In the previous posts we discussed profit taking in different markets, profit targets, trailing stop losses, risk:reward, time horizons and how to identify a trend. Starting with part 1 is highly recommended.
Best Indicators
I have noticed that some indicators work really well when the asset is at or near all time highs and other indicators work best when the market is recovering or in a bearish trend.
If ATH', or ATH' territory
Tyler Jenks’ Hyperwaves: Help to identify areas of support in parabolic markets. Also indicates when the parabolic move is exhausted (phase 4 or phase 3 breakdown).
Hyperbolic burst: Use 30 period RSI. If >/= 70 then parabolic status. Prefer week and daily to be > 70 with W > D. If both weekly and daily are > 70 then in a Parabolic High Risk (PHR) state. If Weekly and Daily > 80 then Extreme Parabolic High Risk (ePHR).
Fractals/Parabolic SAR’s: Very useful for setting trailing stops and identifying a reversal in trend. Up fractals should not get broken in a down trend and down fractals should remain in tact while trending up.
Ichimoku Cloud: Tenken-Sen serves as a high probability entry. Kumo twists can help identify the end of a trend. The cloud can act as support. I find it to be most useful as a way to identify no trade zones. This occurs when the price is inside the daily cloud.
MA’s: Like 10MA - 50MA - 128 MA on the daily chart and the 7/30/50 on the weekly. If the 10 MA crosses the 50 then it is a good indication of upcoming consolidation and/or reversal.
For Bitcoin'
NVT: Most objective measurement we have to value the Bitcoin' blockchain. However, with the introduction of the Lightning Network and batching transactions I do not know if this will continue to work. For example: The blockchain could be getting used more but NVT could be showing the network as overvalued because there are less total transactions.
If Bear Market or Recovery
Horizontal support/resistance and/or FIB’s: Prior resistance turns into support. FIB’s can help identify major levels of support/resistance. Look for gaps that need to be filled.
VRPR: Large volume profile on top = large resistance | Large volume profile below = large support | If gap in volume below price then high probability that the asset will retest that zone, a/k/a ‘fill the gap’.
Patterns: Patterns can be very useful in identifying high probability entries and estimating profit targets.
Candlesticks: Capitulation and Euphoria wicks are a very strong indication of a reversal. I like to look for reversal candlesticks to be in confluence with an area of support, such as a horizontal, trend or Ichimoku Cloud.
Trendline: Can be very useful in identifying bottoms and catching trend reversals. If trend is violated and holds as resistance/support on a retest then it is a likely reversal. When the price is in a freefall using trendlines and/or hyperwaves can be useful in identifying key areas of support.
Do not look for a reason to enter a trade, look for reasons to stay out! Anyone can find a reason to enter a trade, and anyone can come up with an eloquent explanation to make the trade sound profitable. When you are actively looking for reasons to take the other side of your position and are coming up empty then it is probably time to bet big and use a generous stop loss!
Thanks for reading!
Best Indicators
I have noticed that some indicators work really well when the asset is at or near all time highs and other indicators work best when the market is recovering or in a bearish trend.
If ATH', or ATH' territory
Tyler Jenks’ Hyperwaves: Help to identify areas of support in parabolic markets. Also indicates when the parabolic move is exhausted (phase 4 or phase 3 breakdown).
Hyperbolic burst: Use 30 period RSI. If >/= 70 then parabolic status. Prefer week and daily to be > 70 with W > D. If both weekly and daily are > 70 then in a Parabolic High Risk (PHR) state. If Weekly and Daily > 80 then Extreme Parabolic High Risk (ePHR).
Fractals/Parabolic SAR’s: Very useful for setting trailing stops and identifying a reversal in trend. Up fractals should not get broken in a down trend and down fractals should remain in tact while trending up.
Ichimoku Cloud: Tenken-Sen serves as a high probability entry. Kumo twists can help identify the end of a trend. The cloud can act as support. I find it to be most useful as a way to identify no trade zones. This occurs when the price is inside the daily cloud.
MA’s: Like 10MA - 50MA - 128 MA on the daily chart and the 7/30/50 on the weekly. If the 10 MA crosses the 50 then it is a good indication of upcoming consolidation and/or reversal.
For Bitcoin'
NVT: Most objective measurement we have to value the Bitcoin' blockchain. However, with the introduction of the Lightning Network and batching transactions I do not know if this will continue to work. For example: The blockchain could be getting used more but NVT could be showing the network as overvalued because there are less total transactions.
If Bear Market or Recovery
Horizontal support/resistance and/or FIB’s: Prior resistance turns into support. FIB’s can help identify major levels of support/resistance. Look for gaps that need to be filled.
VRPR: Large volume profile on top = large resistance | Large volume profile below = large support | If gap in volume below price then high probability that the asset will retest that zone, a/k/a ‘fill the gap’.
Patterns: Patterns can be very useful in identifying high probability entries and estimating profit targets.
Candlesticks: Capitulation and Euphoria wicks are a very strong indication of a reversal. I like to look for reversal candlesticks to be in confluence with an area of support, such as a horizontal, trend or Ichimoku Cloud.
Trendline: Can be very useful in identifying bottoms and catching trend reversals. If trend is violated and holds as resistance/support on a retest then it is a likely reversal. When the price is in a freefall using trendlines and/or hyperwaves can be useful in identifying key areas of support.
Do not look for a reason to enter a trade, look for reasons to stay out! Anyone can find a reason to enter a trade, and anyone can come up with an eloquent explanation to make the trade sound profitable. When you are actively looking for reasons to take the other side of your position and are coming up empty then it is probably time to bet big and use a generous stop loss!
Thanks for reading!
emasar Indicator is available for purchase at alphanalysis.io/product/emasar/