.5:1, meaning if you risked 1BTC on this trade, you could've made 2.5BTC. As this was a false breakout trade, you could've also decided to enter a short on ETH. Entry would've been $745, SL $749, price reached a low of $725 so far, giving a risk reward ratio of 5:1, meaning if you risked 1BTC on this trade, you could've made 5BTC. Trading ETH on a BTC false breakout setup proved more profitable than trading BTC itself.
- 4 days ago we had a successful trade that gave us a 3:1 Risk Reward Ratio, meaning you could've made 3BTC for every BTC risked.
Below are two potential trade setups. Regardless of the path that the price takes, I will be monitoring the market for a valid trade entry signal.
Long Trade Setup #1: Breakout and Continuation
To open a long position, we are waiting for price to break resistance, move back down to test previous resistance as support and then bounce back up.
Trade Entry Confirmation:
1. Price Action: Price breaks above the high of 29.5K with force, creating space between the price and 29.5K, falls back down to 29.5K and bounce back up.
2. Candlestick Pattern: A bullish candlestick pattern such as a bullish engulfing candle, a pinbar, or a multiple candlestick breakdown (a large red candle followed by multiple green candles that eventually close above the open/high of the large red candle)
2.1 Ideally Engulfing / Break candle has a large candle body with small wicks
2.2 Ideally Engulfing /Break candle closes near the highs of the candle
3. Volume: Above average volume on the bullish engulfing candle, pinbar, or on any of the multiple green candles that eventually break the red candle (ideally on the candle that breaks)
4. MACD: MACD histogram bottoming out, as indicated by the histogram becoming less negative (changing from red to pink)
Long Trade Setup #2: Retest and Continuation (200MAs)
To open a long position, we are waiting for price to retrace back down to test the 200MAs and then continue moving up.
Trade Entry Confirmation:
1. Price Action: Price needs to move back down to the 200MAs and bounce. 200MAs are currently sitting at ~28.7K, but will move as price moves.
2. Candlestick Pattern: A bullish candlestick pattern such as a bullish engulfing candle, a pinbar, or a multiple candlestick breakdown (a large red candle followed by multiple green candles that eventually close above the open/high of the large red candle
3. Volume: Above average volume on the bullish engulfing candle, pinbar, or on any of the multiple green candles that eventually break the red candle (ideally on the candle that breaks)
4. MACD: MACD histogram bottoming out, as indicated by the histogram becoming less negative (changing from red to pink)
Short Trade Setup: False Breakout
To open a short position, we are waiting for price to break above the horizontal resistance @ 29.5K and then fall back down.
Trade Entry Confirmation:
1. Price Action: Price breaks above the high of 29.5K and then rapidly falls below 29.5K, forming a bull trap
2. Candlestick Pattern: A breakout candlestick (candle close above 29.5K) followed by a breakdown candlestick (candle close below 29.5K)
2.1 Ideally breakout and breakdown candlesticks are consecutive candles, but can also have a few candles in between the two
2.2 Ideally the breakdown candle has a large candle body with very small wicks
3. Volume: Above average volume ( volume above the average volume line) on both breakout candle and breakdown candle, ideally the breakdown candle's volume is a local high
4. MACD: MACD histogram topping out, as indicated by the histogram becoming less positive (color changing from dark green to light green)
ENTRY CONFIRMATIONS
Ideally we get all confirmations for an entry, but sometimes we might take a trade when we have fewer confirmations. The more confirmations, the higher the win probability, though it also means you miss out on some profitable trades if you're only taking trades when we have all confirmations. It's up to your own risk appetite to decide when you feel comfortable entering a trade. You can also adjust position size based on level of conviction, entering a bigger position when there are more confirmations. Make sure you practice proper risk management and money management.
TRADE MANAGEMENT
I have put in preliminary Stop Loss and Take Profit on the chart, but these will depend on how the entry setup forms, so I will update when we have a valid entry signal.
Stop Loss: We typically put a SL around the high / low of the entry area, though we might adjust based on market conditions such as high ATR ( average true range ) or long wicks.
Take Profit: We typically aim for at least a 2:1 RRR (risk reward ratio), but you can decide to take profits earlier, adjust stop loss as we get into profit, take partial profit, leave a small portion for larger gains, etc. How you want to manage depends on your own risk appetite and what you are comfortable with.
HOW TO USE MY ANALYSIS
Every day I post potential areas of interest and trade setups based on the latest market conditions and market structure. Once price reaches one of the identified areas of interest and gives a valid entry signal, I will post the entry, along with stop loss and take profit levels, in real time. No hindsight 20/20 here. Everything is in real time for full transparency and so that you can actually enter the same trades that I'm entering. Some trades only give us a few minutes to enter, which is why it's imperative that you follow me so that you don't miss out. Below are two ways that you can use the analysis that I publish daily:
1. You can integrate my analysis into your own analysis, for example by using it as a starting point, or as confirmation of your own TA, or to identify potential trades for yourself.
2. You follow the trade setups and trade entry signals that I give in real time.
MAKE SURE YOU FOLLOW ME SO THAT YOU DONT MISS TRADE SIGNALS, GET THE LATEST SL AND TP LEVELS, AND FOLLOW THE TRADE PLAY OUT IN REAL TIME!
DISCLAIMER: I'M NOT A FINANCIAL ADVISOR AND THIS IS NOT FINANCIAL ADVICE, AND I WILL NOT BE RESPONSIBLE FOR YOUR WINS OR LOSSES, DYOR.
Feel free to ask any questions, and please let me know how I can improve these daily posts / what you would like me to include in these daily posts, thanks. - Yesterday we had a winning trade! We entered short @ 29.3K, with a Stop Loss @ ~29.5K, and price reached a low of 28.8K, giving us a risk reward ratio of 2.5:1, meaning if you risked 1BTC on this trade, you could've made 2.5BTC. As this was a false breakout trade, you could've also decided to enter a short on ETH. Entry would've been $745, SL $749, price reached a low of $725 so far, giving a risk reward ratio of 5:1, meaning if you risked 1BTC on this trade, you could've made 5BTC. Trading ETH on a BTC false breakout setup proved more profitable than trading BTC itself.
- TRADES(S) RECAP
Note
Potential false breakout short entry here on btc. A bit high risk as it doesn’t meet my ideal conditions. But calling it out anyways in case it confirms your trade analysis. What I didn’t like was that the candle that closed above the high didn’t do it with enough conviction. It has a long upper tail, indicating not enough people bought into the breakout. We want to see a close near candle highs to indicate that a lot of people fomoed in and would now be trapped, leading to a good sell off.Note
If the breakout candle had closed nicely, this would be a 75-80% probability of winning trade. As it is set up now, based on historical trades, this has a likelihood of 50-60% of winning if we target a 2:1 risk reward. That is still a great profit expectancy, but it requires that you have good risk management and position sizing to ensure that you can take enough trades for probabilities to play out. So if you’re a sophisticated trader, this can still be a good trade for you. If not, you might want to pass up and wait for the next one.Note
For those of you who took the short scalp trade, congrats. Trade worked out pretty well. So far reached as low as the 200MAs at 28.9K. As 200MAs typically serve as an area of support/resistance, they’re a good place to take profits. Especially since we might be setting up for a potential long from the 200MAs if we get a good bounce and confirmation signals.Note
Like clockwork! We took a short at the top to the 200MAs. And then we formed a long setup at the 200MAs and moved up. Apologies that I wasn’t available to make the entry call on the long trade as I was asleep, but if you look at my entry criteria in detail, you would’ve seen that it met all of the entry confirmations. Cheers.Note
New Years weekend, so apologies for being a bit out of normal schedule in postings. As of now, I’m looking at 29.6k for potential trade. If again like the previous few times where we just baru create a new ATH without momentum to really break it, I will again be looking for a false breakout short entry.
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.