Over the last few weeks I’ve been experimenting with trading indicators as well as using my secret weapon (fxstreet price analysis) to make an absolute packet on Bybit. In fact I have managed to trade up 0.2btc to nearly 10 bitcoins over a 2 month period. This isn’t just dumb luck though, I did this by using the tools made available for free on tradingview.
The first indicator that I have found to be useful is quite possibly the easiest to use for identifying support and resistance, so that’s the one I’ll kick this blog off with.
This is a volatility indicator that consists of 3 lines. The outer lines plot out 2 different deviations on opposite sides of the price action. Each of the two lines represent support and resistance respectively, and the red line in the middle represents the moving average.
Support is the price it struggles to break past on the down-side.
Resistance is the price it struggles to break past on the up-side.
Take a look at this screenshot from tradingview.
I’ve circled the resistance (A) and the support (B) and I’ve also highlighted the date on (C)
The date is July 2nd and in my free bitcoin signals telegram announcement channel I sent out a signal to buy bitcoin at $9600 and sell at $10,800 on the 28th of June 2019.
Not only was this 5 days before bitcoin started to approach $9600 but bitcoin was trading at $12400 when I sent this out. This means that if you had shorted, you would have traded a $2800 gap. This is quite a large gap that could have made you 22% on 7 X leverage, a tidy sum if you leveraged just 0.15btc (this would basically have been a 150% ROI on 7x leverage)
So the question you might be asking yourself, is can Bollinger Bands predict the future? Well no, not quite but what they can do is give you a very good indication as to what is happening in both a trending market (meaning the market is trending up or down) or a ranging market (meaning it’s ranging between support and resistance) The phrase “the trend is your friend until the end makes a lot of sense with bollinger bands, as the trend eventually ends and this is known as the Bollinger bounce.
As shown in the image above, you can see where the downward bounce has occurred, the red circles show the support and resistance, and the arrow shows where it bounced to a downward trend.
Bollinger Bands act as a dynamic support and resistance indicator, which is perfect for swing trading. When the bands are wide this is when you want to swing trade between the support , moving average and the resistance.
However when the Bollinger Bands start to tighten up, this is a signal that there is going to be a big break in either direction. A breakout is when a candle goes above the mapped out line or below it. Once this happens, it’s generally and indication that the market will move in that direction, so it’s time to follow that trend.
However it can’t tell you which direction, so Bollinger Bands alone only tell part of the story. Which is why you need something else to help you gauge the trend.
Relative Strength Index (RSI)
The RSI indicator is what’s known as a momentum indicator. This indicator tells you when something is either overbought or oversold. When bitcoin is oversold, it usually means it’s due a reversal to a bullish trend. When bitcoin is overbought, it means that bitcoin will soon flip to a bearish trend.
The RSI uses a single line which has a scale of 1 – 100. If the market is reading over 70 it’s an indication that bitcoin is overbought, when the reading is under 30 it means that bitcoin is oversold.
As you can see from the image above, the RSI is shown in a separate scale. And on two occasions it’s dipped below 30 meaning that bitcoin right now is oversold, and we should be due a reversal.
The main purpose of the RSI indicator it to allow people to identify tops and bottoms and as the trend is leaning towards oversold, it would make sense to consider a long position.
When the RSI is sitting around the 50 range or above, it’s telling you that we are in a likely uptrend. When it’s sitting below 50 it’s telling you we are likely in a downtrend. However we can’t see this in 5 day view, so lets zoom out to 1 month view and see what the RSI is telling us.
As you can see in this image, I’ve drawn in yellow to highlight when it was above 70 and below 30 on the RSI and also on the chart itself which shows the up-trend and down-trend. However if you look to the bottom left of the RSI you’ll see that after a sustained period of down-trend, the trend broke in an upward direction. But I still don’t know which way the market is likely to go, what else can I use to help me?
Moving Average Convergence Divergence (MACD)
The 3rd and final indicator on todays post is the MACD which is a trend indicator that consists of a fast line, a slow line and a histogram, which are made up form the MA-fast MA-slow and MA period.
Like the RSI the MACD is plotted on it’s own scale which is shown in the image below at the bottom of tradingview. I’ve highlighted this with the blue box.
The MACD is a little more difficult to grasp than the Bollinger and RSI so take a moment, and re-read this if necessary, as this make or break the retail bitcoin trader.
The Fast Line is the moving average of the difference between both the MA-fast and MA-slow
The default setting on MACD is 12, 26 close, 9 and you can see this where I have circled in green. What this signifies is that the fast line of the MA (moving average) is the different between 12 and 26 MA, and the slow line the MA represented by the 9 of the MACD fast line. It’s a bit of a head spin so I’ll break it down for you in a moment.
But lets first understand divergence and convergence, as this part is important as you’ll notice that the MA lines crossover from time to time and this is where we can finally identify if the trend is about to reverse.
When the difference between the two lines get closer this is convergence, much like when the Bollinger Bands tighten in range. And when the lines get further away, this is divergence.
Take a look below. The red box highlights divergence as the two lines were getting further apart, and this saw the price move down.
However the green box shows the convergence, as the lines start to become closer, and look what happens when they cross.
The yellow arrow on the right shows the blue line (12) crossing the orange line (26) and this lead to a bullish reversal.
Conversely, if the orange line crosses upwards with the blue line, we see a bearish trend.
Now take a look at the right hand side yellow arrow you’ll see that the blue line is about to cross up through the orange line again, this would indicate that we are due a bullish reversal again, and I have highlighted this on 3 other occasions with the yellow circles so right now opening a LONG would make sense.
As you can see, whilst I was busy writing this blog, the position broke as expected, which I’ve highlights with the two yellow circles.
So there you have it, these are the 3 best indicators for trading bitcoin. You can open a tradingview account for free HERE and use up to 3 indicators in the free version.
And to put your new found trading skills to use, you can open up an account on Bybit here or by clicking the banner below.
At the moment, Bybit are offering anyone that signs up using my referral link a free $60 bonus if you deposit 0.1btc between July 1st and August 1st 2019
As this is usually 0.2btc, get started now to grab that 50% discount.
This is not financial advice, this blog is for informational purposes only, trading carries a high risk of loss, do your own research and make your own decisions as its on you!