Under the Hood: Crypto Reversal Swing Trading Algorithms
Technical series showcasing the core elements of Tradingbay Algorithms
Reversals are often hard to spot even for experienced traders as no one can ever know for sure that the market WILL reverse at the perceived time. It is always safer to trend trade rather than focusing on market tops/bottoms. Tradingbay does a lot of the guess work for you and allows for additional market verification via TREND ANALYTICS in order to confirm REVERSALS.
USE CASE 1: WAIT FOR TRENDS TO VALIDATE
In the very basic example above on XMR/USD, we have loaded up CORE & EARLY REVERSAL + HARMONICS (top panel) + CORE & EARLY TRENDS (bottom panel). We have a positive BULLISH reading from REVERSALS however it is clear market conditions are not optimal. As overlay we have STABILITY coloring in the candlesticks. During the period BULLISH REVERSAL took place, we had a UNSTABLE environment. We also had the EARLY TREND system shift to BEARISH. Such a scenario is not a good entry for market.
A few days later we had a positive BULLISH switch for EARLY TREND while our reversal system continued showing BULLISH. When this takes place, you now have confirmation for a possible market entry because REVERSALS were confirmed by TRENDS. As a added benefit, HARMONICS can be used as an additional confirmation metric however for the purpose of trading reversals it is not required. As always the more systems confirm the bias in your layering the stronger the indication would be.
It is also very important to review the STABILITY systems when considering a reversal trade. It will help you pinpoint a more stable moment in time to enter a recent reversal while avoiding additional market volatility. Its never a fail proof method however we have discovered many points in time where STABILITY has significant synergy with REVERSALS.
USE CASE 2: AVOID LOSSES BY LAYERING REVERSALS WITH STABILITY
In this example we showcase how to stack multiple REVERSAL systems across multiple assets (top panel) alongside STABILITY systems for the same assets (bottom panel).
In the situation above on XMR/USD @ 04 DEC we notice a large amount of reversal systems showing BEARISH however it was not until the point shown above that the majority of the STABILITY systems indicated STABLE. Right before the dumps took place, a majority of the systems agreed it was a good time to enter and worked out very well for trading the reversal.
USE CASE 3: HARMONICS LAYERING WITH REVERSALS + 1X STABILITY
If you wish to ignore all trend data and focus purely on reversals, you may do so alongside layering REVERSALS with HARMONICS. It is advisable to keep STABILITY on the candlesticks for the asset you wish to trade. Background coloring for this example is not required.
- [A] We notice 3X HARMONICS confirmations alongside 6X REVERSALS however STABILITY is showing a CAUTION state and we still have many other assets not showing any signals so far. You may decide to enter in on such set ups but ensure to keep stops tight as this level of confirmation is not very strong.
- [B] This point provides a far more stronger indication due to having 3X additional HARMONICS SELLS. STABILITY is still showing CAUTION therefore we can wait for a better entry point. In most cases this level of confirmation would be adequate for a good entry.
- [C] Once the market has stabilized, we notice STABILITY is now STABLE and we have another additional BEARISH signal in our stack increasing the chances of success. This would be the most optimal market entry in this layer config.
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