Market Cycles: How to Overcome the Fear of Missing Out (FOMO)In this post, I'll be providing an educational post on the cryptocurrency's market cycle, and how to overcome the fear of missing out, also known as fomo.
It's important to understand that the cryptocurrency market has very clear market cycles.
In order to profit in the cryptocurrency market, it's important to think like a whale .
1. To begin with, whales keep their assets in the form of fiat, or tether (USDT) before the beginning of a market cycle
2. Whales buy Bitcoin with their cash at hand, and this is when we see Bitcoin rally alone
3. Since Bitcoin is the only cryptocurrency to rally, Bitcoin dominance soars up along with Bitcoin's price
4. However, the market trend soon changes as the whales, who have profited from Bitcoin, move onto large cap altcoins
5. These are our typical altcoins at the top 20 in terms of market cap
6. After these coins rally, capital then flows into the undervalued coins with a much smaller market cap
7. Because there isn't enough liquidity, these less popular coins tend to break out the hardest, and demonstrate immense risk
8. After whales profit from small cap alts, it's time to convert their assets back to Bitcoin
9. This process is repeated during a bull run, and ultimately converted to fiat in a bear trend.
So, what are we currently seeing in the market today?
Bitcoin
- For Bitcoin, we are seeing a textbook bearish divergence
- In my previous analysis, I have provided consistent updates, in which the divergences I have spotted, both bullish and bearish, have played out perfectly.
- You can check the previous analysis above.
- As such, it's reasonable to expect this divergence on the longer time frame to play out as well
- The higher highs on the price, and lower highs on the Relative Strength Index (RSI) is extremely concerning
- The Moving Average Convergence Divergence (MACD) also demonstrates decreasing bullish histograms, with a potential death cross in play
Does that mean we have missed the train?
While Bitcoin may be done for the short term (since the uptrend is still intact, and we are seeing higher lows and higher highs on the longer time frames), but there are opportunities to be spotted in the cryptocurrency market.
Ethereum
- Ethereum has been consolidating for a while on the weekly, and has been inactive on the daily
- The Ethereum 2.0 Countdown just recently began, providing bullish stimulus for prices
- Based on the market cycle theory explained above, Bitcoin's short term bearish signals suggests an opportunity for Ethereum to break out
- Considering that Bitcoin dominance is trading within a downtrend over the long term, we could expect price action from Ethereum in the coming days
- For my analysis on ETH's long term price action, check my previous analysis below:
Conclusion
In summary, seeing everyone else make money while you sit on a pile of cash, might be frustrating mentally. But as I always emphasize, trading is a psychological game. Successful traders have a good understanding of the market psychology and cycles. As such, capitalizing on trading opportunities require a combination of proper knowledge and patience. There will always be opportunities, regardless of the market situation, as beauty is in the eye of the beholder.
BTC-M
And the wind blew, the earth split and it appeared ...The birth of BTC pumpkin. One dark dark evening, in a terrible 2017, when huge incomes of investors drove them to euphoric blood-strokes, it was born... Vegetable electronic evil , the king of margin calls, garden crypto ganster - BTC pumpkin.
With the right hand, it weakens the growing trend , and with the left hand it attracts with overbought stochastics, bear patterns and low volumes of bold sellers in the position ...and vice versa...
And no one knows peace from it for 3 years!
BTC Pumpkin's worst weapon is its mood. The bipolar disorder of this vitamin monster changes the mood every six months .
Will we see a new wave of BTC Pumpkin bad mood?
What is more terrifying, grater, blender or saw?
Today is the day when the crypto pumpkin knocks on the deposit house of every investor and says "treat or margin call?"
We hope you love sweets!
Can the BTC market free itself from the Pumpkin shackles? It remains to wait only six months...
P.S. Drug use is bad for your health and hampers your trading.
How to Create the Perfect Trading PlanHello traders! Here I would like to present to you another personal market psychology trading plan that I believe is effective for all traders ranging from beginners to advanced . Do you have a trading plan? Most don't. It's very important to create a set of fixed rules that you will always follow when you are trading! The key word here is trading - not investing. Investing has a completely different set of rules when finding the right entry and profitability of your account; however, here I will be showing you the sole principles of my own trading strategy that I believe has worked for me over the past years of trading. If you follow these steps correctly, I believe you will have the golden ticket to a much more profitable future, and if applied correctly, you will be having more winning trades than losing.
The 7 crucial steps:
1. Understand what timeframe you want to use
2. Risk management is key - don't over leverage, use a certain percentage
3. Market trend - make sure to follow the trend, don't be trade against it
4. Types of markets - do you trade mostly stocks? Bitcoin? Forex? These are all good for technical analysis
5. Entries - make sure that you have the correct entry. Don't rush into the market
6. Stop losses are crucial - especially when you are away from the charts
7. Targets - do you know where you want to exit?
Trade Safe!
X Force
Learning the BARR Top Pattern : Chainlink; is the run over?IF Chainlink does not claim 13$ again soon we may be putting in a bearish retest of a BARR TOP (Bump & Run TOP) Pattern.
The pattern is explained below and there are some obvious key area to watch on the LINK/USDT Chart.
Note the below image of Bitcoins run to 20000 as a comparison of a successful BARR TOP.
The Bump And Run Reversal Top (BARR Top):
• Follows strong bull market at steep angle
• Initial “bump”, followed by a hook shaped movement reversal
• Sell on the retest key diagonal trendline or buy if the pattern fails and reclaims the trendline
• GOOD SUCCESS RATE
Price has a strong uptrend off in two phases - the bump & the run, first a small increase then recovery occurs, then price increases with massive volume at a very sharp angle. The BARR Signifies a trend change from strong Bull to strong Bear market.
Price then makes a sharp peak and comes down breaking the support line the angle of this support line is usually around a 35-50 degree angle. It then throws back and bearish retests off that previous support (this is the entry point), its common for this rejection to be at the 0.618 fibonacci level.
Link has already made its sharp peak and has rejected right off the diagnol BARR trendline.
Log scale is to be used when identfying pattern. The possible price target is the start of the pattern, BARR Tops usually have strong breakouts but do not always hit price target.
Note how in the chart of LINK USDT we are rejecting right off the 0.618 fibonacci level, until price gets back above that LINK may continue to decrease in value.
If you enjoyed the idea show your appreciation by giving it a like!!
I look foward to hearing your comments.
Waiting to Enter on a Channel BreakHello my friend | Welcome Back.
Please support this idea with LIKE if you find it useful.
***
* Once I have this structure in place, finding the trend becomes relatively easy. When the pair is trending lower, I only want to look for selling opportunities. Of course, the opposite is true when the pair begins trending higher.
Enter in the Direction of the Trend
At this point, you have identified the major trend and found a favorable corrective pattern such as a channel or a wedge.
The next step is to look for an entry once price breaks the pattern.
BTC: Understanding Healthy vs Unhealthy Bull RunsHello traders and investors, here I would like to compare and contrast the stark differences between a healthy and unhealthy bull run. I would like to dissect the 2019 bull run vs the 2020 bull run, as there is one major difference that I would like to focus on in terms of the differences of the two bull runs.
The first thing that we can witness from 2019 is that we saw an incredible 300%+ bull run. This is no doubt an incredible feat for Bitcoin during that time, but it was merely impossible to know when to enter the market with no confirmation in sight. We have seen a series of higher highs being printed, with no real pullback until the end of the blowoff top where most have entered. After the real pullback, most were probably entering the market thinking it was going to go higher, which wasn't the case as we were seeing a series of bearish confirmations and sell signals from our lagging indicators and a bearish descending triangle.
The second thing that we can witness from the current 2020 bull run is that it is much more extended and simply a matured bull run, especially taking into account of direct stock market correlations and the on-and-off decoupling of different assets. This year has brought interesting and new concepts of how the bull market is running, especially with the series of uneventful news such as the unfortunate COVID19 pandemic (my prayers are out for everyone to be safe!) and now the election cycle in place.
In my opinion, this is actually one of the most healthiest bull runs we have had with all things considered. The fact that Bitcoin has responded to all negative news and events from 2020, the fundamental news of Bitcoin and the store of value idea is being shown within the price action. We are also technically seeing a higher low with each consecutive pullback, which is absolutely fantastic from a bullish perspective. Now the underlying question remains, "when should I enter the market?" Based on confirmations, we can enter safely when Bitcoin consolidates when we create a new 'higher low', possibly in the upper $9,000 to $12,000 range for the longer perspective. Remember, Bitcoin can still have impulse waves in between, but the overall point is making sure you are riding the 'waves' of the market, not the impulse waves.
Trade Safe.
X Force
Trading Hierarchy: What Really Matters in TradingHello traders, these past few weeks have been incredibly profitable for many traders (and many losses as well)! Here I would like to show you an investor philosophy that I always trade by when approaching the market. Many people approach technical analysis thinking it's the first and foremost thing they must learn, which in reality, should be the last. It's crucial to first understand that trading psychology and risk management is the MOST important factor when trading within the market. Even if you have strong technical analysis (which can never be perfect), you can lose if you have BAD risk management. You can lose even more if you are no patient enough and trade EMOTIONALLY.
The sad reality is, many professionals who have traded for years, still have yet to realize this. I hope this small educational post shines light onto advanced and beginner traders. Everyday, I am witnessing traders who are making money not knowing why, or losing money not knowing why. One thing that I always like to advocate is that it's better to know why you lost a trade, rather than not knowing why you made money in a good trade. These are realistic expectations of the market, there is no simple magic pill in technical analysis .
Trade Safe.
X Force
Only 5 Set-ups like this mon-shot since 2012 - How to trade ?All Charts To Same Scale For Comparison.
See Can Spot A better Way To Trade It
NOT ADVICE. DYOR
Bitcoin Suuport In or Not Yet ?Bitcoin - Support In or Not Yet ?
DXY - Retrace Over or Not Yet ?
Will USDCNY Crash By End By End Oct ?
NOT ADVICE. DYOR.
How to trade GOLD/SILVER RATIO in Any platform!?This is the first educational post I Make on Tradingview so make sure you like and comment and follow if you like it,
in this post I will explain how to trade The GOLD/SILVER RATIO in any platform
You can use the same strategy to trade ETH/BTC in Binance Futures with leverage ...
first lets define what is gold silver ratio ,
The gold/silver ratio (GSR) is the current price of an ounce of gold divided by the current price of an ounce of silver. It's a simple numerical calculation that shows how many multiples gold is trading relative to the price of silver, a common indicator used by precious metals investors worldwide.
this indicator help us know which is going to gain more or wich is going to lose more in some cases when there is high volatility in the markets you might find this chart stable with very strong trading opportunity for example back in the 26/2/2020 when the markets were uncertain and volatile this chart made a very good breakout and huge gains! you can find that on the chart above
so now lets explain how to trade it in any platform that have GOLD/USD and SILVER/USD
if you want to short the GSR
all what you need to do is to sell short GOLD and buy long SILVER with the same amount of money and leverage in each of the positions
Example
if you open a long position with 1000$ and x3 in SILVER/USD you have to open a short position in GOLD/USD at the same moment with 1000$ and x3 leverage.
If you want to long the GSR
all you need to do is the opposite of shorting we buy GOLD/USD and sell SILVER/USD with same rules again we should use the same amount of money and us the same leverage in each of the two position.
thanks for reading good luck
2020: Why Bitcoin Is Inversely Correlated With the US DollarThere is no doubt that Bitcoin and the overall crypto market has some correlation with the stock market, with market experts remarking that Bitcoin has been surging in tandem with traditional markets for awhile over the past year or so. Extensive research has already been conducted by market experts to study the seeming correlation of both markets, but I would like to take my stab at it as well, but from the US Dollar correlation perspective. Investors should be aware of the close inverse correlation between the strength of the US dollar and Bitcoin.
A widespread debate among investors is the correlation of Bitcoin (BTC) with other markets. In other periods, gold and Bitcoin appear to be moving in tandem. However, the correlation that needs to be monitored most closely is that of the dollar, as the global economy is based on the strength or weakness of our global reserve currency, the US dollar.
Bitcoin and Cryptos as assets:
The US dollar is the de facto world currency, thus the value benchmark for everything else, including assets and other fiat currencies. A lot of financial activities are based on US dollars like loans and settlements, which no doubt increase requirements and adoptions of US dollars (In a negative word, US dollar colonization). When the world lacks a supply of US dollars, everything else will fall in price in reference to US dollars. If the US dollar is stable, then the crypto prices may have become influenced by the monetary policies of other currencies. For example, there is very high inflation in Argentina, so the general public would like to exchange their Argentine pesos for Bitcoin, to reduce the risk of inflations.
Although Bitcoin and other cryptocurrencies can function like currencies, like payment and store of value, the market cap of cryptocurrencies is quite small compared to traditional finance, and most financial activities are based on fiat money. After all, you can't borrow Euro, then pay back Ethers. Typically you need to pay back Euro. In other words, the financial inclusion of cryptocurrencies is not enough. If bitcoin and other cryptocurrencies replace more traditional financial functions, which may reduce the role of the US dollar and other fiat money, the relationships between Bitcoin and other fiat money will be different.
For most of Bitcoins’s young life, the correlation between the cryptocurrency and the S&P 500 was largely negative—until the 2017 bull run (when Bitcoin’s skyrocketing notoriety seemingly invited a host of new investors, many of whom had their hands in other markets).
What I believe:
I believe that since the US dollar is now standing at the frontlines of support, and testing it twice, we can see some form of recovery within the US dollar, especially with Trump miraculously being tested negative again, and now also going into elections - which makes people want to carry more cash while the stock market remains volatile. People will be looking for a hedge, whether it is gold or Bitcoin, we also can't take out the fact that cash is also king. In the chart above, we can clearly see the inverse correlation between Bitcoin and the US dollar. For example, the COVID19 crash led to the USD rise immensely high in preparation for a possible recession caused by this pandemic (stocks also plummeted). After a miraculous recovery, we saw the US Dollar bleed slowly and also saw a clear recovery in the stock market, bringing Bitcoin along with it up.
From a pure technical standpoint, we can see that Bitcoin has broken down our legacy trend line, and is now retesting the resistance twice, while the US dollar retests the support for a second time.
With all of these considered, we can assume that Bitcoin will have some form of correction, while markets remain volatile and cash driven investors will liquidate their investments in preparation for a hedge.
Trade Safe.
X Force
BTCUSD: Decision Time - What Will Autumn Bring $9K or $12k?What will the break of the symmetrical triangle bring: $12K, $9K or more $10K?
Bitcoin Hash Rate, Dominance, Energy, NVTS & Volume
Logirthmic Curve & Network Growth : $100K in 2021?
2020 BTC Timeline - In-Depth Fundamental & Technicals AnalysisAs a result of the Corona pandemic, the financial markets are experiencing a year of extremes. These include, as well as the speed of the price slump and the severity of the market fluctuations during the panic phase in March, the recovery rally that has lasted for two and a half months. Its extent is extremely impressive, and considered by many, terrifying. All of my explanations are clearly inputted in the chart above. Let's take a moment to dissect the current ups and downs of 2020:
Phase 1: Pre Corona Bullrun
Bitcoin was in the traditional bull market during the months prior and after 2020. There were no clear signs of retracement, including the indices and equities market.
Phase 2: Corona Crash
COVID 19 Pandemic, with a series of uneventful news. Global markets saw a crash, including Bitcoin's largest drop in it's history in a short timespan.
Phase 3 & 4: Recovery + Accumulation
1. Stimulus from the Fed and Congress
2. Expectations of a strong recovery
3. Dominance of Tech Stocks
4. Individual Investors outweigh the market
5. Momentum Trading
Phase 5 & 6: Uncertainty + Election Cycle & Post Cycle
Stock market makes a full blown new high, bringing Bitcoin to newer highs. All we can do is now assume and mix new educated guesses via technical analysis and current world fundamentals. Things to consider include the possible tech bubble, Trump testing positive for COVID-19, the election cycle. IT WILL BE A ROCKY RIDE.
Technicals:
1. Bitcoin has created a definitive top for the year 2020, and we still have yet to fill our CME gap near $9,700.
2. We are currently bouncing on the larger 236 fib level.
3. We are also trading in a tight region of the newly immediate fib level.
It is possible to revisit $11,000 levels, before re-visiting any lower levels. Current sentiment for Trump testing positive is NEUTRAL. The markets have reacted rather neutral. Bitcoin has dumped pre-market upon announcement, but has stuck to support.
Trade Safe!
X Force
If you like my content, please like my post for support! Thank you.
BTC: How Will Bitcoin React To Trump Testing Positive?After a few of the most uneventful news this week, Friday (Oct. 2) has brought a couple of interesting developments that are rather unexpected. Just a few hours ago, United States President Donald Trump announced on Twitter this morning that he and First Lady Melania Trump had tested positive for COVID-19, an unexpected movie plot twist that has sent shudders down into the global economy at the time of writing. Will Bitcoin become the safe haven for investors after such an incident? We are shunned by such an incident as well, but let's dive into some of my deeper thoughts on both sides of the spectrum, as we are seeing gold decouple from Bitcoin.
Overview / Current Aftermath / Technical Analysis:
At the time of writing, Bitcoin has fallen 2.5% as the news broke out dropping from $10,660 to $10,300, and is now stabilizing on the short term with a slight bullish divergence on the one hour time frame. From a technical standpoint, we can assume there needs to be some form of a recovery bounce; however, there was a larger fall when the BitMEX news broke a few hours before that, where Bitmex has been accused of preventing money laundering. There has been a minor recovery to the $10,450 levels at the time of writing which has put the asset back to weekly support near the 20MA. From a larger perspective, the 20MA has acted as a strong support for Bitcoin, but with more unexpected global crisis looming, we aren't sure of the outlook on Bitcoin. As Bitcoin has been a traditional safe haven investment, we have been witnessing Bitcoin slowly align with traditional equities markets, where we aren't seeing the true decoupling from the stock markets.
Looking at the larger picture and time frame, Bitcoin is still within its range-bound channel and this reaction by the news-selling bears has been just a blip. But what about the short term? We can expect some form of reaction most certainly during and after the hours of US trading hours, whether it will be up or down - we do not know for certain. Gold prices has spiked over a percent in a short time span following the news taking the precious yellow metal back over $1,900/oz again. Highlighting the investor flight from risk was a drop in Bitcoin, with Bitcoin down by more nearly 4% on the day, while Ethereum fell by 6-8%, respectively.
US futures on the S&P 500, Dow Jones and Nasdaq 100 traded around 1-1.5% lower, suggesting the major indices will fall at the start of trade later on today, while oil suffered the heaviest blow, sliding by more than 3%, as investors fled risk-linked assets. Even the US dollar came under strong pressure to the benefit of typical safe haven assets such as the Japanese yen, gold and US Treasuries - all of which are up at the time of writing, respectively.
Bullish Perspective:
Analysts who have been less critical of Bitcoin and other cryptocurrencies in the past seem to believe that BTC won’t be too drastically affected by today’s chaotic news cycle–after all, it hasn’t been (at least, not yet.) As stated by Joseph Young, a crypto market analyst from Forbes, has stated, "...BitMEX charge and Trump contracting COVID-19 couldn’t take Bitcoin far below the $10k level even briefly... The resilience of Bitcoin during this cycle is quite impressive.” Similarly, Marcel Burger, founder of crypto investment consultancy boutique Burger Crypto, wrote on Twitter that “Trump testing positive on COVID and the entire market tanks again. Bitcoin also dealing with bad news around Bitmex (founders arrested), but actually manages to control the damage. Pretty bullish to me.” The election cycle will continue to have a big effect on crypto prices, but how far? That is only determined by time and the equities market.
It’s true–BTC’s +/-5% immediate reaction to either (or indeed, both) of these events could almost be considered a non-reaction in the history of an asset that is known for its extreme volatility. Still, the real reaction to these two events–and to their related affairs–could still be on the horizon as we still haven't seen a real reaction by traditional markets such as the SNP500 during opening hours. For example, Trump’s COVID case will likely have a significant effect on the US Presidential election cycle, which, in turn, could have a big effect on the price of Bitcoin, instead. While even before Trump tested positive for COVID, the American election cycles were having an increasingly powerful effect on cryptocurrency prices; and it isn’t all sunshine and beautiful angels. Most people have always more or less re-invested back into Bitcoin, eventually, as we have witnessed in August, for example.
Bearish Perspective (Higher Probability):
While both the BitMEX indictment and Trump’s COVID case made it into the New York Times today, one of these just might be more significant than the other. Both have immediate and long term effects on Bitcoin, regardless of how Bullish Bitcoin may be. Indeed, while the BitMEX's case is more specific to the cryptocurrency world, Trump’s COVID contraction seems to be having a more powerful effect on crypto markets on the immediate term. The BitMEX news has caused a 3% fall in the price of Bitcoin. Prices rebounded before Trump’s COVID Tweet sent them back down again. Together, these two stories still acted as a negative effect for Bitcoin prices in the immediate follow up. If traditional financial markets are any indication of what’s coming for BTC and other cryptocurrencies (and, historically speaking, they have been - even more so currently during the COVID-19 pandemic), further price drops could be on the horizon - short term and long term. Markets outside of the cryptosphere are reacting to Trump’s COVID announcement similarly to the way that they reacted to the widespread lockdowns in March: for example, gold is continuing its rally to the upside, continuing the rebound that began ahead of Tuesday’s presidential debate due to the uncertainty and uneventful news that followed.
Stock markets, however, can be a completely different story. If our analysis on Bitcoin and the Stock Market's correlation continues to be true, we may see further downfall for Bitcoin. The BBC reported just a few moments ago that, “(the) stock market futures showed that all three of America’s main indexes – the Dow Jones, the S&P 500 and the Nasdaq – are set to drop by at least 1.5% each when trading begins on Friday...” A number of analysts, including the X Force Global, are predicting that BTC will go the way of the stock market, just as it did when the COVID financial crisis began in March of this year. These eventful news will only exaggerate the price drops.
Trade Safe.
X Force
Eyes on post election price actionThese 3 charts indicate that price is usually fairly stagnant pre election.
The historical data on these charts only go back to 2012 however the patterns are almost identical.
Chart number 1 rallies to an all time high in 392 days, and chart 2 rallies to another all time high in 399 days.
The blue vertical line is the date of election and the pink line shows us where price was at that time.
This tells me that historically post election and early into the following year a bull run occurs. The year of an election also correlates with the year of a halving which seems to deliver positive price action.
Could 2021 be the next big bull run?
BTC/USD Weekly Timeframe
BTC: Bullish and Bearish Divergence Cheat Sheet - Trading 101Almost all forms of technical analysis involve the use of lagging indicators, as they are a great way to find the overall direction of the price action in either the immediate or medium term ahead. There are very few indicators that use any type of leading analysis due to the nature of the market psychology. That is because we don’t know what will happen - we can't predict the future, but we can most definitely try and find a way to understand how the market behaves and make a certain judgment off of this theory. All we can do is interpret what kind of future behavior may occur based on past events – this is the basis of all psychology and significant portions of medicine: we can only predict future behavior by analyzing past behavior. Now, just because most of the tools and theories used in technical analysis are lagging in nature – it doesn’t mean that there is no method of leading analysis.
Divergences are one method of turning lagging analysis into leading analysis – it’s not always 100% accurate because of market situations on a daily basis, but divergences can detect anomalies and differences in normal price behavior based on supply and demand of prices. Divergences are useful in identifying when a significant trend may be ending or when a pullback may continue in the prior trend direction. Let’s review some of those now.
Divergences are easily one of the most complex components to learn in technical analysis - that's if you are patient and have a good disciplined setup. First, they are challenging to identify when you are starting because we always try to find bias within our trade setup. Second, it can be confusing trying to remember which divergence is which and if you compare highs or lows. It is essential to know those divergences themselves are not sufficient to decide whether or not to take a trade – they help confirm trades, and if you have other indicators that are implying a buy or sell signal, these divergences can increase your trade setup by three folds.
When we look for divergences, we are looking for discrepancies between the directions of highs and lows in price against another indicator/oscillator. The RSI is the oscillator used for this lesson. We are going to review two of the main types of divergences:
Bullish Divergence - A bullish divergence occurs, generally, at the end of a downtrend. In all forms of bullish divergences, we compare swing lows in price and the oscillator. For a bullish divergence to happen, we should observe price making new lower lows and the oscillator making new higher lows. When bullish divergence occurs, prices will usually rally or consolidate.
Bearish Divergence - A bearish divergence is the inverse of a bullish divergence . A bearish divergence occurs near the end of an uptrend and gives a warning that the trend may change. In all forms of bearish divergence, we compare swing highs in price and the oscillator. For a bearish divergence to happen, we should observe price making new higher highs and the oscillator making new lower highs.
Tesla getting ready to race bitcoin againUsing candlesticks in extraordinary ways. CAVEAT: small sample size. NOT ADVICE. DYOR
Signal code: Rising Window followed by Long Lower Shadow & then Rising Window again is a buy.
Why Bitcoin Is Directly Correlated to the Stock MarketHello Traders and Investors.
Here I would like to shine some light on why the stock market is now currently the leading indicator (here we use the SNP500) against all commodities, assets, and tradable cryptocurrencies during and post the COVID-19 Crash. Although the Bitcoin market has been showing strength, the general public has been growing eerie about the current stock market situation and all eyes are currently on the SNP500 Index. It's important to note that when Bitcoin and the SNP500 is directly compared to each other from a visual perspective, we can see a strong correlation between the two in terms of price action. We have yet to see the decoupling happen in the near future, but due to the largely correlated price action since the recent COVID-19 crash, the SNP500 has brought down the price of Bitcoin with it, and also bring it up during it's recovery - and if current price action is suggesting that we may be in a correction, we can also assume that no matter how strong Bitcoin is in terms of technicals and fundamentals, we have to play with the market as is.
This begs the question, "Where is Bitcoin headed?" We don't know; however, since we are seeing Bitcoin and the SNP500 achieving a historical correlation after the COVID19 Pandemic Crash, we can only assume that Bitcoin will also correct. There is currently a strong divide between two categories of people who trade traditional assets and cryptocurrencies:
1. Cryptocurrency Investors = Bitcoin is currently king and will outpace traditional markets, regardless of what happens - even if the stock market crashes.
2. Traditional Market Investors = We all more or less can agree that the stock market is overdue for a real correction, and Bitcoin will follow.
From our observations, we believe the current correlation during this pandemic is more than enough evidence that we have to mostly agree with category #2 - where if traditional markets correct, Bitcoin will also correct. Bitcoin has historically exhibited almost no correlation to traditional assets since the introduction back in 2009, but since the market is now assumed to be as a matured asset class after trading for 10 years on the market, we can slowly assume that there will be more consistent correlations as the timeline grows.
The SNP500 is one of the best indicators of how well America's top companies are performing and the valuation of the markets is impacted by many things, including economic trends and geopolitics. In the end, charts are nothing but lines explaining what has happened in the past, but the lines of the past three months may be suggesting to the general public as a fair warning that a correction may be in again for Bitcoin. How far? Only time will tell.
One possible explanation for the Bitcoin correlation with the stock market is the amount of people who are attempting to be risk averse as much as possible in times of hardships. For investors who have been offloading their equities, the last thing they want to do is to take their capital and buy Bitcoin again, only to lose it all. Even though interest rates are currently unenthusiastic and inflation is a risk because of quantitative easing, many have been favoring cash. This is why we want to make the point that holding cash is also not a bad thing in times of hardships.
Another theory is that the Bitcoin correlation to stocks strengthens whenever this cryptocurrency faces stubborn levels of resistance. One threshold that BTC has repeatedly struggled to smash through over the years is $10,500 – and in the second quarter of 2020, there were a number of failed attempts to crack this price zone, and now it is facing the same resistance once again. It’s also worth keeping in mind that this results in a much directly correlated market between crypto and the stock market. A massive increase or decrease in Bitcoin prices tends to have an effect on hundreds of other alt coins.
Many crypto analysts (category #1, as stated above) are hoping for an “uncoupling” that breaks the correlation between Bitcoin and the stock market – meaning that the cryptocurrency treads an independent path and isn’t swayed by macroeconomic factors such as interest rates, inflation and unemployment.
Although there have been some similarities in the past few months, the evidence of Bitcoin correlations to the stock market is far from conclusive - this write up is only an observation and not a conclusive test result. Prior to the coronavirus pandemic, when investors were being spooked by the looming threat of a US-China trade war, some developments that suggested tensions between Washington and Beijing were worsening actually appeared to help Bitcoin surge. As we can see, this is a perfect example of why we may not currently understand the real historical correlation we are having with Bitcoin at the moment.
This leads up to our next point - Diversification.
There’s a reason why Bitcoin correlations matter: diversification. Pro investors often try to invest in a multitude of equities and financial instruments that aren’t influenced by the same factors, helping to mitigate losses in the event of a downturn, also known as hedging the market. If crypto and the stock markets rise and fall in tandem with one another, this could create unwelcome exposure for a poorly balanced portfolio. But with Bitcoin currently facing similarities to the US stock market, Bitcoin for the past few months can be considered by many a lucky draw since it recovered similarly to the SNP500.
When it comes to Bitcoin and the stock market, some experts also believe that the correlation will inevitably increase in the years to come. We believe this will happen as well as previously stated above, the market has been trading for almost a decade and is now known to the general public. The cryptocurrency market is doing its best to keep its clear distinction as a unique asset class by offering new forms of phases in technology (ICO phase, DEFI phase, and so forth). It’s a well known fact that institutional investors are intrigued by Bitcoin – and through the rollout of derivatives such as futures and options from 2018, it is becoming increasingly possible for people to acquire cryptocurrencies for the first time. Some experts believe that maturity in the crypto markets will only serve to strengthen the bond with stocks.
As a final conclusion, we would like to conclude on one question: Will the stock market crash?
Assuming that there is a Bitcoin correlation with stocks, here’s the main piece of advice I would love to give to our users: Gaining intelligence about any stock correlation can help you make your decision about positioning in the market. Bitcoin has been one of the best introductions to mankind since sliced bread.
Some analysts fear that a bubble is about to burst – especially in indices such as the Nasdaq 100, which has recovered all its losses and actually reached a new record high even as COVID-19 cases in the US continue to rise with anger. The uncomfortable question now is if, and when, such a crash would occur. It could be weeks. It could be months, even years.
Correlations with the stock market come and go, but COVID-19 remains a massive unknown that could affect Bitcoin just as much as the S&P 500. BTC has been trading within an incredibly odd trading range, meaning it’s rapidly becoming a spring that is coiled up and ready to burst any moment. Irrespective of whether it moves upwards or downwards, the jump is set to be a big one.
Trade Safe.
X Force
Where will the trend end? TD Trend Factor and TD PropulsionBITFINEX:BTCUSD
Dear friends!
I continue describing Thomas DeMark’s technical tools. I have already explained such tools as:
1. TD Retracements
2. TD Lines of demand and supply
3. TD D-Wave
4. TD Sequential and TD Combo
Today, I am going to deal with TD Trend Factor and TD Propulsion. These are two independent technical tools that in combination help you quite accurately identify the trend reversal moment and potential targets. But first, I’d like to unveil a small secret of DeMark. Following long experiments with Fibonacci numbers, DeMark found out the two most important of them. These are 0.382 and 0.618. By subtracting one from the other and dividing the result by 4, he found the value of 0.059.
Later, for many years using this number in practice to calculate levels of support and resistance, he came to the conclusion that the most frequent ratio that occurs in trading is 0.0556. Therefore, when calculating the resistance levels, an upward percentage of 0.0556 * 100% = 5.56% is used. When calculating the support levels, a downward percentage of 100% - 5.56% = 94.44% is used to analyze micro-movements or prices whose count goes more than two digits after the decimal point, DeMark suggests using a coefficient with a shifted decimal point, i.e. 0.556% and 99.444%, respectively.
TD Trend Factor basically aims at identifying the trend reversal level and confirming its relevance. To do this, we first need to find out the reference point.
For a bearish trend, it is determined by the following conditions:
1. Identify the bar that marks the peak of the bullish trend
2. If the high bar above the previous bar, the starting point is at this bar’s high
3. If the high bar closes below the previous bar, the reference level is the closing price of the bar with the peak.
To explain it better, I’ll give an example:
The above chart presents Bitcoin all-time high. Its peak is at 19891 USD. You see that this bar’s close is lower than the previous bar’s close, so, the reference level is the high bar’s close.
This level is at 18960 USD. So, based on this level, we shall build the levels of TD Trend Factor for a bearish trend. The simplest way is to calculate them in Excel.
Therefore, I’ve got the following calculations:
18960*94.44% = 17905
17905*94.44% = 16910
16910*94.44% = 15970
You can be calculating in this way until the result is close to 0. With rounding to integers, there are the following levels
18 960
17 906
16 910
15 970
15 082
14 244
13 452
12 704
11 997
11 330
10 700
10 105
9 544
9 013
8 512
8 039
7 592
7 170
6 771
6 394
6 039
5 703
5 386
5 087
4 804
4 537
4 284
4 046
3 821
3 609
3 408
3 219
3 040
2 871
2 711
Eventually, as the history has proven, the low of the bearish trend came at 3215.2 USD, that is just a few dollars below one of the levels indicated above.
You might say that this is a coincidence but try to carry out this experiment on other trends and you will see that it works.
If we analyze the earlier history BTCUSD price chart, we’ll see that the TD Trend Factor levels of the downtrend had excellently worked out before that (see the chart above). In addition, it is clear that the lower the price is moving, the thicker becomes the grid. This construction fully matches to the market behavior; in a bearish correction, the deeper the price falls, the stronger the resistance becomes and the shorter is the range of price swings.
For a bullish trend, the same rules are applied, only in vice versa. .
To find a reference levels, we need identify the bar that marks the low of the bearish trend and:
1. If the low bar closes below the previous close, the reference level is at the low.
2. If the low bar closes higher than the previous close, the reference level is the low bar’s close.
I’ll explain on the example.
The above chart represents the low at 3215.2 USD that we have already marked before.
If we zoom it in, we’ll see that the close is a little higher than the previous bar’s close, so the reference level will be set based on condition 2, at 3283.4 USD.
The levels will be calculated in the same way, only the coefficient will be 105.56% instead of 94.44%.
Finally, there are following levels:
3 283
3 466
3 659
3 862
4 077
4 303
4 543
4 795
5 062
5 343
5 641
5 954
6 285
6 635
7 004
7 393
7 804
8 238
8 696
9 179
9 690
10 228
10 797
11 397
12 031
12 700
13 406
14 152
14 938
15 769
16 646
17 571
It makes no sense to mark all the levels in the chart, but to estimate the relevance of the calculated levels, I’ll mark the closest ones to the recent price movements.
As you see from the above chart, the calculated zones serve not only as strong resistance levels, but as a support as well.
How to use TD Trend Factor
TD Trend Factor is a supplementary tool, used to confirm signals, it doesn’t provide any buy or sell signals by itself. So, you need to use it together with other DeMark's tools:
TD Retracements
TD Lines of demand and supply
TD D-Wave
TD Sequential and TD Combo
And other DeMark's indicators that I haven’t yet described.
One of these tools is TD Propulsion.
The indicator is designed to send signals of the trend extension or exhaustion. This tool consists of two parts. The first element is TD Propulsion Up and TD Propulsion Down,these indicate entry points. The second part is TD Propulsion Up Target and TD Propulsion. As you can guess by the name, these are trend targets. So, let us see how this indicator is built and how it can be employed in practice.
Thomas DeMark says that to confirm a bullish trend, we need to do the following:
1. Identify the points of X and Y – the low and the high of last growth wave in they bullish trend.
2. Identify the Z point – the lowest level of the bearish correction, following the growth wave XY.
If this level is lower than 23.2% of the correction size, than the points of X and Y are correct; if this is not so, one needs to rearrange the borders of the wave.
Next, we shall identify the TD Propulsion Up level
To do it, we use a simple formula:
A = Z+(Y-X)*0.236, , so, in the given example, this is:
A = 12730.6 + (17171 - 5400.2)* 0.236 = 15508.5 USD.
This level marks the first resistance level in the trend continuation. As a rule, this level is not broken out when the trend reverses. Next, we shall find out the level of TD Propulsion Up Target.
To do it, we use a simple formula:
A = Z+(Y-X)*0.472, so, in the given example, this is:
A = 12730.6 + (17171 - 5400.2)* 0.472 = 18286.4 USD.
This level is potential buy zone. As you see from the chart above, this level is very close to the real one and the trend reversed only after just a little more than a thousand of dollars,
I will describe this situation in more detail a little later. Now, I’d like to explain how to analyze a bearish trend with TD Propulsion.
Here, you build everything in a similar way, just like when using other DeMark's tools. For the further analysis, I found out clear borders of the downward wave. They are marked with the points of X and Y in the above figure.
Now, let us look at the start of the bullish correction and the level where it finishes. This is point Z in the chart. You see that this level exceeds the level of 23.2% of the correction, and so, the wave itself and point Z are suitable to calculate the TD Propulsion Down.
To do this, I use the following formula:
A = Z-(X-Y)*0.236, so, in the given example, this is:
A = 4384- (6485.8-3215.2)* 0.236 = 3612.14 USD. This level is TD Propulsion Down.
Next, I identify D Propulsion Down Target.
The formula is:
A = Z-(X-Y)*0.472, so, the there is the following result:
A = 4384- (6485.8-3215.2)*0.472 = 2840.27 USD.
As you see from the above chart, the A level has worked out. As I’ve already written above, this level may signal either the trend continuation or its reversal. And the way how the price goes through this level, very difficult and slowly, is the trend reversal sign. In addition, I should note that both in the first case, when we identified the bullish trend reversal, and in this situation, level A works out. Therefore, it can be applied as a low-risk trading strategy to set the intermediate targets when analyzing the Bitcoin future price movements. To see the full capacity of these tools, we need to study their application together with other DeMark's tools on a real example.
As an example, I will analyze the moment when the trend was reversing at 3215.2 USD. It is clear from the above chart that TD Propulsion Down A level exactly matches to the TD Trend Factor level at 3612.1 USD. When, following the Z point, the BTC price was moving down, it is clear that this level provides a strong support. In addition, the TD Trend Factor level at 3466 USD is not broken out. The price rebounds from it like a rubber ball.
A buy signal here is the bullish Setup (remember TD Sequential and TD Combo). This signal is marked with a red arrow in the above chart. It is confirmed by a typical rebound from the TD Trend Factor level at 3466 USD and the bar closing above level A. After this combination, one could have already entered a long with a short stop beyond level 3466 USD.
You already know what happened next. The risk/profit ratio for such a trade is perfect. Now, for a fair experiment, let us try to find out an entry point in the current market. First, let us build the TD Trend Factor support and resistance levels.
There is already a clear high with the peak at 13764 USD. We see that this high bar closes above the previous bar’s close. So, the reference level will be at the highest high of 13764 USD. Next, we multiply each level and the product of each multiplication by *94.44%.
There are the following values:
12 999
12 276
11 593
10 949
10 340
9 765
9 222
8 709
8 225
7 768
7 336
6 928
6 543
6 179
In the above chart, I marked these levels and I have noted that the last bar closes above the previous bar’s close; and its low at 9728.2 is close to the TD Trend Factor level at 9765, which itself is a bullish signal. For the Bitcoin price prediction, based on this signal, I may already assume a reversal and point Z to calculate the levels of TD Propulsion.
It is clear from the above chart that the Z point is a little lower than the level of 23.2% of the correction from the wave XY with the coordinates on the price scale of 3405.3 and 13764. Therefore, the Z point is relevant for this wave. So, we can calculate TD Propulsion Up (A) and TD Propulsion Up Target (B), according to the coordinates and the formula studied above:
A = 9728.2 + (13764 – 3405.3) * 0.236 = 12172.85 USD.
A = 9728.2 + (13764 – 3405.3) * 0.472 = 14617.51 USD.
Next, I attach the TD Sequential indicator and select the timeframe where setups are worked out most accurately on the historical data. For the BTCUSD pair, the indicator performs the best in the five-day timeframe.
As a result, you see that the BTCUSD is now in a bullish setup, where the fifth bar is formingg, out of nine in total. It means that before a the bitcoin trend could reverse and a bearish trend should starts, there at least four bar more to be formed in the bullish trend, not counting the currently forming bar, that is, there are more then four weeks ahead. In addition, there is a strong support level at the Z level at 9728 USD, below which, one might set stop losses, and the first target for ta take profit is at 12172.85 USD, the second target profit is at about 14617 USD.
Besides, I can define the possible BTCUSD scenarios and suggest an adequate response to a particular market situation.
The chart above outlines three possible scenarios for the BTC future trend.
1. The first scenario, a pessimistic one suggests that the BTC ticker shouldn’t break through the A level and rebounds downside. This is a clear trend reversal sign. We should take the profits and enter short trades with a stop above the A level.
2. The second scenario is neutral. According to it, the ticker should break through the A level and stop close to the B level. In this case, we will take the profit at the B level and expect either the reversal below the A level to enter shorts, or reaching the B level to enter new longs.
3. The third scenario is the most optimistic and the least possible, in my opinion. The ticker breaks through the levels of A and B with large volumes and without strong delays. In this case, we should just follow the trend, moving the stops, covering the TD Trend Factor levels, calculated before, based in the low of the bearish trend.
Here, I am about to finish describing Thomas DeMark's tools, TD Trend Factor and TD Propulsion, but I am not finishing writing about his studies. In my next training article, I will deal with more unique tools by the famous trader and explain how to apply DeMark's indicators to cryptocurrency trading.
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I wish you good luck and good profits!
How to filter good and bad entry signals? TD REI and TD POQBITFINEX:BTCUSD
Dear friends!
I continue describing Thomas DeMark’s technical tools.
Today, I am going to deal with more DeMark’s technical tools, TD REI and TD POQ that are included in the group of indicators TD Oscillators.
Major problem of all oscillators
The main problem that DeMark sees in the use of oscillators is that average traders exaggerate the value of the divergence of the indicator with the price position.
As a rule, people, who do not understand how an indicator works and based on what principle it alternates, do not care what the composition and the recommended interpretation of this indicator might be. They try to interpret its vague signals that aren’t basically signals and must be confirmed by other indicators. A good example is a famous indicator, RSI.
In May, this indicator showed a bearish divergence in the daily timeframe (see the chart above) and, according to all rules, the trend should have reversed, and the price should have started declining. According to DeMark, the main problem in interpreting such signals is that users do not take into account the time that the indicator is in the overbought and oversold stages. DeMark notes that if the indicator is in the overbought or oversold zone for more than 6 bars, this indicates the strength of the trend, which means that this signal is false.
It is clear from the above chart that the two overbought zones lasted for more than 6 bars, which indicates the trend’s strength, and so, the oscillator’s correction in these cases will be a false sell entry signal.
The number of bars may be different for other oscillators. Everything depends on the indicator’s parameters and the peculiarities of its composition. Therefore, in each particular case for each timeframe, one should perform an own analysis of the number of bars in the overbought or oversold zones.
To facilitate the analysis of all these parameters, DeMark developed his own series of oscillators that will described below.
Introduction to TD REI indicator
First, I’d like to write about TD REI, or Range Expansion Index. This indicator is designed to filter out false signals when the price is trading in the range or in a strong trend, it should send a reversal signal only if the market sentiment really changes.
Before I present the charts with this indicator, I want to pay tribute to its developer @ e2E4mfck. The matter is that the TD indicators are not available in the Tradingview standard library, therefore, I had to look for those that were published in the public library and only thanks to such enthusiastic programmers can you get acquainted with these wonderful tools by DeMark.
So, you see the TD REI indicator in the chart above, at its bottom. The TD REI oscillator typically produces values of -100 to +100 with 45 or higher indicating overbought conditions and -45 or lower indicating oversold. Besides, the TD REI counts the number of bars, and, if the price is in the overbought or oversold area for more than 6 bars, the indicator shows this and indicates a strong trend.
On the other hand, this indicator is more responsive to the price changes, and, while the RSI is still in the overbought area, or in the neutral area, the TD REI has already a few times entered the oversold area, thus sending a buy signal (in the above chart, all buy signals on the indicator are marked by circles, and by green flags on the price chart.
It stands to reason that this indicator is much more complicated than it may seem, based on the above example. It also has many peculiarities, which I will describe later.
First, I’d like to describe its mathematical model, so that you can understand the indicator’s signals.
Mathematical model of TD REI indicator
The TD REI value is calculated by adding the respective differences between the current day’s high and the high two days earlier and the current day’s low and the low two days earlier.
To make it clearer, the calculation formula looks like this:
X = (H – H2) + (L – L2), where
H is the current high
H2 is the high two days earlier
L is the current low
L2 is the low two days earlier.
Besides, two conditions must be met:
Condition 1
• the current day’s high must be greater than or equal to the low five or six days ago,
or
• the high two days earlier must be greater than or equal to the close seven or eight days ago.
Condition 2
• the current day’s low must be less than or equal to the high five or six days ago
or
• the low two days earlier must be less than or equal to the close seven or eight days ago.
If neither of the conditions is met, a zero value is assigned to that day’s bar.
If both conditions are met, then there will be a different formula:
TD REI = (Y / (H5 - L5)) x 100
Where:
Y = (Sum X1 next… X5)
H5 is the high over a five-day period
L5 is the low over a five-day period
Differently put, TD REI a kind of shows the price movement, adjusted to a trading range over the five days.
TD REI filter for signals
Like any other indicator, TD REI is not a Grail and sends false signals too. To filter out these false signals, Thomas DeMark suggests using the TD POQ indicator, (Price Oscillator Qualifier).
To be fair, I must note that this indicator can be used together with any oscillator, based on the price action, (for example, MACD, RSI).
TD POQ conditions to validate the TD REI signals:
Buy signal:
1. TD REI has been in the oversold condition (below -40) for six or more bars;
2. The last complete bar should close below than the previous bar
3. The current bar’s open should be equal or lower than the highs of the previous two bars;
4. The market should be trading above the open price and break through the high iver the last two days.
Sell signal:
1. TD POQ has stayed in the overbought condition (above + 40) for six or more bars;
2. The last complete bar should close higher than the previous bar’s close
3. The current bar’s open should be equal or higher than the low for over the last two days
4. The market should be trading lower than the opening price and break through the low of the last two bars.
To explain how you can use the TD POQ to filter the entries, I’ll describe the examples of a buy and a sell signal.
Buy signal:
1. It is clear from the chart above that the first condition is satisfied, the price has been in the oversold area for more than 6 bars.
2. The last complete bar closed lower than the previous bar’s close (green dots below the red ones in the chart)
3. The current bar opens lower than the highs of the two previous bars (the current opening price is the same as previous bar’s close, it is market with green dots; and it is lower then the two yellow dotted lines)
4. When the price breaks through the highs of of the last two bars, there is a buy signal (it is marked with the red cross).
As you see from the chart, there is a reliable early signal to enter a trade.
I must note that the TD REI is a good supplementary tool for other Thomas DeMark's indicators. It is clear from the above chart that the signal perfectly matches to the start of a bullish set, indicated by TD Sequential (the developer is @andyhitchman) on the five-day timeframe (but it also matches on the shorter timeframes).
Sell signals
Now, let us analyze the sell signal on the example of the BTCUSD all-time high.
First, I’d like to note that the TD REI indicator, starting from 8000 USD recorded on November 20th, 2017 (in the BTCUSD price chart) was in the overbought condition for more than 30 bars and has never sent a false sell signal! In my opinion this fact alone is the evidence of the TD REI efficiency.
Now, let us analyze the sell signal produced on December 19th.
1. As I’ve already said that the indicator had been in the overbought zone for than 6 bars before the signal emerged. We can put a check.
2. The last candlestick closed as a doji, the closing price is almost equal to the previous bar’s close. This condition is NOT fully met, so we need an additional confirming signal.
3. In the above chart, you see that the current bar, of December 19th, opens lower than the high of the previous two days, so, we also put a check.
4. The market broke through the lows of the previous two bars and is trading lower (I marked the breakout with the red cross).
Therefore, as there is not a fully confirmed signal, it is important to employ this indicator with other Thomas DeMark’s tools.
For example, in the previous article (see here), I described a good tool, TD Propulsion.
In that article, we defined the TD Propulsion Up Target level for the bullish trend at level 18286.4 USD.
If we attach it to the present chart and add the calculations of the TD Sequential indicator, we shall see that this very bar closes lower than the TD Propulsion Up Target level, and at the same level, a bearish set up starts, based on the TD Countdown indicator.
Both these signals are confirming signals and, finally, suggest sell trades.
Analysis of the BTCUSD current market situation
Now, let us analyze the current BTCUSD price trend. In the previous article, when I was writing about the TD Trend Factor and TD Propulsion indicators, I finally outlined three possible scenarios for bitcoin trading.
At that time, it was difficult to determine the BTCUSD future trend.
Remember, there were three scenarios:
1. BTC price should rebound from level 12172.9 USD and go down
2. The price should rebound from level 14202.4 USD and be trading flat with a possible decline in future
3. The BTCUSD should continue moving up.
Now, if I apply the TD REI with the TD POQ filter to this chart, the situation becomes clearer.
As you see from the above chart, the last TD REI signal satisfies all the four conditions of the TD POQ filter (the overbought condition continues longer than six bars, the last bar’s close is higher than the previous bar’s close, the current bar’s open is higher than the lows of the two previous bars and the lows of those bars have been broken through).
In addition, as the fourth condition suggests, the market was trading lower than the reversal bar’s open (blue dots). Therefore, the first scenario, a more pessimistic one, becomes more likely. As I wrote in the previous article, the BTCUSD price is likely to hit the TD Propulsion Up level (level A). In fact, the market has already worked out this target so far, having not reached just a few dollars. Considering the bullish set up on the five-day timeframe, according to the TD Countdown, the btcusd may be trading flat for some more time. The BTCUSD may even try to hit level again 12172.9 USD, but, in general, it is not enough to invest your entire deposit into entering a buy trade.
As experience proves, the combination of TD REI signal and the TD POQ is a strong signal and I don’t recommend ignoring it. The BTC price is likely to rebound and continue its downward correction, according to the pessimistic scenario. After all, it doesn’t suggest that the bullish trend will necessarily end. However, my overview of the TD REI indicator won’t be complete if I don’t describe a situation, when the TD POQ filter doesn’t work.
The above chart represents such an example. You see that the TD REI has been in the overbought area for a long time, however the reversal bar (marked with the red arrow) doesn’t satisfy the last condition, the bar doesn’t break through the lows of the previous two bars. It is clear from the above chart, that the price hasn’t reached the level, marked with blue dots.
It suggests that the sell signal is false, and so, when the indicator reaches the oversold area, one might use this opportunity and enter a new buy trade, to increase the bullish position (I marked the buy zone with a green flag in the chart).
In case of a bearish trend and an unconfirmed buy signal, one may act in a similar way. However, you must always bear in mind that it is better to employ DeMark’s tools together. Only when all the indicators send the same signal, you can avoid trading mistakes and safely put entries.
I am not finishing writing about Thomas DeMark's oscillators. In my next educational posts, I am going to describe such indicators as:
TD DeMarker,
TD Pressure,
TD Range expansion Index,
TD Rate of Change.
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I wish you good luck and good profits!
Mikhail @Hyipov
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