I traded this strategy in forex with a robot for 3 years on a 30 minute chart - called 20 Bounce. Aim is to win 20 pips with a 40 pip stop loss. If you win 3 times and lose 2 on the turnover you win 20 pips every 5 trades which is fine. Challenge is when the market starts going sideways for a while - win 2 and lose 2 and losers are bigger than winners. Instinct tells me that Bitcoin could work well as it tends not to go sideways. Will test it out a bit
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Bitcoin doesn't go sideways? All Instruments consolidate and bitcoin is more stable than it has ever been?
How you define "sideways"? To me Bitcoin currently is quite sideways.
Technical definition of sideways - price is not making higher highs (going up) or lower lows (going down).
Here is an example - Eurostoxx50 (Daily) over 2016. Long period in the middle of sideways visualised as a channel which is parallel to the bottom or the top of the chart. The blue arrows show moves which are clearly not sideways - making higher highs or lower lows
Now look at the Bitcoin chart - up 122% for 2016 - cannot by any stretch be defined as going sideways unless you take a view that goes all the way back to 2013.
Long periods during the year when it was going sideways - marked as purple channels in between the not sideways blue arrows.
The way I test it is if I can draw a parallel channel that has multiple touches at the top and the bottom. Next chart goes all the way back to 2013 highs.
Note: this is a weekly chart.
thanks, makes totally sense
thank you for the detailed and visual explanation. I find that often times these simple analytical tools are just brushed over and therefor are not understood on a fundamental level.