When it comes to being a safe swing-trader, you need to be able to catch a trend and detect when the momentum of the strength is weakning. An understanding of macroeconomics is also important to understand mid-long term catalysts that can affect the price of what you are interested in trading!
Let's take a recent case:
BTCUSD
Note, the TPI can have values between -1 and 1. When the TPI is between -0.2 and 0.2 the probability of the trend is concidered to be neutral / flat.
At the close of the daily candle on the 9th of january closed with a TPI value of 0.6 (previous day was roughly 0.3).
Even though the market structure is bearish, we know that the mid-term trend is super bullish, so we enter first on BTC and ETH.
Why do we add ETH into the mix? Simple, because of correlation and beta.
This is the Pearson Correlation Coefficient | from https://cryptowat.ch/correlations
This is an important tool for me, because it tells me how correlated the alts are to BTC and ETH, this means I know if they lag behind BTC or follow it's trend in a timely manner.
This allows me to go to the next step; calculating beta:
Beta is defined by a scalar on how much an asset is going to move compared to benchmark asset (we use BTC as our benchmark)
I'll save the beta calculations for another post
But I end up with a few coins that are lagging behind BTC and some that follow it
When the strong trend for BTC starts, I allocate towards BTC, ETH, AVAX, Aptos and Audius
ETH, AVAX, APT and AUDIO has a high correlation to BTC when it comes to how they follow the direction of BTC, however they have a higher beta, which means their returns are scalled by a factor that is higher than 1 (they become bigger)
We enter a swing position on all these coins and wait for the TPI to show weakness in the upwards trend of BTC
Let's see how that went:
The 7th of febuary, we have closed a lot of the trades, we have more capital available, we now look towards the lower correlated coins as some of them likely haven't pumped yet. I will make a seperate post in the future on how I use data to make a list of these coins, an example case is IRIS
Iris has a rather low correlation to BTC (0.32) this doesn't mean IRIS doesn't follow BTC, it just lags behind quite a bit, this means:
If we see a retracement in BTC but still see strength to the upside in the TPI or the Based Algo (developed by efremolo), we can buy coins like IRIS until we see additional weakness in BTC!
On the 28th of febuary we saw the TPI show further weakness in the upwards trend for BTC:
This is a perfect test case of how I would use the TPI to maximize my returns in a bullish market.
Vice versa in bear markets, you run the same model, but reversed, however this limits you to coins that are on futures exchanges, which would need you to put money into exchanges. In very uncertain times I recommend you keep costody of your funds; "not your keys, not your coins". If this is how you think, you can use decentralized protocols such as aave and borrow against a coin to short it yourself.
Before I finish this post, I want to give you a brief summary on what my TPI is saying now, and how I'll be moving
1: Market Structure is still bullish
2: TPI on the 1D (mid-long term) is above 0.64, which is super bullish
3: BTC will still be outperforming alts, unless the fed pumps more liquidity into the market
It may be controversial, but I don't think the current banking issue is nearly as bad as it was in 2008, with the amount of inflation since then, its fair to assume that the effects of those bank runs, aren't as major as it would have been back then!
Because of the higher probability of BTC outperforming the alt market, most of my holdings is in BTC for now:
Let's take a recent case:
BTCUSD
Note, the TPI can have values between -1 and 1. When the TPI is between -0.2 and 0.2 the probability of the trend is concidered to be neutral / flat.
At the close of the daily candle on the 9th of january closed with a TPI value of 0.6 (previous day was roughly 0.3).
Even though the market structure is bearish, we know that the mid-term trend is super bullish, so we enter first on BTC and ETH.
Why do we add ETH into the mix? Simple, because of correlation and beta.
This is an important tool for me, because it tells me how correlated the alts are to BTC and ETH, this means I know if they lag behind BTC or follow it's trend in a timely manner.
This allows me to go to the next step; calculating beta:
Beta is defined by a scalar on how much an asset is going to move compared to benchmark asset (we use BTC as our benchmark)
I'll save the beta calculations for another post
But I end up with a few coins that are lagging behind BTC and some that follow it
When the strong trend for BTC starts, I allocate towards BTC, ETH, AVAX, Aptos and Audius
ETH, AVAX, APT and AUDIO has a high correlation to BTC when it comes to how they follow the direction of BTC, however they have a higher beta, which means their returns are scalled by a factor that is higher than 1 (they become bigger)
We enter a swing position on all these coins and wait for the TPI to show weakness in the upwards trend of BTC
Let's see how that went:
Iris has a rather low correlation to BTC (0.32) this doesn't mean IRIS doesn't follow BTC, it just lags behind quite a bit, this means:
If we see a retracement in BTC but still see strength to the upside in the TPI or the Based Algo (developed by efremolo), we can buy coins like IRIS until we see additional weakness in BTC!
On the 28th of febuary we saw the TPI show further weakness in the upwards trend for BTC:
This is a perfect test case of how I would use the TPI to maximize my returns in a bullish market.
Vice versa in bear markets, you run the same model, but reversed, however this limits you to coins that are on futures exchanges, which would need you to put money into exchanges. In very uncertain times I recommend you keep costody of your funds; "not your keys, not your coins". If this is how you think, you can use decentralized protocols such as aave and borrow against a coin to short it yourself.
Before I finish this post, I want to give you a brief summary on what my TPI is saying now, and how I'll be moving
1: Market Structure is still bullish
2: TPI on the 1D (mid-long term) is above 0.64, which is super bullish
3: BTC will still be outperforming alts, unless the fed pumps more liquidity into the market
It may be controversial, but I don't think the current banking issue is nearly as bad as it was in 2008, with the amount of inflation since then, its fair to assume that the effects of those bank runs, aren't as major as it would have been back then!
Because of the higher probability of BTC outperforming the alt market, most of my holdings is in BTC for now:
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Telegram:
t.me/ikkeomarfree
I can also pass funded accounts for you!
$50,000 accounts
Just dm my Telegram @IkkeOmar