How to trade effectiently using bitcoin technical analysis

How to trade effectiently using bitcoin technical analysis

How to trade bitcoin efficiently using bitcoin technical analysis

One of the many way people trade bitcoin is by using technical analysis. Technical analysis is basically different techniques and methods to produce a financial forecast using the asset’s past performance. While many would argue that technical analysis is not applicable to bitcoin and cryptocurrency markets, they mistake bitcoin technical analysis for the “voodoo looking bitcoin technical analysis charts.” I will not be discussing or going over these “voodoo charts,” but I will show you how to use bitcoin technical analysis indicators to produce very strong and reliable trade signals. In order to show you how to use technical analysis to trade botcoin, I will be using Haasbot, which allows us to even automate our bitcoin trading strategies.

Simple Moving Average (MA) and Triple Exponetial Moving Average Indicators

For this illustration, I will show you how to use one bitcoin technical analysis indicator to produce Buy Signals and another bitcoin technical analysis indicator to produce Sell Signals. I will be using TEMA to produce the Buy Signals and I will be using MA to produce the Sell Signals.

haasbot trade bot TEMA bitcoin technical analysis

As you can see here, I am using TEMA at 30 minutes, with a Short TEMA-Length of 16, a Long TEMA-Length of 28, and I have only selected “Use Buy Signals” in Haasbot. I will go ahead and check the TEMA buy signals, by running a small backtest on the TEMA technical analysis indicator.
haasbot trade bot TEMA Chart bitcoin technical analysis

As we can see here, the results looks quite good, considering TEMA is a predictive indicator. If you want more information on how TEMA works, check out the TEMA page on the Haasbot Wiki. Now we want to look at MA for the Sell Signals.

haasbot trade bot MA bitcoin technical analysis

Now, for using Sell Signals, I will be using MA at 30 minutes, with Short MA-Length of 21 and a Long MA-Length of 35. I have also went ahead and selected “Use Sell Signals” for this bitcoin technical analysis indicator. Of course, I will run another small backtest to see how the indicator would have faired against historical data. If you want to know more about MA, check out the MA page on the Haasbot Wiki.

haasbot trade bot MA Chart bitcoin technical analysis

Since we are quite satisfied with the results, we need to see how both of these bitcoin technical analysis indicators would have faired, when working together to produce buy and sell signals. We will look at the last 48 hours of data of this.

haasbot trade bot TEMA MA bitcoin technical analysis

Based on these results, it looks like we have a very strong and robust combination of bitcoin technical analysis indicators. The two indicators work really well with each other to produce some very nice Buy and Sell signals, which is very visible on the chart above. The best part of this chart is that we are now positioned with a buy at roughly $370 and the market is currently rising from there, which lets us profit once the Long MA crosses below the Short MA. This puts us in a very nice position to take a nice profit.

Overview

While some people may not think that bitcoin technical analysis amounts to anything, this post shows otherwise. I personally don’t believe in those technical analysis “voodoo charts,” but I do believe in math and technical analysis indicators. It is important to keep in mind that the whole strategy of using technical analysis indicators is to produce strong signals, but not all of them will be profitable. Our goal is to produce more profitable signals than unprofitable signals, which this strategy clearly does. Overall, bitcoin technical analysis can be very useful for trading more efficiently, particularly within the very volatile markets of cryptocurrencies.