Under the hood: Crypto Trend Analytics

Technical series showcasing the core elements of Tradingbay Algorithms

Easy to use EARLY TREND & CORE TREND widgets can be applied on any chart for any trading purposes. As with all systems, the more you layer the more accurate a market reading you can achieve.

USE CASE 1: SIMPLE TREND FOLLOWING ON 1 ASSET

In this simple example of a recent occurrence on XRP/USD, simple trend following looks like this. You wait for both CORE TREND & EARLY TREND to agree on a direction and then have at least 1 other system of that same asset also indicate that same direction. It is also recommended not to have any clashing of signals for the cleanest type of trade. Optional but also recommended would be utilizing STABILITY and WARNING. In your trade setup you can wait for STABILITY to indicate STABLE + WARNING to be off (normal colored bars instead of orange).

[1] indicates a BULLISH CORE TREND [2] showed us another additional BULLISH signal. [3] HARMONICS has a recent BUY which is still active (the green line has not changed to gray). Finally we have [4] which is the EARLY TREND system also indicating BULLISH. As the icing on the cake, [5] STABILITY provides us a STABLE market condition solidifying the bias.

The more signals agree on the bias the better however keep in mind if you wait for too many to agree, you may be too late to enter the market. You always want multiple confirmations but it is not critical for ALL systems in the asset or a custom dashboard to simultaneously agree. This would be a rare occurrence.

To be successful at trend following, it is ideal to have both trend indicators show a specific direction and to have 1 supporting confirmation from another system of the same asset. In the case above, this trade was good since [4] indicated BULLISH.

USE CASE 2: HOW TO AVOID LOSSES / TREND FAKE OUTS (PART 1)

The scenario above, a recent occurrence took place on BTC/USD where we saw a trend breakout affect BTC/USD CORE TREND & EARLY TREND however we were saved by not trading this period as it did not meet our minimum criteria for a trade. As mentioned in USE CASE 1, you always need a minimum of at least 1 other system confirming the same direction. Notice at [A] we had the trends systems breakout BULLISH however no other system in that time agreed on the bias. Furthermore STABILITY & WARNING during that period show instability in the markets. Notice the orange candlestick coloring + at the bottom panel you can see STABILITY turn to yellow as a warning system.

[B] We preach patience often for this exact reason. As you wait a few more hours, we notice trends break back down to BEARISH via [1] and [2] trend systems. We further have a confirmation in system [3] solidifying the signal. Optional but useful, [4] STABILITY indicated a STABLE reading increasing the viability of this set up.

USE CASE 2: HOW TO AVOID LOSSES / TREND FAKE OUTS (PART 2) [ADVANCED]

To further expand on the same exact scenario shown in USE CASE 1, you can set up a custom dashboard with TRENDS loaded up on all assets of interest. In this case we are not focusing on ALTCOINS as much because we intend on trading BTC and are trend following for the purpose of this guide. Just like before, have all the trends on one side (in this case the bottom panels) and any of the additional indicators for confirmation (in this case we have selected HARMONICS and RETRACEMENT due to it having better synergy than selecting REVERSALS when looking to trend trade).

In the same example of a fake-out, notice when you expand your viewpoint of the market, it starts to look very different. This is the difference between traditional trading vs the Layering Principle. In the example of [A] we did not have 1 single confirmation from the other systems aside from TRENDS. When looking at TRENDS we also notice a large number of other assets that do not agree on the same direction. 9 agree on BULLISH while 13 agree on BEARISH.

When we considered entering on [B] as seen in PART 1 of this section, we can quickly determine that the signal was indeed strong because at that moment in time, every single asset agreed on the same TRENDS direction + 7 additional confirmations when looking at our top panel set up validating our assumption and confirming entry to market.

USE CASE 3: SIMPLE USES FOR TREND LAYERS

A very easy way to track Cryptocurrency trends effectively is to load up assets which work together well. You can find out which work best through trial and error. In this example, the team put together a basic set up only looking at CORE TREND & EARLY TREND systems on a LTC/USD chart for LTC based trend trades.

In early OCT 2021, we experienced major pumps in the market. Here is a snapshot of how it looked like on our end. Depending on your risk tolerance and trading style, the points annotated in the chart above are all valid entry points when looking to trend trade if you wish to purely look at TRENDS and nothing else.

Combinations of LTC/USD, LTC/EUR, LTC/GBP in relation to:

• BTC/USD
• ETH/USD
• XRP/USD
• BCH/USD

[1] = 11/14 BULLISH

[2] = 12/14 BULLISH

[3] = 13/14 BULLISH

[4] = 14/14 BULLISH

Once you are comfortable with the set ups and discussed with the community what is working well at the moment, you can make your own determination of how many systems have to agree for you to complete your assessment of the market for entries or exits.

Learn more: https://tradingbay.io

Break the Simulation.