Crypto the Bitcoin Algorithm Newsletter Sunday December 17, 2017 #Bitcoin $BTCUSD $XBTUSD $BTC $BITCF $BTCS $BTSC $GBTC $ETH $LTC
Hello! My name is Crypto the Bitcoin Algo. Welcome to the member edition Bitcoin trade report for Compound Trading.
Like our other algorithmic chart models, I am in development and testing for coding phase to be used as an intelligent assistant for our traders (not HFT). My charting model is specifically suitable for the use and purpose of trading Bitcoin $BTCUSD, Bitcoin/USD perpetual swaps $XBTUSD and Bitcoin related equities.
Note: The $XBTUSD model is built on a chart from BitMEX. Prices on other exchanges may vary slightly from what you see on the model, so remember to keep that in mind when trading the model.
Notices:
- Basic fib models for $ETHUSD and $LTCUSD as well as a few bitcoin related equities will be featured in the newsletter starting this week.
- CME’s Bitcoin futures contract, $BTCF2018, began trading at 18:00 EST tonight. Though it is not off to the hot start CBOE’s contract had, there is decent liquidity there already – a good early sign for a new futures product.
- Join us in our private Crypto Trading room on discord! Curt, Sartaj and I have been team trading as well as posting TONS of supplemental charting in there.
- We have been trading $XBTUSD (BTC/USD Inverse perpetual swap contracts) on BitMEX.
- $XBTUSD moves with $BTCUSD so trade alerts are still valid for $BTCUSD, however the prices will vary slightly.
- You can read my blog post about how to trade Bitcoin here. I will post an update with more information about BitMEX as soon as I can.
- 24 hour trade room on discord is gaining traction – A few things to keep in mind going in:
- #TeamTrading is key in a 24-hour room like this. No one can watch the model 24/7 (trust me I’ve tried) but as a team we can catch all of the best trades.
- To make this work we need an orderly chat room, full of highly functioning people, all trading together.
- In Curt’s words, the accuracy of the model plus the margins on Bitcoin combined with #TeamTrading will take this thing from Compound Trading to “uber quantum leap compound trading.” If done right, our ROI will be absolutely astronomical.
- As always, don’t hesitate to DM me on twitter (@reedshermanator) if you have any questions, comments, concerns, etc.
Primary Methods of Trade:
Live Twitter Alert Feed for Bitcoin Trades: @BTCAlerts_CT
The primary method of trade we have found works with the most predictability is to wait for bitcoin to breach the upper right wall of a quadrant (the orange or grey diagonal dotted lines – the thicker orange lines are more significant) and confirm over the next horizontal Fibonacci resistance. You can expect to get to reach the midline of the upper quadrant – over the midline you can expect it to reach the next quadrant wall. Entering this trade near the apex of a quadrant gives you the widest trading range.
This method also works in reverse: Wait for Bitcoin to breach downward through the upper left wall of a quadrant, or fail when trying to breach upward through the upper left quadrant wall. Let it confirm under the next horizontal support and you can expect to see the midline of the quadrant – under the midline you can expect to see the next quadrant wall. Same as above, entering this trade near the apex of a quadrant gives you the widest trading range.
Channels: Another high probability trade is entering long as price rides up the bottom right wall of an orange quadrant. This is a safe trade to hold with a stop under the quad wall until the current time cycle expires. This trade works in reverse as well. You can enter short just under the upper right quadrant wall resistance, with a stop just over the quadrant wall, and hold until the current time cycle expires.
Horizontal Fibonacci Support/Resistance: The horizontal support/resistance lines are good indicators to use inside quadrants. The light green 0.5 Fibonacci line and the grey 1.0 or 0 fibonacci levels (midlines) are the most significant. Clusters of these lines represent significant support/resistance as well. Intersections of horizontal and diagonal Fibonacci lines represent an upcoming decision and create a high probability of a significant move out of sideways trade.
Resistance Clusters: Along with the algorithm indicators on the chart there are traditional support/resistance lines that are very important. When these lines converge volatility tends to increase. Under the cluster is a high probability short. If it does get through the cluster it becomes a very high probability long scenario as the HFT algos cover their shorts and load up long.
Targets: Red circles on charting. These are placed at the 2 most likely prices at the end of each 75-hour time cycle. These are still in very early stage of development/testing and should be used for observation only at this point. Two are provided for each quadrant time frame – the upper scenario targets should be considered if the trend is up and likewise for the lower. Only one is expected to hit on each time cycle. These targets have been less predictable with the recent market volatility. I do not recommend entering trades based on these targets.
Natural Support/Resistance: Natural support/resistance is represented on the chart by purple horizontal lines. Although generally reliable, these are not a great indicator in the current area of trade because they rely on history.Thicker natural resistance lines on the chart are the most significant.
Conventional Charting: Conventional charting should be weighed in to all trade decisions.
Bitcoin Algorithm Live Charting Link:
New Charting: https://www.tradingview.com/chart/XBTUSD/stuvYiJZ-XBTUSD-buy-sell-triggers-at-gray-and-green-arrows/
In summary, our first generation Bitcoin algorithm chart model uses the following indicators (listed from most predictable to least in terms of win rate):
- Trading range created by long term algorithmic modeled quadrant support and resistance (blue dotted lines)
- Trading range between buy/sell trigger levels (grey/green arrows and solid lines)
- Directional channels formed by long term algorithmic modeled support and resistance
- Horizontal Fibonacci support and resistance (multi-colored horizontal lines)
- Conventional Natural support and resistance (purple horizontal lines)
- Long term conventional trend lines (red diagonal lines)
- Conventional MA’s
Observations in the current area of trade:
New $XBTUSD charting has been performing well. Key levels in the current area of trade are as follows:
9882, 13772, 17776, 21736, 25684.
$XBTUSD 17750 area is a key pivot point – We will start long entries there and resume short bias as price approaches the 19500-21000 area and that quad wall:
$XBTUSD simple fib extensions provide simplicity to trade. Key levels are as follows:
15900, 17000, 18075, 19150, 20225, 21310.
Link: https://www.tradingview.com/chart/XBTUSD/Og6wcoDf-XBTUSD-Simple-levels-17-Dec-2017/
$XBTUSD trend based fib extension provides more key pivots for the next step up:
Link: https://www.tradingview.com/chart/XBTUSD/98IANpgh-XBTUSD-Trend-Based-Fib-Extension-17-Dec-2017/
$XBTUSD conventional charting notes:
- Stoch RSI still sitting near the bottom – watching for it to curl up.
- MACD has flattened out a bit but still has room before it could cross down.
- SQZMOM just starting to trend down (Dark green) but has reversed quickly in the past so I’m not too concerned with it yet.
$XBTUSD Conventional trendlines show current area of trade:
$XBTUSD log scale channel wall would be a likely bounce point in the case of a significant pullback:
ETH/LTC Basic Fib Models:
$ETHUSD pulled back to a potential good entry point on the quad wall around 700 area. Key levels:
215, 420, 624, 828.
Link: https://www.tradingview.com/chart/ETHUSD/rHyzLbFt-ETHUSD-Basic-model-updated-17-Dec-2017/
$LTCUSD cooling off after a huge run this week. Key levels to watch are 192, 287, 381, 475:
Link: https://www.tradingview.com/chart/LTCUSD/faXlPVC1-LTCUSD-basic-model-updated-17-Dec-2017/
Bitcoin Related Equities:
$OSTK – Overstock.com, Inc.
12/17: Sitting at 52-week highs. Stoch RSI going up, MACD crossed up, SQZMOM trending up and about to turn green. 70.20 area is next resistance, 56.30 area nearest support. Over 70 it could see 84 area.
Link: https://www.tradingview.com/chart/OSTK/1eaJDU1x-OSTK-12-17-17/
$MGTI – Management Capital Investments, Inc.
12/17: Trading 4.20, near 52-week highs. A bit extended here, stoch RSI near top and beginning to turn down. However, it has the horns set up and could really go if it confirms over 4.60 area resistance.
Link: https://www.tradingview.com/chart/MGTI/1zxlYA8V-MGTI-12-17-17/
SQ – Square, Inc.
12/17: Testing support in the model as well as the 50 MA on the daily chart. Stoch RSI near bottom but starting to trend up. Waiting on MACD to cross up and SQZMOM to start trending the right direction before making an entry.
Link: https://www.tradingview.com/chart/SQ/uRigfr4p-SQ-12-17-17/
More Examples of High Probability Trades in the Model:
- Below is a textbook example of the highest probability trade in the model (break of the upper right quad wall). Trades like this are repeatable and extremely predictable in the model.
- Below is an example of a trade over a resistance cluster (and break of the quad wall). Notice the huge volume when the resistance cluster is breached. I went long on new candle over the quad wall/resistance cluster, added over the midline and exited at the upper quad wall.
- Below is a trade using both the large orange quadrants and the smaller grey quadrants. First trigger is breach of the (shared) quad wall, then confirmed over the midline in the small quad. Struggled a bit with the next quad wall (I use tight stops when playing the smaller quadrants) but eventually got to my target at the midline.
- Although the targets are still in very early development phase, we did get a direct target hit down to the second on August 22. Also a good example of a short opportunity as it enters the quadrant from the upper left and loses its mid line. Then another good long opportunity as it enters the small quadrant through the lower left wall, shown by the white arrows:
- I’m not on the short side too often, but I will do it when the upper left quad wall is breached to the downside. Another high probability trade in the model, this one live tweeted:
Covered 4029.00
— Reed Sherman (@reedshermanator) August 16, 2017
Covered 3981.97
— Reed Sherman (@reedshermanator) August 16, 2017
- The best ROI comes when trade moves between quadrants, but we can do some intraday scalping off the quad wall too.
Long $BTCUSD 4003.00
— Reed Sherman (@reedshermanator) August 21, 2017
Closed all 4061.23
— Reed Sherman (@reedshermanator) August 21, 2017
- And another live tweeted win on the break of a quad wall:
Closed 4624.24 $BTCUSD
— Reed Sherman (@reedshermanator) August 31, 2017
Long $BTCUSD 4630.21
— Reed Sherman (@reedshermanator) August 31, 2017
