Bitcoin Trading Journal: Swing Trader Shares How to Profit From Altcoin, BTC Investing
This is the second installment of my trade journal, which includes completed trades on large-cap altcoins XRP and Ether. I’ve found that crypto investors are always curious about each other's positions and typically these conversations take place in private DMs and telegram chats.
The goal here is to provide some transparency on my trading routine and I hope traders find the process of observing each step of every trade educational. Trading position sizes have been redacted, but they are always calculated based on a 1% portfolio loss using the stop loss and entry as a guide.
XRP/BTC
Entry: .00002769 Satoshis (sats)
Targets: I set my first target at .00002933 (sats) which is the first resistance I have identified for a 6% gain. My second target is at .00003085 (sats) which is near the second resistance at .00003297 (sats) and provides an 11.4% gain. I’ve set this target near the main resistance on the chart as this is an area where the price previously had a major breakdown. My sell order is below it just in case shorts front-run the line. In total, this would be a 19% gain on my XRP/BTC position.
In case the trade goes belly up I’ve placed a stop loss at .00002690 (sats) which equates to a -2.85% loss.
It’s also good practice to consider the risk to reward ratio when making an investment, especially with altcoins given Bitcoin’s current dominance rate. The risk to reward ratio measures the difference between a trade’s entry point all the way to the stop-loss and sell or take-profit order.
Comparing these two provides the ratio of profit to loss, or reward to risk. For this trade, it is roughly 2.08 at the first target, 4 at the second target and 6.7 at the final target.
9/19/19
General analysis
XRP has been in a sustained downtrend for months, which I have been publicly sharing on Twitter and watching intently. The price has flipped multiple levels of support into resistance on the way down and the first sign of a potential bottom for me is a bullish divergence. One finally appeared on both the daily and weekly timeframe (charts pictured below) around Sept. 6th.
XRP/BTC Weekly Chart. Source: TradingView
Entry ideas
I identified .00002769 (sats) as a fresh area of resistance that was created on the XRP drop. My plan was to wait until this line flipped from resistance to support before entering a trade, as I prefer trading on confirmations. XRP price broke through this area violently on Sept. 17 and continued up for another day before violently falling when Bitcoin sharply corrected.
At this point, my alarm went off again at .00002769 (sats) on the support retest, but the price dumped through with force as Bitcoin continued to correct. XRP bounced back very quickly, leaving a long wick below. At this point, I was confident to enter a trade and took the breakout back above resistance on the following candle.
There were three short term targets that I was interested in, which are listed above. The first two were areas of resistance that were left behind when the price dumped. The third was slightly below the key resistance on the chart (top black line). I chose to set my sell orders slightly below this point because shorts often front-run key areas and I wanted to be sure that my orders fill.
XRP/BTC Daily Chart. Source: TradingView
How it worked out
The first target was hit quickly and I chose not to close the trade in order to see if the area held as support, which it did. I set a limit sell order at the second target (.00003085 sats) for half of my position, which fired not long after.
XRP price nearly reached my final target, but ended up creating a bearish SFP above the previous swing high, which was a signal for me to close and reevaluate. I took profit on the remainder of my position at the previous swing high on the way back down to .00003208 (sats) rather than wait to see if my final target would hit.
XRP/BTC Daily Chart. Source: TradingView
In addition, I noticed a clear bearish divergence forming on the daily chart, as well as hidden bearish divergence on the weekly. Both signaled to me that it was time to get out while I was ahead and in profit. At the time, Bitcoin also looked quite bullish to me and my assumption was that a large Bitcoin price move could negatively affect the XRP/BTC pair.
XRP/BTC Daily Chart. Source: TradingView
The first sell order elicited an 11.4% profit and my second order secured a 15.8% profit. Total profit for the position averaged out at 13.6%.
ETH/BTC
Entry: I hope to catch the breakout from bullish consolidation at .02065 (sats)
Target: I’ve set my target at .022229 (sats) which is the previous swing high for a profit of 7.6%. A stop loss was set at .02044 (sats) for a .98% potential loss and the risk to reward ratio for this trade was 7.78.
General analysis
Ether has been in a sustained downtrend against Bitcoin since it’s all time high in January of 2018. The altcoin finally showed a clear reversal signal this month when it formed a head and shoulders pattern and breaking out on spike in purchasing volume.
I have been trading Ether aggressively since the middle of September and my first trade was the breakout of the head & shoulders at .017976 (sats). I closed this position at the bottom of the daily support at .021914(sats) which equated to a 23.5% gain.
ETH/BTC 4-Hour Chart. Source: TradingView
Entry ideas
Although I am trading Ether against Bitcoin, the USD pair gave a solid sign of reversal. Ether price deeply pierced the weekly demand and bounced which resulted in long lower wicks on multiple candles. The relative strength index (RSI) was oversold and formed a strong bullish divergence against Ether’s spot price, meaning the RSI made a higher low while Ether’s price made a lower low.
ETH/USD Daily Chart. Source: TradingView
Meanwhile, the Bitcoin pair was cooling off after it’s strong move from the bottom, and the pairing showed signs of consolidation before another move up. I decided to play the breakout of the descending resistance, a signal to me that reaccumulation was likely ending and the price was ready to continue it’s bullish movement.
With that said, I was wary of the fact that Ether’s price had already moved from oversold to overbought on the daily chart, so I viewed this as a scalp play.
ETH/BTC 4-Hour Chart. Source: TradingView
How it worked out
The trade immediately went my way so I moved my stop loss into profit and waited. While analyzing the trade, I revisited the supply zone that was pierced at my first exit and decided to move my take profit point down a bit below the equilibrium (EQ) of the center dashed line.
ETH/BTC Daily Chart. Source: TradingView
Barring a massive move up, I noticed that the price was likely to form a bearish divergence with the RSI on the daily chart. I saw this on multiple large cap altcoins (including XRP above), which added support to my idea that the pump was over for the moment. Bitcoin was also looking incredibly bullish to me, which usually has a negative effect on the ETH/BTC pair.
I am glad I did as the price was strongly rejected from this zone and my take profit order fired at .022 (sats) for a nice 6.5% profit.
One thing that can be taken away from this experience is that keeping a journal allows a trader to backtest and review candle patterns and support / resistance levels without confirmation bias. This improves the ability to execute and manage future trades.
The views and opinions expressed here are solely those of the (@scottmelker) and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.