Trade with the trend
Cryptohopper Newsletter
Chart
Bitcoin has retested the support at 8,500$ after having dropped more than 20% from this year’s high two weeks ago. The price is now moving higher and retesting the resistance at $9,000
Trade with the trend
Bitcoin has some of the most spectacular swings out of all the assets in the world. It can rise hundreds of % in an uptrend and then fall more than 80% in a downtrend. As such it is important for traders trading on the smaller time frames to trade with these trends and not against them. Trading against the trend is one of the most common mistakes new traders make.
For this week’s analysis, we will look at how we can identify a general trend and how we can trade with it.
Let’s dive deeper into how you can trade the trends within the BTC/USD market!
Identifying the trend
First off, we must choose the timeframe in which we want to place our entries and exits; let’s take the 4h chart as an example. Then, we must look at an order of magnitude larger, Alexander Elder described an order of magnitude larger as a factor of 5. In our example we can take the daily chart as our larger time frame.
Then, we can use a trend-following indicator to identify the trend on the respective timeframe. The MESA is a good example of a trend following indicator. By using the MESA and only trending in the “green zone” we can ensure that we will always trade with the broader trend.
Identifying the pull-backs
A momentum indicator can work well in identifying the pull-backs on a smaller time frame. Let’s take Williams % as an example. This indicator can be used in identifying the oversold zones and timing your entries in the market.
A trailing stop loss can then be used in order let your position run along with the general trend and not exit prematurely.
You can find both the MESA and Williams % along with many more indicators in our strategy section; you can set them to any timeframe you desire!
Chart
Bitcoin has retested the support at 8,500$ after having dropped more than 20% from this year’s high two weeks ago. The price is now moving higher and retesting the resistance at $9,000
Trade with the trend
Bitcoin has some of the most spectacular swings out of all the assets in the world. It can rise hundreds of % in an uptrend and then fall more than 80% in a downtrend. As such it is important for traders trading on the smaller time frames to trade with these trends and not against them. Trading against the trend is one of the most common mistakes new traders make.
For this week’s analysis, we will look at how we can identify a general trend and how we can trade with it.
Let’s dive deeper into how you can trade the trends within the BTC/USD market!
Identifying the trend
First off, we must choose the timeframe in which we want to place our entries and exits; let’s take the 4h chart as an example. Then, we must look at an order of magnitude larger, Alexander Elder described an order of magnitude larger as a factor of 5. In our example we can take the daily chart as our larger time frame.
Then, we can use a trend-following indicator to identify the trend on the respective timeframe. The MESA is a good example of a trend following indicator. By using the MESA and only trending in the “green zone” we can ensure that we will always trade with the broader trend.
Identifying the pull-backs
A momentum indicator can work well in identifying the pull-backs on a smaller time frame. Let’s take Williams % as an example. This indicator can be used in identifying the oversold zones and timing your entries in the market.
A trailing stop loss can then be used in order let your position run along with the general trend and not exit prematurely.
You can find both the MESA and Williams % along with many more indicators in our strategy section; you can set them to any timeframe you desire!
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