BTC divergence trading on RSI. Short position. Short term

24 мар. 2018 г.

Greetings.

I have created a new tradingview profile for posting charts and ideas. This will be the first chart.

I am primarily trading Bitcoin perpetual contracts on BitMEX. But these charts can be used for trading Bitcoin on your preferred exchange aswell.

Since this is the first chart i post, please do not enter a trade from this chart. Moving forward i will be posting charts around the time i actually enter a trade or plan to enter a trade.

This chart is just to give you an overview of how i plan some of my entries and exits from trades, and to show you what indicators i use.

I use indicators such as EMA's, RSI, MACD, Stochastic RSI, Ichimoku Cloud and i plot fibonacci retracements and extensions. I also tend to use elliot waves for larger swings.

For the charts i post here however, i want to keep the focus on a few indicators to not clutter the ideas, and to keep things simple and intuitive. If there is a demand for other indicators, i am certainly open for suggestions :)

I have found divergence to be a very strong trading tool in cryptocurrency. It is also a tool that is quite easy to use, if you are new to trading. I believe this is because many cryptocurrencies, Bitcoin included, have a lot of volatility and high momentum in price action, which makes RSI more reliable. Therefore it is possible to enter trades based on divergence alone. I use RSI to spot divergence.

To give a short overview on how i plan to do my charts, it would be the following:

- For planning entries: RSI divergence
- For planning exits: Fibonacci retracements
- Timeframes: 15 min, 1 hour and 4 hour

- 15 minute timeframe for short term trades (minutes to hours)
- 1 hour timeframe for mid term trades (hours to days)
- 4 hour timeframe for long term trades (days)

If you look at the chart, there is a quite clear divergence on the 15 minute timeframe. Since the 15minute timeframe is only used for short term trades, targets are not too far from the entry.

Fibonacci retracements are used to plan targets. In this case the 0.23 and 0.38 fibonacci, since we do not ever want to be greedy on the short term trades. Both targets were hit in this case. That is a maximum profit of around 2,5% from the entry range. However the actual profit would usually be a bit lower, since position should be reduced at target 1.

Position sizes, stop-loss and how much to reduce position at each targets is traders choice. I usually prefer to reduce 40% of the position at target 1 and set stops to breakeven. Then reduce another another 40% at target 2 and move stops to target 1. Then i let the last 20% run. Again - its traders choice really.

If you are interested in my track-record:
- 8+ years of trading and investing in small, mid and large-cap stocks
- 1 year of Forex trading
- 1 year of cryptocurrency trading

Hope you like the chart.

Please leave a comment if you have any suggestions.