Bitcoin trading: entry and exit points
Last update: May 08, 2016
- Getting the coins - A short summary
- Technical Analysis - Entry - When to enter a trade (very briefly)
- Technical Analysis - Exits
- Bitcoin TA Tools
- Bitcoin TA Talks, News and More Reading
This is not a blog about technical analysis but who ever bought Bitcoin has probably played with trading to some extent. There’s money to be made. Relevant enough?
So take this as a primer, there’s a lot of resources inside for those who want to know more and are too lazy to Google.
##Getting the coins
First of all - what are you going to start with?
If you want to trade with fiat you will need a bank account and a verified account on one of the Bitcoin exchanges good for trading.
If you are into derivatives trading you will need BTC and you will also profit in BTC. If you want to short Bitcoin, you can also deposit BTC - no need to buy first. This is fine if you don’t have the paperwork to link your bank account.
Most exchanges apart from Bitstamp will let you trade unverified if you deposit Bitcoin. Here is a comparison of futures exchanges with some agenda regarding permitted countries.
##Entry points - Technical analysis
Much has been written about breakouts, triangles and channels. Maybe too much. Two cents to this issue on this website are here.
Nonetheless, many newcomers are still asking what are the best technical analysis indicators for Bitcoin? The truth is that it is only reasonable to use such an indicator that is widely trusted.
If most traders believe certain indicator they will set their trades according to it. Because of that, the indicator might as well be a charlatan bullshit but it cannot be ignored, simply because your market believes in it.
Most favorite entry point indicators
- Moving averages and MACD
Moving average captures a long term trend - that is, as much long as wide the time frame of MA is. Two different MA’s cross shows a point where the current price is about to rise faster than the long term trend would - a good point to open a long position.
MACD is derived from MA (moving average convergence divergence) and follows all recent trend changes. It consists of the MACD and a signal line, which is an exponential MA of the MACD. Crossover of these two is again what you are looking for.
- Relative Strength Index as Stochastic RSI
You will find this one as StochRSI on any charting website.ads. It is usually not the default (that’s MACD in the area below the chart) but it is still widely used. StochRSI signal is veru simple. If it falls under 20, stays a little and then starts coming back up, the price is too cheap for current market momentum - time for long. If it surges above 80, stays a while and starts sinking it’s time to short.
- StochRSI on Investopedia combined with MACD - An often used combo
Triangles are patterns where the price oscillations are gradually getting smaller, forming a triangular shape. This typically results in a breakout - a sudden surge or fall.
Most traders project the expected closing by drawing a triangle into the chart they are trading and start watching the buy/sell walls and price movements more closely when it a triangle should be closing.
Exit points are important. Who masters them should neither get rekt nor leave money on the table, though especially the latter really needs hours and hours of screen time.
In brief, exit points are typical point where to set your stops. Contrary to popular practice you should start with wider stops so that your trade doesn’t end as a loser because the market moved a little against you. Initial stop order should leave a lot of space. Then once your trade is becoming profitable, start moving the stop tighter to lock in more profit.
A good strategy is also to walk out of the position step by step. Say, 10% profit but expecting more - close 25% of the position. 12% - close 25% of what’s left … and so on. You can do this very easily on OKcoin.
Most favorite exit signals on Bitcoin markets:
Chandelier “hangs” a certain distance from the timeframe’s highest high in an upward trend, or above the lowest low in a downward trend.
It is a very good indicator for locking in profits though it doesn’t stop out your trade on every minor move against you. What is handles beautifully though are huge sell offs that move the Bitcoin price something like 20 dollars in 5 minutes.
See picture - it would stop the trade well before the dump. The same would manage the following indicator too - Parabolic SAR.
- Cryptowatch has chandelier exit
- Parabolic SAR
Parabolic can actually also be used as an entry signal. It is default on Cryptowatch and very useful. Leaving any math behind, Parabolic SAR are dots indicating the current trend. If there is a major sell off that shakes the whole market, SAR dots start showing in the upper side of the price line. If a buy spree occurs that has the potential to start a bull trend, dots start showing up below the price line.
Because Parabolic SAR is always somewhere around the price line, but keeping the distance, it can be used to set your stops. But watch out for the indicator settings. If you just opened your position and want to have wide stops, reset the SAR max step value to 0.015. That will make it looser, ignoring minor moves.
- Cryptowatch has Parabolic SAR on by default
- Larger timeframe!
If you are holding a futures contract with enough time till delivery or in any situation, if you are willing to stay in your position longer, check 1H, 3H and 1D timeframes too. Movements that look apocalyptic on 15m chart will often not even stir the 3H chart.
- Different market
If you are trading BTCUSD, do check BTCCNY for confirmations.
Of course, no exit strategy will save you if you re 100% sure this time it will work out big. Watch here MrJozza talking about how not to lose it all on Bitcoin markets.
##Bitcoin TA - Tools
- TradingView Chart - probably the most advanced TA charts available. Also as a desktop version here. TradingView comes with a trollbox chat but if you care about your money don’t take TA from there too seriously.
- Charts at Cryptowatch - bitcoinwisdom.com alternative with plenty indecators, alarm, altcoin markets and futures. These charts are what was implemented into Bitfinex web app.
##Bitcoin TA - Talks & News
CoinMama - Bitcoin and ETH with credit/debit card
Everyone's favorite bucketshop
Everyone's second favorite bucketshop
Forever The Fastest Way to Buy Bitcoin 24/7
Zero-Fee Bitcoin Trading in Japan
Hardware Wallets for Bitcoin and Altcoins
Bitcoin & Altcoin Trading Charts
- Tools and Downloads
- All ”Dummy Numbers” Posts
- Promotions and Coupons
- All about Bitcoin lending
- All about Bitcoin VCC's
- Buying Bitcoin with Skrill
- Bitcoin Cold Storage 2016
- Bitfinex Referral Code 5egV78YtlC
- Coinmama Referral Code fny3000
Good to Read
- Finance & Technology: VPRO Backlight on Youtube (full documentaries)
- Macro & Bigger Picture: Stratechery
- Wall Street Technologist
- Austerity Sucks
- For Coders: Crypto Trading Tools
- Bitcoin Markets Wiki
- Baby Pips Forex and Charting School
- Technical Analysis for Dummies [PDF]
- StockCharts Chart School
Basics to Start Bitcoin Trading
- What is AML/KYC
- How high are fair flat fees
- What are Maker-Taker fees
- How to get trading charts
- How to trade on mobile
- Best practice
About This Site
There is a rumor around the web that Bitcoin has no real value other than for speculations.
Sherlock Holmes: ”Has all my instruction been for naught? You still read the official statement and believe it.”
- Top up a debit card with Bitcoin
- There is webhosting for Bitcoin geeks
- Topup prepaid phones with Bitcoin
- Use ad networks like Bitclix or A-Ads
- Chat with RoyalTiffany (had to be here)
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