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Using technical analysis on Bitcoin

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Mutatu

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Location: Dorset UK

Thought I would start a topic on technical analysis. For one, many may not of come across this and two maybe others have a view on the usefulness of TA when it comes to Bitcoin.

I have used technical analysis to help with purchasing shares(stock) for a while. It can also be useful for trading currencies if one is into that kind of thing. A word of warning to those who may get interested, it is easy to get carried away and believe in TA too much, it can be a useful tool though to help control one's emotions and find better entry and exit points into a share.

It may be that Bitcoin is still too volatile for technical analysis to work effectively? Looking at the chart on the link below it may have helped as a warning for those buying in large amounts at the peak six months ago.(it would have also suggested that the price was making a short term bottom a couple of months ago)

I guess my favourite indicator would be the RSI on a daily chart. Buy when rises from below 30 be careful when above 70 I am in UK so you may wish to change the setting on the chart:

http://bitcoincharts.com/charts/localbtcGBP#rg360ztgCza1gEMAzm1g10za2gEMAzm2g25zxzi1gMACDzi2gRSIzi3gSStochzv

If you wish to see more there is lots of info out there, the following link gives some info on the indicators that I have set up on the chart above:

http://finance.yahoo.com/news/four-highly-effective-trading-indicators-193000721.html

After all that it may be best to just purchase a small amount each month and get the benefits of pound cost averaging?

Posted on July 30, 2014 at 1:02 AM

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• BlockchainFeed

  

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  Location: Seattle, WA, USA

  Hi @Mutatu, What is your preferred exchange or platform for trading crypto-currencies/tokens?

  Posted on July 30, 2014 at 1:07 AM
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• Mutatu

  

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  Not trading I'm afraid, just acquiring. I am just purchasing small amounts using Localbitcoins and CryptoPay here in UK. I do trade swings in FTSE using TA. Personally I don't have the time to play too much so prefer to sticking to one simple trade. Is trading BTC not expensive?

  Posted on July 30, 2014 at 1:15 AM
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• ItsAboutSharing

  

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  I had traded stocks "professionally" for years and am fairly well versed with TA. I've applied it towards Bitcoin with some success, but being honest, I would have done much better to simplify things (and buy and hold). I think what you are doing is great, using TA to find entry points. When you are looking to build your Bitcoin position by getting in and out, then you have to also consider taxes. So that means, if you are sitting on a profit and want to sell and buy back in lower, you have to consider a roughly 30% tax on the profits. Another reason to gamble less.

  I see a few guys who use TA very successfully but if you are not familiar with TA it is going to take months, if not years, to become very familiar with it. Time required, is the reason I no longer trade bitcoin actively, at least in part. That said, if things look ugly, I might exit a portion of my position, but I've tried to only trade with 10% of my holdings for months now.

  Well done, Its about sharing

  Posted on July 30, 2014 at 2:55 AM
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• fernando

  

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  I would love to learn more about TA out of curiosity, but I'm a bit wary because I'm more a buy and hold kind of guy and I'm not planning to change now :)

  One of the things that make me uncomfortable with TA and BTC is that everyone who talks about it says he is doing amazing. I simply can't believe it. It reminds me to a time when I had a couple of friends with gambling problems. They were always killing it. Only the weren't and they were just lying to me and to themselves. If I saw more losses (honesty!) I think I would be a bigger believer :)

  Anyway, whenever I want data or a graph, the best resource I've found is: https://bitcoinwisdom.com/

  Posted on July 30, 2014 at 4:01 AM
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• Rob

  

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  Location: California

  I have a relative who has day-traded stocks for decades, I assume with success. I'm wondering if his skills would carry over to Bitcoin trading. I tried to get hi interested in Bitcoin as an investment back when it was around $60, and now that I see he's trading stocks again every morning, I wonder if I could get him interested in Bitcoin with the trading possibilities. Anyone have thoughts?

  My hope would be the interest in making money might lure him into becoming a Bitcoiner.

  Posted on July 30, 2014 at 1:20 PM
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• Mike

  

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  Location: Chicago, IL

  I've used TA in trading for a number of years -- the key thing is to not believe in TA for the sake of TA. Every iteration or interpretation of TA is based on market behavior which is driven by the people on the other side of the screen (even those computers -- they were programmed by people).

  Everything in TA can basically be boiled down to 10-ish basic market principles about reversals, momentum, etc. It has certainly helped me in my entry points for bitcoin and I have had mixed success with it in other capital markets.

  The bitcoin market actually trades (or at least is did previously) more technical than any market I have ever seen. Timing can still be a bit of an issue, and often times you will find yourself standing on the train tracks. However, if you are in it for small steady trades then TA has actually shown me to be especially useful for bitcoin.

  Posted on July 30, 2014 at 2:13 PM
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• popinjay

  

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  @itsaboutsharing I had traded stocks "professionally" for years and am fairly well versed with TA. I've applied it towards Bitcoin with some success, but being honest, I would have done much better to simplify things (and buy and hold). I think what you are doing is great, using TA to find entry points. When you are looking to build your Bitcoin position by getting in and out, then you have to also consider taxes. So that means, if you are sitting on a profit and want to sell and buy back in lower, you have to consider a roughly 30% tax on the profits. Another reason to gamble less.

  I see a few guys who use TA very successfully but if you are not familiar with TA it is going to take months, if not years, to become very familiar with it. Time required, is the reason I no longer trade bitcoin actively, at least in part. That said, if things look ugly, I might exit a portion of my position, but I've tried to only trade with 10% of my holdings for months now.

  Well done, Its about sharing

  Agree with your points about keeping it simple. Been through the whole load up 100 indicators phase myself and lost a lot of money in forex until I learned to keep it simple. I basically trade trends with support and resistance alone. Learn I simple entry trigger or two using a basic indicator and you are set. Oh unless you can't manage your trades and keep emotions at bay. The most important part of trading IMO

  Posted on July 30, 2014 at 2:18 PM
  Last Edited: July 30, 2014 at 2:21 PM
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• popinjay

  

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  I should add it's very hard to day trade bitcoin right now in these ranges without any kind of leverage. Buying when you think it's a good value and holding is the best philosophy right now

  Posted on July 30, 2014 at 2:20 PM
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• Mike

  

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  Location: Chicago, IL

  @popinjay

  Agree with your points about keeping it simple. Been through the whole load up 100 indicators phase myself and lost find of money until I learned to keep it simple. I basically trade trends with support and resistance alone. Learn I simple entry trigger or two using a basic indicator and you are set. Oh unless you can't manage your trades and keep emotions at bay. The most important part of trading IMO

  I think we've all been there. I'm the same way. Half the time I won't even really draw up support and resistance, I just look at what the past few periods of price have done and interpret what that sounds like, if the market were still based on open outcry.

  I think being able to see/hear a viable market-story is a huge aspect of using TA successfully. Otherwise it's just all noise.

  Posted on July 30, 2014 at 2:26 PM
  Last Edited: July 30, 2014 at 2:27 PM
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• irnhnve

  

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  The only indicator I use is MACD, and even now I just buy a little every 2 weeks. Bitcoin cost averaging FTW.

  Posted on July 30, 2014 at 4:40 PM
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