In everyday charting we use many indicators to equip us with the confidence to jump in and avoid getting rekt. Just the simplest of them can lead us to take the most unreal (great) trades we now wish we did. Today we're going to discuss about Price Action (candle closing), (I mean even grandma uses this!) and the good old 21 MA (Moving Average). As powerful as they are, most times you just don't need Moving Averages crossing each other to determine new trends. Or else we could have all been so successful following the recent multiple golden and death crosses.
Many traders believe rather vaguely that when we get the first daily close above the 21 day MA that signals the beginning of an upward movement. Conversely, daily closes below this MA indicate the awakening of the bears. While this concurs to a degree with this analysis, that belief can be squashed by fake outs which are a common occurrence in BTC movements. This is where Price Action comes in. Patience is key here as when the candles start closing on the opposite side of the 21 MA we have to wait for INITIAL TWO consecutive closes to become certain of the trend change. But when to actually enter the trade? We enter at the price of the close of the second candle close or wait for a 2 to 3% retrace if one would want to be more careful. Consequently, when we later get the two consecutive closes on the opposite side of the indicator that's when one would GET OUT! That brings us to the realization that the close of a long is the entry to a short and vice versa.
Although this strategy alone should put you in NICE greens but alas! You must be thinking there must be a way to stretch your realized gains. Turns out there is! And that's when comes in. A very high daily close has long been considered as a trend reversal indicator. Therefore, once in a trade and we get a daily close at 3X or more the previous week's (7 days) average , we don't jump to closing the trade yet. Patience is still key, we wait for the NEXT TWO daily candles to close and that's the price we close trade at. Knowledge of this strategy ought to keep you on the right side of the massive and painful swings BTC players (traders and hodlers) have to face.
So where does this leave us at now? We already had the two initial candles below the 21 MA close on May the 22nd at $9222. This tells us that it would be very hard to close dailies above the range $9200 - 9450 in the coming days. Ideally (BTC? Ideal??), this range acts as an entry to a short position I would hold on for a while. Intermediate term .
This is NOT financial advice. Please do your own research and understand trading derivatives has high risk.