Trading set-up for BTC/USD.

Bitcoin is firm around 49000-50000 area and that is significant. Above 50000 levels it might further drive speculative interests among retail investors.

But the question how do you trade BTC? What technical set-up do you use?

Well, there can be many set-ups and you can go with the one that you are comfortable with. But always trade what you see. The indicators help us in timing an entry. Today I would share one technical set-up for Bitcoin which is working well at this moment. I have also experimented a little bit.

The TA combinations that I use for this set-up(in BTC)

• Bollinger Band
• Moving Averages( 55EMA, 100 SMA, 200 SMA)
• RSI(Relative Strength Index- 14 periods)

Bollinger Band

In Bollinger Band, you can notice a middle line, an upper band, and a lower band. The middle line is the 20 Moving Average. The Upper and Lower Bands are the standard Deviations (the default deviation is always 2).

The intraday traders and the short-term traders generally use the upper band region to sell it and the lower band region to buy it. But that may not work always. And most importantly the standard deviation of 2 is not always sacrosanct to all kinds of assets. I have done my experiment with BTC in particular and I found that the standard deviation 2 does not work in BTC, so in my set-up, I have changed it to deviation 3 and it really works well in the H4 chart.

Now, have a look at both deviation 2 and deviation 3 in the H4 chart of BTC/USD.

You can also use the 30 min, H1, H4 chart. Also, you should always take clues from the daily, weekly, and monthly closing of a candlestick in the chart.

Now the most important part is that even if a Bollinger Band Deviation 3 works well with the H4 chart of BTC/USD to make a trade entry, don't use it alone. Always use a combination of other indicators.

Moving Averages are known for the trend. If the price is well above the 55, 100, 200 Moving Averages then we can consider it as a bull trend. Further, if the gap is higher then the momentum is stronger, but do remember that any retracement will always probe the support of 55, 100, and 200 Moving Averages and that should ideally be your Buy zone in a Bull trend.

So if you use Bollinger Band along with Moving Average Combination, and if you find that the lower Band and the MA converge at a common level, then that should be considered as a strong Buy zone.

Moving Avearages

I generally use 55 EMA, 100 SMA, 200 SMA in my chart set up.

EMA- Exponential Moving Average or Exponentially weighted Moving Average
SMA- Simple Moving Average

In EMA, more weightage is given to the recent price action. In SMA, it is the simple average of the prices over a specific period.

EMA is more relevant to momentum trading, the near term price action whereas the SMA is more relevant to medium to long term price action. Always remember that 200 SMA is considered parity in trading. So whenever the price goes up and goes down significantly, one day it will correct to 200 SMA.

Let's have a look at how these three MA combinations (55 EMA, 100 SMA, and 200 SMA) are working out for BTC/USD.

Relative Strength Index(RSI)

Generally the 14 period RSI is used in treading set up and that signifies the overbought or oversold condition of an asset. Generally, any reading above 70 is considered as an overbought condition, and similarly below 30 is considered as an oversold condition.

It is a momentum indicator and it calculates the momentum as a ratio of higher closes to lower closes over a period of 14- day(if you are using RSI(14))

In general practice, traders use these reading to either short(if above 70) or long(if below 30) the pair. But again don't use it alone, always go with the combination of indicators.

Trading set-up for BTC/USD

Now combine all these three indicators-- Bollinger Band(Deviation 3), MA Combinations(55 EMA, 100 SMA, 200 SMA), and RSI(14) to see how the price action is behaving in BTC/USD.

The price of BTC is comfortably above the 55EMA, 100 SMA, and 200 SMA respectively-- Bullish Trend. RSI prints a reading of 61.87(<70), so it is not overbought in the H4 chart at this moment, which means it has room to go up further as the momentum is up.

Interestingly the current price action of BTC appears to be trading within a channel. If that assumption is correct then the immediate support is around 46500, which is the Channel bottom+Lower Band of Bollinger Band+55 EMA in H4 chart.

Overall, BTC is poised for further discovery of new horizon and it might break impulsively above 50k and may possibly close above 50K in the daily and weekly chart, if that happens then it will further drive speculative interests and the retail traders might further join this rally.

Thank you.

_DISCLAIMER

_{This is for informational and educational purposes only. Trading always involves risks and uncertainties, so you should do your own research before making any investment, and you should not invest more than what you can't afford to lose.}