Crypto the Bitcoin Algorithm Newsletter 3 Dec. 2017 $BTCUSD $XBTUSD $BTC $BITCF $BTCS $BTSC $GBTC #Bitcoin

Curt MelonopolyBitcoin (BTC) Algorithm (Crypto), ,

Crypto the Bitcoin Algorithm Newsletter Sunday December 3, 2017  #Bitcoin $BTCUSD $XBTUSD $BTC $BITCF $BTCS $BTSC $GBTC

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: 

  • We are working on solutions to a variety of issues that have come up over the last week including the technical issues we all experienced on BitMEX and other exchanges during the recent downdraft as well as making adjustments to the models for the increased volatility. Curt will provide detailed updates as solutions are hashed out. 
  • CME’s Bitcoin futures contracts have officially been approved to begin trading December 18, 2017. CBOE and Nasdaq have said they will launch their own Bitcoin products in 2018. We are not entirely sure how this will effect crypto markets yet, but it is something to be aware of going forward. Update: This morning CBOE announced their BTC futures will begin trading on December 10, 2017.
  • 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.

New Buy Sell Triggers and Fib Support and Resistance (also Model C from Curtis’) work is coming soon.

The buy and sell triggers have provided accuracy at important ranges and simplicity of trade. 

$XBTUSD Buy/Sell Triggers 00:01 EST 3 Dec. 2017

https://www.tradingview.com/chart/XBTUSD/5TUfmKml-XBTUSD-Buy-Sell-Triggers-3-Dec-2017/

Bitcoin Algorithm Live Charting Link:

$XBTUSD: https://www.tradingview.com/chart/XBTUSD/gvkz8UuK-Crypto-the-Algo-Updated-Charting-15-30-00-EST-3-Dec-2017/

Daily Chart Model: https://www.tradingview.com/chart/XBTUSD/mBeFFCtC-XBTUSD-Daily-Model/

In summary, our first generation Bitcoin algorithm chart model uses the following indicators (listed from most predictable to least in terms of win rate): 

  1. Trading range created by long term algorithmic modeled quadrant support and resistance (orange dotted lines)
  2. Trading range created by short term algorithmic modeled quadrant support and resistance (grey dotted lines)
  3. Directional channels formed by long term algorithmic modeled support and resistance
  4. Horizontal Fibonacci support and resistance (multi-colored horizontal lines)
  5. Conventional Natural support and resistance (purple horizontal lines)
  6. Long term conventional trend lines (red diagonal lines)
  7. Conventional MA’s 

Observations in the current area of trade:

$XBTUSD appeared to be heading into a new quadrant on the daily model, however the downdraft this afternoon brought it back into the lower quadrant. This situation is fluid, but definitely important for trade moving forward.

$XBTUSD pullbacks have been slightly shrinking in magnitude (~41% then ~31% and most recently ~23%) and significantly shrinking in time. If the pattern follows, the 23% correction intraday on 11/30 should be enough to complete the correction and allow for more upward movement before the next correction:

$XBTUSD daily model has been a great tool during this time of high volatility. Both the quadrant walls and horizontal fibonacci lines are significant support/resistance.

Key levels: 9203, 10246, 11290, 11800. Above the 11,895 ATH’s trade will be less predictable but those levels will act as significant supports.

$XBTUSD upcoming time/price targets. These targets have been accurate recently however I still do not suggest taking trades based on them.

$XBTUSD increased volatility has caused both targets to hit on the same time cycle. $610 range between the two targets:

$XBTUSD BitMEX change in tick size from $0.10 to $0.50 has increased the trading ranges/volatility significantly as the HFT algos have adjusted. I am working on adjusting the model to better fit these new wider ranges of trade:

$XBTUSD conventional charting considerations:

  • Stoch RSI is near the top but showing bullish divergence.
  • Both the MACD and SQZMOM are giving extremely bullish signals, but are a bit extended in terms of traditional equities.
  • MA’s all lined up continuing the bullish trend.

$XBTUSD trade on 11/29-11/30 was clearly divergent from the model – However the conventional trendlines and midline supports continue to act as predictable reversal signals:

A very predictable trade in the model has played out repeatedly over the last couple of weeks. When price enters a new quadrant and establishes support on the downward trending quad wall, there is a very high probability it will chase the next apex:

 

 

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:

 

  • The best ROI comes when trade moves between quadrants, but we can do some intraday scalping off the quad wall too.

  • And another live tweeted win on the break of a quad wall:

 

 

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