You would expect a pullback after a nice gain, but wait for a sell Fractal. Why? Here are the positives: 1. Currently multiple buy Fractals (highlighted in green box). 2. The lower indicators under the chart are CHOP and Chop Zone; readings below the shaded area (38.2) indicate a strong trend. The solid green indicates up. 3. The top lower indicator is phase energy, and this is positive. It is losing its over-bought condition. 4. The alligator is feeding in the uptrend. 5. RSI / Stochastic (top indicator) is strong, but correcting. It did roll over, but so far the price remains bullish. 6. Prices are trading above the Ichimoku Cloud . 7. Prices are trading above the thick red Ichimoku Cloud conversion line. This is a support level. 8. Prices are trading above the Ki jun-Sen baseline of the Ichimoku Cloud and this has been HEADING HIGHER. 9. The 5/34 Momentum indicator (top middle) is strong. 10. The moving average trend line is rising. In my opinion, BTCUSD-is still in an uptrend. What would change my mind? A sell Fractal and a change in the alligators feeding. Good luck to you. Don.
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PRPS
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One quick question: do you want btc to go up, and do you care iether way about the coin, or are you only interested in making profitable trades in any area and in either direction. Thank you
649bruno
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Great question. I never care if my trade goes up or down. I follow the trend.
So, the most important factor I use is the fractal. I start with the daily chart as a basic screen. If I see a possible opportunity, then I have to (and this is extremely important) observe the CHOP indicator to see if it is in the shaded area or below the shaded area. If CHOP is back and forth inside that shaded area, I have a range bound stock (or commodity). I search for trending stocks. If they are range bound, I move on and look for something else. Only 15 to 30 percent of the time does the stock or commodity trend. Range bound stocks/ currencies are very hard to make money. As an example, last weekend I looked at over 200 stock charts. Only 5% were trending. That means 95% of the charts would be range bound and my indicators would be whip-sawed. There is another aspect of using fractals and CHOP. The markets are constantly in rotation. Lots of trading but very little movement in the S&P 500. Why? Most stocks are range bound. The pros rotate into and out of these instruments and we, the retail trader, are usually at a loss or have “dead money” in a sideways action.
So, if I see a buy fractal, and CHOP suggests the stock is trending, I look to see if the alligator is opening or closing. Then and only then do I use the indicators. The three I have on top are Awesome Oscillator (lower), 5/34 MACD (middle), RSI/ Stochastic (top). RSI by itself would also work. The trend-line I use is 233 units. This is a Fibonacci number. Because momentum changes direction before price, the AO is like reading tomorrow's Wall Street Journal TODAY.
Now, the Ichimoku Cloud. There are rules, and these rules have to compliment CHOP. 1. The prices cannot be in the cloud for extended periods of time (it is too easy to zig zag). 2. Thus, the prices cannot be ranging (defined as candles moving around the black cloud baseline without breaking to new highs or lows for 25 candles). 3. Establish the trend direction of the cloud. 4. Establish your entry point. 5. Determine your stop loss. 6. Are there any likely news events pending? 7. Only trade in the direction of the cloud. 8. Use the cloud to determine support and resistance. 9. Just as other indicators, when the red conversion line crosses the black baseline, these are buys or sells (AO would be confirming). 10. During a trend, the conversion and baselines act as support and resistance. 11. Only trade in the direction of the conversion and baselines. 12. Violation of the conversion line or baseline can be used as exits. 13. During ranges, and when the CHOP is in the shaded area, the cloud loses its effectiveness. 14. When price violates the baseline (down), this is a warning signal of a trend shift. 15. Do not stay long if prices break below the cloud.
The most important thing I have learned is the fractal. It is pure emotion of those buying and selling. I do not allow myself any pre-conceived notion of direction. Remember these five words – they will make you a much better trader. “Move when the market moves”.
If you discover something that is TRENDING (up or down), then "move when the market moves". Go long or short.
I hope this answers your question. Good luck to you. Don.
PRPS
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Well 'that' was one hell of a concise reply. Thank you very much. Even tho I'm a bit of a newbie to technical trading, I did grasp quite a bit of what you said actually. Funnily enough, and I find this quite interesting, I also use AO/ Stcoh RSI & MACD as my three main indicators. The reason for this is they just seem to give the better and more accurate clues as to what is and has been going on compared to many others I've played with. I also use bolly bands usually, but they're not exactly great generally other than to indicate overbought/ oversold [that's how I use them anyways]. The ichimo cloud is an interesting one, but seems like it takes a while to learn it properly, so I'm not using it at the mo. I've got quite a lot to learn, and maybe stupidly have been trying my strategies out only in BTCUSD, which is probably a huge mistake. The only reason I fell into this was because I had BTC but found I couldn't sell them back through Coinbase easily when I suddenly felt like I wanted out of crypto, so thought that I'd use them to trade with on another exchange instead. I'm not doing too great so far. Tend to lose 6 out of 10 trades at present, but I do know that some of this is to do with Crypto being so pumpy and dumpy, and also my exchange is killing me with margins and fees on small trades. If I can get to 7 out of 10 I'll start playing for bigger money, but need to up my game and change my broker first. My btc is classed as just playing money for now, but I would like to get to a point where I can confidently put a nice trade in and not have to babysit it or worry too much. I'm learning to use stops better, which helps a lot. But really I do know that I'm gut trading too often, and that's where I'm losing percentage wise.
With regards to your chart - I do find it looks quite busy for me personally, but cutting through some of the pretty colors and patterns I feel like maybe this one isn't working out the way you thought, am I right? I say that for 2 obvious reasons 1) btc is falling back in price 2) it has exited the green box up there.
I'm going to save and re-read your reply, as it sounds like a lot of good advice in a short message. I get the feeling from it that you like to triple check everything before pressing long or short. Am I on track with your thoughts and chart?
PRPS
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P.S. Is that the GDAX chart, or Bitstamp?
649bruno
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It is Bitstamp.
My first line said "You would expect a pullback after a nice gain, but wait for a sell Fractal. Why?....."
The analysis is working as I thought it would. This morning I simply said that the trend is still up, and do not go short until a sell Fractal is generated.
The key point I am trying make is that your indicators will work far better if chop is below that shaded area. If you look back at RSI/ Stochastic this morning, it was extremely over-bought and rolling over to the down side. If you would have gone short, the price action didn't follow downwards, and you could be frustrated.
Now, ask yourself why the roll-over did not generate lower prices? The evidence is right below my chart - the nice busy colors. When CHOP is rising, and it returns to the shaded area, the trend turns into a range-based zig-zag. Look at the two most positive moves on the above chart: they were August 8th when a buy Fractal occurred, the CHOP ZONE turned green and CHOP started heading lower, in tandem with AO and RSI turning positive. It worked because we had TREND. CHOP went below the shaded area.
The second meaningful up move came September 3rd when a buy Fractal signaled a new up move, this was confirmed by CHOP ZONE turning green, and CHOP heading sharply down, indicating a strong TREND.
The indicators you use are great, but they probably won't work UNTIL CHOP IS BELOW THE SHADED AREA.
This is your key. If this were the movie "Ghostbusters", CHOP is your gate-keeper. Your trigger. The alligator is your compass, up or down.
As for the current technical condition in BTCUSD-I will not anticipate a short being valid until a sell Fractal AND, MOST IMPORTANT, CHOP below the shaded area (below 38.2).
Until then, I believe the uptrend is in effect.
And yes, I do triple check everything. If there is a trend, the AO should confirm, the Ichimoku Cloud should confirm, RSI should confirm, and I should be happy!
I hope this helps. Don.