Trading Bitcoin

Steve Homes

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Contents

Contents 2

1 What is trading and how does it

work? 7
1.1 Leverage Trading . . . . . . . 10
1.2 Ordertypes . . . . . . . . . . . 17
1.3 Stop-Loss & Take Profits . . . 22

2 Understanding the price move-

ments 24
2.1 The Candlestick Chart . . . . . 25
2.2 Support & Resistance . . . . . 29
2.3 Trendlines . . . . . . . . . . . 34
2.4 Moving Average . . . . . . . . 36

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2.5 Consolidation phases . . . . . 40

3 Recognize Simple Patterns 43

3.1 Triangles . . . . . . . . . . . . 45
3.2 Flags . . . . . . . . . . . . . . 51
3.3 Double-Top & Double-Bottom 55
3.4 Head & Shoulders . . . . . . . 57
3.5 Wedges . . . . . . . . . . . . . 63

4 Using simple indicators 66

4.1 Correlations . . . . . . . . . . 67
4.2 Trading Volume . . . . . . . . 70
4.3 Fibonacci Retracements . . . . 72
4.4 Relative Strength Index . . . . 78
4.5 MACD . . . . . . . . . . . . . 81

5 Composed Indicators 84
5.1 Fear & Greed Index . . . . . . 85
5.2 Hash Ribbons . . . . . . . . . 87
5.3 BEAM Indicator . . . . . . . . 90

6 How do I plan my first trade? 93

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Introduction

"[Bitcoin is] probably rat poison squared"

–Warren Buffett, legendärer Großinvestor

Bitcoin fluctuates far too much to use it as a

currency for daily payments! This, or some-
thing similar, is usually the main statement
of sworn Bitcoin opponents. At the current
stage of development, they may even be right,
but Bitcoin is offering much more than the
claim to be a currency. The book is not even
supposed to be about whether one finds Bitcoin
good and should buy it or not. It is also not
at all about Bitcoin itself or the blockchain
technology. In this book we take Bitcoin as it
is. It is a volatile and highly risky new asset.

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And it is precisely these characteristics that

make Bitcoin so attractive in the trading area.

If you want to acquire a solid background

knowledge of Bitcoin, and you should, I can
recommend three excellent books at this point.
If you have no prior knowledge of Bitcoin at
all, then reading Julian Hosp’s "Cryptocur-
rencies - Simply Explained“ is an absolute
must. After that, you can decide whether you
want to expand your knowledge more in the
technical or more in the business aspect of
Bitcoin. Of course I recommend both. On
the economic side, Saifedean Ammous "The
Bitcoin Standard" is highly recommended. You
can get into the technical depths with Andreas
Antonopoulus "Mastering Bitcoin".
In fact, you don’t need too much previous
knowledge for this book and for trading with
Bitcoin, because we will take you from zero to
an aspiring trader. You have certainly looked
in the table of contents and found terms that
you have never heard before. Don’t worry, by
the end of this book you will understand them
all. Even better, you will be able to use them.
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What you are holding in your hands is also

your ticket to a great online community on
YouTube, Twitter and Facebook that provides
the entire crypto world with valuable trading
content every day and is so incredibly moti-
vated that it will not let you go. Please feel free
to browse through my favorite channels, with
which I have been building my knowledge
about trading with Bitcoin since the beginning
of 2018. It’s actually a long list, but here are
the most important ones:

• The Moon

• Sunny Decree

• MMCrypto

• Ivan on Tech

A big shoutout goes out to exactly these people,

as we say in the Bitcoin trading scene, and with
that I wish you lots of fun and success in the
exciting world of trading!

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Chapter 1
What is trading and how
does it work?

"And, as always guys, we are really pumped

to go straight into the content!"
–MMCrypto, Bitcoin Influencer

Generally speaking, Bitcoin Trading is the

buying or selling of a financial product whose
performance is directly related to the price of
Bitcoin. It is important to understand that such
a derivative has no direct impact on the price
of Bitcoin at which it is traded on the various
exchanges.
You can imagine it like in a betting office. For
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example, just as you can bet on the outcome

of a football game for or against your favorite
team in sports betting, you can bet on the
upcoming price development in trading with
Bitcoin. By placing your bet, you cannot in-
fluence the outcome of the football game and
thus cannot influence whether the price of
Bitcoin rises or falls. What makes you think
that your football team will win the game? I
am sure you can list a whole range of reasons.
You may or may not be right. In trading, we
call the "reasons" why Bitcoin might rise or fall
indicators. Again, logically, there is no guar-
antee that the price will rise or fall based on a
particular indicator. Nevertheless, it is possible
to derive probabilities on which decisions can
be based. It is especially helpful to combine
several indicators so that the decision to trade
can be consolidated. For example, in a football
game, we would not base our betting decision
on the fact that our favorite team has won all
five previous games and therefore the team
must win the next one. But the probability
increases. We also try to find other reasons
why this was the case. In the last lost match,
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a different goalkeeper was used than in the

matches won? This could be another indicator.

But why shouldn’t we just buy or sell Bitcoin

on a crypto exchange based on our decisions?
This is where the leverage comes into play,
which we will deal with in more detail in the
next section.

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1.1 Leverage Trading

Leverage trading. A word that each of you
has probably heard before. Especially when
crypto exchanges are on their way up in a
drunken stupor and suddenly everyone who
owns a stock portfolio feels like a professional
trader. This book also helps to bring trading
closer to many people, but a real trader makes
a profit even when the overall market is not
just pointing upwards.
In the Bitcoin scene, leverage trading is mainly
done with swaps and futures. This book is
implicitly limited to swaps, but futures can
certainly be traded with the presented methods.
Swaps are exactly those bets that have already
been compared with sports betting in the above
section. You don’t make friends with such a
comparison, but it simply fits well. In practice
there are two different types of swaps.
Don’t be put off by the upcoming terms, they
are only meant to help you find your way
around the trading platforms of your choice
later on. The first type is the "linear USDT
perpetual swap". This means that you buy a

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betting slip with US Dollar Tether and bet on

the movements of the Bitcoin price until you
sell the slip. It is best to do this at a higher
price, or it will lose value if it does not become
worthless. You will receive your winnings in
USDT.
A swap contract in which you use Bitcoin
and get the profits in Bitcoin is called "inverse
(perpetual) swap". Note, however, that you
always specify the dollar equivalent on the
platform for which you are buying swaps, since
a single contract is issued for one dollar. For
the Bitcoin Hodler, this is certainly the most
attractive form of trading, as he himself aims
to increase his Bitcoin stack. There is therefore
no need for a detour via the USDT.

Now that you know what is traded on the

trading platforms, it is time to clarify what
leverage is actually about. This is the real
reason why we trade on the platforms and not
just buy or sell "physical" Bitcoin. Leverage
allows us to increase the price movements of
Bitcoin even further. This sounds as crazy as
it is risky, but with enough knowledge and
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experience it can be controlled and calculated.

How this works, we find out by a simple ex-
ample, where we trade an inverse perpetual
swap as explained before. Pay attention, some
simple calculations follow, but they are easy
to understand. You have a certain amount
of Bitcoin on your trading account, say the
equivalent of $500. In a first try, you only use a
small part of it, say $50. The platform now asks
you for leverage. For example, if you set this to
10x, you will borrow money from the platform
and trade with $500 instead of $50, but only use
the $50 of your capital. You cannot lose more
than that. In your trade, this is now noticeable
as follows: If you have bet on rising prices and
the Bitcoin price rises by 1%, your position is
already worth 10% more. The performance of
your swap is therefore increased by a factor of
10x. The same happens in the opposite direc-
tion. If the Bitcoin falls by 1%, you are already
10% in the red. If you close the trade, in the first
example you now have $55 (which are credited
to you in Bitcoin), in the other example you
are deducted the Satoshis worth $5 and you
have only got $45 (in Bitcoin) back from the bet.
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In the unfortunate event that Bitcoin falls

by 10% in this example, you will be liquidated,
i.e. your $50 will be irretrievably lost. Ten
times 10% equals 100% and that is your full bet.
That is as clear as it is hard. You already realize
that you should avoid this in any case. A start
would be to use a smaller leverage if you expect
big moves in terms of price. Many platforms
offer leverage from 2x to 100x, sometimes even
200x. However, just because it is offered, you
should not necessarily reach for it, as you just
read. A suicidal leverage of 200x will ensure
that your position will be closed on even a 0.5%
movement in the wrong direction, possibly
even earlier if fees are included. You can easily
calculate the percentage movement of the bit-
coin at which your trade will be liquidated, in
jargon we like to say "wrecked". Simply divide
100 by the leverage value. So 100 divided by
5x gives you a price movement of 20% until
you are wrecked. Now we have done enough
calculations for now.

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Practice hint:
Watch out for the fees!
The platforms for leverage trading nat-
urally charge fees on the execution of
a trade. These are usually quite low,
in ranges of less than 1%. But beware:
the fees are charged on the leveraged
amount! A short calculation example il-
lustrates this. You want to open a trade
where you bet $100 and use a leverage
of 10x. You pay your fees at $1.000, so
that it becomes noticeably more expen-
sive to trade with high leverage. This
can increase your risk enormously. Even
when holding trades for a longer period
of time, sometimes a funding rate or daily
swap fee is required. Please check with
the platform you are using beforehand.

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Let us now briefly clarify two terms that even

in the world of non-traders are sometimes up
to no good. In leverage trading, you can exploit
price movements in both directions. If you
believe that the price will rise, go "long". If you
think the price is falling, then go "short". These
are the terms and it is just as simple. Since the
financial crisis of 2008-2009 at the latest, it has
become almost universally known that you
can short something.

A little thought game on the side: With linear

swaps you keep your money on the crypto
exchange in USDT, i.e. you are in a sense 1x
short against Bitcoin, since your dollars lose
value the higher the Bitcoin rises. In contrast,
with inverse perpetual swaps you keep your
money on the crypto exchange in Bitcoin and
are therefore always 1x long.

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Practical tip: Don’t run after the

price!
After the price of Bitcoin has fallen
sharply, it feels as if you have to open a
short. Because you are sure that this will
go even further down... Wrong! After a
sharp fall you should look for long posi-
tions and after a sharp rise you should
short. But it is important to note the over-
riding trend in which the Bitcoin finds
itself. Shorting in a bull market is very
risky. How you can best take advantage
of such situations is explained later in the
book.

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1.2 Ordertypes
As soon as we have USDT or Bitcoin on an
exchange, we want to get started. And in the
first moment, a trading platform is a blinking
red and green amount of information, not all
of which can be processed by the human brain
directly. We are approaching it step by step.
It is best to use the platform that seems the
most clear to you right from the start. Make
sure you find a reputable exchange with high
liquidity. As soon as you have chosen your
favorite platform, you will find a window with
which you can execute your orders (orders to
buy or sell).

No matter if we are looking for a long or

short position, we have to place the trade into
the order book of the exchange in any case.
To do this, we need to understand the ways in
which you can have your trade executed. Most
trading platforms offer three different options.
The first and easiest way to open a position is
to place a so called Market Order. Here you set
the desired leverage and the amount of swaps

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you want to buy, either in BTC or in USD,

depending on the product offered. When you
execute this Market Order, it will be activated
directly at the next available price and you will
see the performance in the active positions
window. Don’t be surprised if your trade opens
directly in the red, it just means that the plat-
form you use will include the fees directly in
the Profit & Loss Report (PnL). The goal is, of
course, to maximize your PnL with each trade.
Just as you opened your position as a Market
Order, it can be closed as a Market Order
as well. This way you realize your profits (or
losses) at the next price traded on the exchange.

The second way to place a trade is the Limit

Order. You need to be a good planner for this,
but you will usually get paid for it. With a Limit
Order, you type in a price at which you want
to enter. For a long position, it must be below
the current price, for a short position, it must
be above. For example, you’re a psychic and
your certified fairground seller’s crystal ball
says that the Bitcoin price will drop to $1,000
before it rises really high. This is your chance
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for a limit long trade. So you set the limit at

$1,000, the amount you want to buy and the
leverage. The position will immediately land
in the exchange order book, but without being
executed. In this way you act as a so-called
market maker. This means that you provide
liquidity to the exchange, i.e. you lend money
to it, and for this you usually receive a maker
fee instead of paying a fee when executing at
the limit price. Not bad, is it? Of course, you
don’t really need to be a clairvoyant for that.
In pattern trading, which we’ll cover later, you
actually get an estimate of where you can set
your limit, without using a crystal ball.
Now we come to the last order type, the Con-
ditional Order. The naming is different for
the different crypto exchanges, it is possible
that the self-explanatory formulation "at the
price" is used here. So it is already clear what
a Conditional Order does. You simply tell it
the price at which you want to place an order,
no matter in which direction you want it to
go. In order not to cause too much confusion,
we will limit ourselves here to conditional
market orders (there are also conditional Limit
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Orders. Once you are ready to use them, you

will know directly how they work). Condi-
tional market orders activate a simple market
order, as explained above, in the direction you
want. The only difference is that it is only
placed once the price set as a marker has been
reached. In jargon we say: When the order
was "triggered". . .

But why go long when the price has already

risen to a higher level anyway? Or why shorten
when the Bitcoin has already fallen? We’ll also
clarify this in the chapter on pattern trading.
But it should be said that this is a way to profit
from price breakouts that are linked to certain
brands. Such breakouts are what Bitcoin is
famous and infamous for. We take advantage
of them.

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Practical tip:
The "No-Nines-Strategy"
Once you have found the perfect entry
point for your trade, you must enter this
price level in the Conditional Order. Is
the price that you think would be per-
fect to go long something like $9990?
Then do not do this! Why not? You
can be sure that for purely psychologi-
cal reasons there will be many sellers at
$10.000 who will immediately lower the
price again. It makes much more sense to
set your conditional long to $10.011 for
example. This increases your chance of
a further increase enormously. Do this
for all numbers that contain many 9s, as
the next round number will be a brake
on the price increase for the time being.

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1.3 Stop-Loss & Take Profits

Precisely because Bitcoin is so beautifully
volatile, we have to protect ourselves from to-
tal loss in leverage trading. Since the section on
leverage, you know that you can be liquidated
if the price does not go in the desired direction,
but very quickly in the wrong direction.
Therefore, you must always set a so-called
stop-loss in order not to constantly suffer a
total loss. You do this by telling the crypto ex-
change a price below which the Bitcoin should
not fall in the case of a long, or above which it
should not rise in the case of a short. The mo-
ment the stop-loss price is reached, the trading
software automatically closes your trade. This
protects your bet from excessive losses. But
the stop-loss function is especially nice if you
are already in the plus with the trade, then the
stop-loss protects your profits! So if you don’t
trust the current price movement of the Bitcoin,
even though it’s just rising, then pull your stop-
loss up into the profit zone, sit back and watch
what happens next. Let’s take a closer look
at where and how you should set your stop loss.

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The same applies to the Take-Profits order.

Here we specify the price at which we want
to exit the trade, but not to limit losses down-
wards, but to take profits on the upside. And
we want to book these profits as close as possi-
ble to the price peak, i.e. the top. For both the
stop-loss and take-profits orders, however, we
need to know what movements in the Bitcoin
price we can expect and how we will deal with
them.

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Chapter 2
Understanding the price
movements

"Bitcoin is going to zero! . . . ZERO!!!"

–Dan Peña, American businessman

You are probably already familiar with the price

representation of a Bitcoin over time as a kind
of line chart. This representation is often used
for stocks and other financial products on the
TV screen. To get a brief overview of what
the current price is or how the Bitcoin came
to this price, this representation is very help-
ful. However, it is a smoothed representation
that neglects the price peaks in the very short
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periods of time. For the long-term investor,

i.e. HODLER, this is no problem at all. He
would like to sell, if at all, only years later. For
the trader, however, even the short-term move-
ments are important, which can only be made
visible with so-called candlestick charts. We
will look at this type of price display in this
chapter to understand how the lightning move-
ments in the price can be used sensibly.

2.1 The Candlestick Chart

The first tool that a trader sees when analyz-
ing Bitcoin prices on a trading platform is the
price trend based on a candlestick chart. To
help you quickly get to grips with this, at
first glance somewhat unwieldy, representa-
tion, take a closer look at such a chart directly
in the following picture.

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Figure 2.1: Example of a Candlestick Chart

The first thing you notice is the color of the

candles. A candle with a green background in-
dicates that the price of the financial product
has increased during the period under consider-
ation. If it is colored red, the price has fallen. A
single candle always shows the price develop-
ment within the time frame you have defined.
For example, if you look at the Bitcoin price
on the 1-hour chart, it means that one candle
summarizes the price movement of exactly one

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hour. Within an hour there is then a maximum

price, a minimum price, an opening price and
a closing price. These four prices can be read
directly from the candle itself. Take another
look at the chart. The bottom end of a thin line
is the lowest price in the timeframe and closes
the so-called wick downwards. This is exactly
the same towards the top. The main compo-
nent of a candle is the body itself. As described
above, it indicates the direction of the previous
price movement at the end of the time window.
Thus, for a green candle, the opening price is
the bottom edge of the body, while for a red
candle it is the top edge.
Other time frames very often used by (profes-
sional) traders are the 4-hour chart or the 1-day
chart. Very short-term traders also focus on the
5-minute or even 1-minute chart.

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Practical tip: Use Tradingview!

You could call it the Facebook for traders.
Tradingview is a social network website
where traders can exchange information
about all kinds of financial products, in-
cluding Bitcoin, worldwide. Above all,
the site provides high-quality live charts
that you can use for your analyses. With
a variety of tools, these analyses can be
performed graphically and shared with
other traders as a "trading idea". Profes-
sional traders also use this, in its basic
version free of charge, page.
https://www.tradingview.com/

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For a start, this is the most important infor-

mation, which can be taken directly from the
candlestick chart. Further you can deal with the
information that can be extracted from these
charts. Some traders use the shape and char-
acteristics of the candlesticks to recognize cer-
tain signals that indicate the possible future
course of the Bitcoin price. However, candle-
stick trading is more controversial and will not
be discussed here.

2.2 Support & Resistance

However, we want to take a signal from the
candles in this section, because this offers a
possibility to find out with high probability at
which price levels the Bitcoin will bounce.
This also directly anticipates the topic of this
section. Here the following questions should
be answered: How high will the Bitcoin price
still rise from now? How low will the price fall
from here? As always, it is important to note
that here too only probabilities are involved,
nothing can be predicted exactly. Nevertheless
clues can be found. As just mentioned, one

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of several ways to find these price levels is to

take a closer look at the candles. Please use the
following chart.

Figure 2.2: Support & Resistance in Candlestick-Charts

The ends of long candles indicate important

price levels that cannot be overcome by the Bit-
coin price at the time in question. A price level
at which the Bitcoin drops back on its way up
is called a "resistance". Conversely, a zone that
keeps the price from falling is called "support".

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Many traders use to say that such a price level

is "tested" when a support or resistance, as ex-
pected, works as a turning point. This can also
be used to verify a break-out trade, but more
on this later.
Perhaps the easiest way to find support zones
and resistances is to use nice, round price num-
bers. These are not as significant as technically
selected marks, but can be used as a reference.
Why does this work? People like round num-
bers for buy and sell orders, such as $10,000
per Bitcoin (yes, laugh at this value in the fu-
ture). And as long as those orders continue to
be placed at those figures, it works.

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Practice hint: "Bitcoin is messing

with the kids!"
This saying refers to the fact that support
and resistance lines are often broken for
a short moment, only to immediately re-
verse the movement in the completely
opposite direction. To prevent your trade
from being stopped in the process, it is
better to choose a stop loss that is slightly
below the support zone in a long posi-
tion, or slightly above the resistance in
a short position. You may need to adjust
the leverage a bit to achieve this. Trading
beginners tend to put the stop loss di-
rectly on the support or resistance mark
and are therefore stopped out too often
and too early.

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Have you ever been annoyed not to have

bought the Bitcoin bottom price? Then you
think to yourself: If it falls there again, then I
will definitely buy. So you go into your port-
folio and set a Limit Order at that price. And
have you ever been annoyed not to have sold at
the peak of the Bitcoin price? Then you think
to yourself: If it goes up there again, then I will
definitely sell. So you go into your portfolio
and set a Limit Order at that price. Do you no-
tice what happened? You, and many others too,
are building supports and resistances. In ways
that we have not dealt with before. Tops and
bottoms work as resistance and support. This
can also create a so-called double bottom or
double top in the chart, which we will discuss
in the chapter on chart patterns and learn to
trade for decent profits.
There are also zones of support and resistance.
These do not refer to individual price levels, but
to entire areas where the Bitcoin price has re-
peatedly bounced off in the past. If a support or
resistance is broken sustainably, i.e. the candle
under consideration on the chart closes below
or above it, the support becomes resistance and
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vice versa.

2.3 Trendlines
Support and Resistance zones do not necessar-
ily have to be horizontal, they can also run
along trend lines. Trend lines are created when
the Bitcoin price rises or falls steadily over a
long period of time. It is then possible to draw
a straight line in a cadlestick chart where no
candle intersects the line and there are several
points of contact. Depending on the trading
style, however, the wicks can be neglected.

Figure 2.3: Support of a Trend Line

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If you look at the chart here, you will notice

that three points of contact form such a trend
line. Often the supports are located at exactly
these touch points, so that a reversal of di-
rection is more likely to occur at these levels.
These trend supports can be used as an entry
point and since we can draw the straight line
after several touch points, it is possible to set a
Limit Order on the price of the next possible
line intersection. This way we save the taker
fees and collect the maker fee.
Of course, this strategy is not quite "for free".
If this trend support is broken with the next
candle and the candle also closes below it, you
must end the trade immediately and may have
to post a loss. Just as trend lines can form a
lower limit, it also happens that the trend limits
the price upwards and then acts accordingly as
resistance.

Especially trend lines are often part of a

formation that we call a chart pattern in trad-
ing. We will deal with the patterns later for
a whole chapter, because they can be used to
open profitable positions.
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2.4 Moving Average

Now that we have learned a lot about Resis-
tance & Support, here is the supreme discipline
in recognizing these price levels. It is about
moving averages, which you probably didn’t
go through in school, although they are used
in business for KPIs, in research, and here in
trading. In the language of trading, of course,
we refer to these as MA abbreviation.
For example there is the 20-weekly-MA. It de-
scribes the average of the last 20 completed
weekly candles using the closing price. A mov-
ing average changes with each additional com-
pleted candle, because it always averages the
last X values, in this example 20 weeks. For
many traders the 20-week average is an impor-
tant price indicator. If the Bitcoin with its cur-
rent price is trading above the moving average
of the last 20 weeks, we are in a bull market,
so the overall trend is pointing upwards. A
price below the 20-weekly-MA signals the bear
market with a downwards trending direction.
Almost as important is the price average of the
last 200 days.

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The fact that many traders take these moving

averages into account makes them so valuable
in technical analysis. Because technical analy-
sis works best when everyone participates.

Figure 2.4: Support of the 20-hour moving average

Above you can see how beautifully the price

shimbles along the moving average and keeps
repelling itself. Once you have found a MA
that the price respects with its movements, as
in the picture above, use it either as a stop loss
or as a limit entry into a position. It is impor-
tant that you leave enough room for the price

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to repel itself. However, a closed candle be-

low the average value also signals the break of
support and you must correct or close the trade.

As a slight variation of the simple moving

average, the so-called Exponential Moving
Average (EMA) is often used. The EMA takes
into account the more recent price move-
ments more strongly than the former ones,
with exponentially decreasing weighting. On
your preferred trading platform you will find a
suitable tool for both types of moving averages.

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Practice hint: Golden Cross & Death

Cross
For many traders it is a real event when
a so called Golden Cross or Death Cross
appears. It is the crossing of two mov-
ing averages, more precisely the 50-day
and the 200-day MA. As soon as the 50-
day MA crosses the 200-day MA from the
bottom up, this is considered a signal for
an imminent strong price rally in upside
direction. If the 50 crosses the 200 from
top down, you see a death cross. You can
imagine what this means...

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2.5 Consolidation phases

This section has to do with the trading volume
that you can display on your platform, usually
as a bar chart over time. Each candle is assigned
a bar that shows how many Bitcoins have been
traded in that time period.
After a sharp rise in price, we call it a pump, or
a dump, a price crash, Bitcoin and its traders
need to recover somewhat. This is accompa-
nied by a decreasing trading volume and is usu-
ally reflected in the price with the formation
of a range. Within a range, the Bitcoin price
oscillates so to speak between support and re-
sistance without embarking on a trend-setting
move. You can see such a price behavior in the
next chart.

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Figure 2.5: Lateral movement after pump with volume profile

The price development is shown above, the

trading volume below. At first a strong increase
with high volume occurs. This is followed by a
lateral movement with decreasing volume. A
sideways trend is boring, but it ends at some
point. Either with an upward or downward

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movement. And as soon as we know where

the support and resistance zones are we can
use this movement for a position.

The longer a sideways trend lasts, or the

longer price movements come to a head as
volumes fall, the stronger the breakout will
be. And we can trade these breakouts after the
next chapter.

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Chapter 3
Recognize Simple Patterns

"There will be a huuuge move in the immediate

short term!"
–Carl from The Moon, Bitcoin Influencer
In pattern trading, the aim is to hit the so-called
breakout or breakdown point and exploit the
resulting strong price movements. How to es-
timate this point in advance, we will find out
in more detail by looking at the individual pat-
terns.
In the following sections we will take a closer
look at some of the most popular and, above all,
easiest to trade chart patterns. Most of these
patterns have both a bullish and bearish ver-
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sion. You should keep the following in mind:

When bullish patterns are broken bearish, the
movement is unlikely to be as pronounced as
it would have been in the "intended" direction.
This also applies to bearish patterns that break
out bullish. We will look at this together.

Practice hint: Bulkowski’s Pattern-

site
A somewhat dusty but therefore no
less important source for learning
pattern trading is the website of Thomas
Bulkowski. Here you will find, among
other things, a long list of chart patterns
that can be traded more or less well.
These are always described with statis-
tics, example pictures and tips & tricks.
http://thepatternsite.com/
chartpatterns.html

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3.1 Triangles
Let’s start with the first chart pattern! Trian-
gles are probably the easiest patterns to trade
for beginners. They come in three different
forms. There is the symmetrical triangle, a neu-
tral version, the ascending triangle, which is
the bullish version, and the descending trian-
gle, which is bearish. With this pattern there
are relatively clearly defined probabilities, de-
fined targets and even a clue for the time when
it should break out. Let’s take a look at some
charts. The following chart is unfortunately
not a perfect textbook example, but that’s ex-
actly why it is relevant. Pattern trading never
works perfectly, but that’s what makes it so ex-
citing. Now how does an Ascending Triangle
behave? Take a look at the chart.

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Figure 3.1: Ascending Triangle

The ascending triangle can be recognized by

the fact that the Bitcoin price always bounces
off the same upper price level. It is important
to note that, after bouncing, it never falls lower
at the lower edge than before. In jargon, we
call this: The Bitcoin price forms "higher lows".
In this case we want to trade the breakout from
the triangle upwards, because it is a bullish
pattern.
So take a close look at the horizontal line and
then choose an entry point for your long that
is just above it, but still significantly higher.
Set the stop loss at the beginning just below
the rising edge of the triangle. At the moment
of the breakout pull the stop loss directly to

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the breakout level, then observe the trading

volume. It is only a true breakout if you see a
volume peak that is significantly higher than
the previous ones. If the price continues to
rise at high volume, this confirms the breakout
and you can aim at the first target. If the price
stops rising or even falls back again, this is
usually a false breakout. You are stopped out
and pay the fees... but not more than that. The
probability of a true breakout is about 70% with
this pattern. Assuming that the breakout was
successful, what are our goals?

Figure 3.2: Trade of Ascending Triangle

To do this, measure the length of the opening

of the triangle with a line on your trading
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surface. In the picture this is visible by the blue

arrow on the longest green candle. Then move
the arrow drawn in this way to the candle of
the breakout. There are two ways to do this.
Either you place the end of the arrow on the
rising edge, then you get the first price target
of the triangle with the upper tip. Or you place
the arrow on the horizontal breakout plane.
Thus you get a higher price target, which is
reached with less probability. Both can be seen
on the second chart picture. A small statistic
by the way: Ascending triangles usually break
out after they have covered about 60% of the
distance to the tip.
The same is true for the ascending triangle as
for the bearish descending triangle. Just mirror
it in the other direction.

A symmetrical triangle behaves slightly differ-

ent and offers a breakout chance of 50% in both
directions. This is a bit tricky, but we can trade
it by putting a long above the lowest upper
price and a short below the highest lower
price. In case of a breakout, simply cancel the
second order. Clear so far? We’ll go through it
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slowly. Let’s make a little search game. Based

on your previous knowledge of triangles from
this section, you can probably guess what a
symmetrical triangle looks like. That’s why
you can find the symmetrical triangle in the
following chart, right?

Figure 3.3: Find the Symmetrical Triangle?

So, now enough confusion has been created,

let’s bring light into the dark. Granted, it is
not one hundred percent symmetrical. But you
can see the difference to its bullish and bearish

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counterpart, because there is no horizontal line.

Figure 3.4: Symmetrical Triangle

The fifty-fifty probability went up in this exam-

ple. The target is also measured at the opening
in the neutral pattern and is really reached here
as in the textbook. Feel free to measure it your-
self, you now know how to do it!
But now it is still open how the pattern can be
played out. To do this, set two Conditional Or-
ders. The first one is triggered when the price
breaks above the top line, the other one below

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the bottom line in case it breaks down. Up long,

down short. Delete the other order at breakout
and set the stop loss at the beginning just below
or just above the apex of the triangle. The tip
itself is then a support level.

3.2 Flags
Even more beautiful triangles can be seen now
and then at the so-called flags. They are even
more beautiful because the corresponding tar-
get is much further away and therefore much
more profitable with perfect trade. For this rea-
son, the display requires a whole page.

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Figure 3.5: Trade the Bull Flag

But where is the difference to the symmetrical

triangle? The difference is the long and steep
entrance into the triangle. For this reason, the

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target is not only measured at the opening

of the triangle, but from the beginning of the
climb, as you can see in the picture on the
left. By moving this arrow parallel to the
breakout you get the target of your breakout
trade. Verify this target with resistances, be-
cause it is very far away from the breakout.
Unfortunately, the probabilities for such a
successful trade are somewhat more sobering
than with triangles. Such a breakout works
with 60% chance, the target is then hit with
45% probability.

Flags of this type do not necessarily have

to be pointed, as shown in the example, the
top and bottom lines can just as well be par-
allel. This happens even more often. In the
case that the lines of the flag are parallel, the
direction must be observed. The flag itself
can be horizontal, but it can also be directed
downwards or upwards. The best performance
is offered, not very intuitively, by the flag
pointing downwards. But only in the bullish
version.
Because this pattern, like many others, has a
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Bull flag and a Bear flag. In the example above,

we looked at a bull flag. Bear flags appear in
the chart after a massive sellout, but there is no
end in sight, because the target of the bear flag
is also the end of the flagpole, but projected
downwards. A disaster (for those who do not
know how to short)!

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3.3 Double-Top &

Double-Bottom
Just as disastrous is a double-top formation,
i.e. a movement in which the highest price is
reached twice, but also reverses at the second
attempt. This signals a trend reversal, in this
case with a bearish target. This is exactly what
you can see on the following chart.

Figure 3.6: Double-Top formation

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You can see the two tops, as well as the line to

which the price between the two tops has fallen
back. With this line we can find the target of
our trade. We do this by measuring the height
from the horizontal line to one of the two tops.

Figure 3.7: Trade of Double-Top formation

In fact, this prime example performed far better

than usual. But beware: We only open the trade
as soon as the line is undercut! And as you can
also see in the picture, after breaking through
the line, the price rises again in the next candle

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before the pattern really plays out. For the

cautious, it is then recommended to set a lower
leverage and set the stop loss just above the
two tops.

3.4 Head & Shoulders

The next pattern we want to look at could be
called an extension of double top and bottom.
This chart pattern also heralds a change in the
direction of the trend. The trading jargon says
"Head & Shoulders" pattern. There is also an
inverse version, but let’s first discuss the bear-
ish formation.
Here it has to be said that I would have pre-
ferred that this example pattern did not work,
because this is the effect of the probably worst
event of early 2020. I am sure you remember.
The picture actually says it all.

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Figure 3.8: Head & Shoulders Pattern

Such a pattern consists of a left shoulder, a

higher(!) head and a second (usually) lower
shoulder. The breakout at the neckline is the
first part of the pattern. To make it as difficult
as possible for you, here is a Head & Shoulders
pattern with an upwards pointing neck line.
Yes, the pattern allows this. Textbook examples

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usually only show a horizontal neck line. Due

to the panic selling, this chart pattern is way
over its target.

Figure 3.9: Trading the Head & Shoulders Pattern

Basically, the target is measured from the neck

line to the tip of the head and this arrow is
placed at the neck line downwards as shown

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in the picture.

We also look at the inverse Head & Shoul-

ders Pattern, a formation of bottom reversal,
which is a real, but this time almost textbook
picture.

Figure 3.10: Inverse Head & Shoulders Pattern

Here, the Bitcoin course goes through a phase

of bottom formation in which 3 lows are formed
at once. An inverse Head & Shoulders pattern
occurs when the middle of the three lows indi-
cates the "lowest low". Furthermore the neck
line is visible as a horizontal line. This is the
point at which this pattern is traded. Only as
soon as the price rises above the neck line after

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the third low, we place our order.

Do you see the evil behavior of Bitcoin in the
picture after the prize has broken out? He
comes back and does a backtest that even falls
just below the neck line of the pattern. This
is where some stop losses are collected. Get
ready for something like that! This can also
happen with other chart patterns. Over time
you will get a feeling for when it is a fake-out
and when it is a backtest. A backtest is even
positive, because it confirms the breakout and
releases the highest target to be achieved. As
mentioned in other sections, pay attention to
the volume at the time of the breakout.

Figure 3.11: Trading the inverse Head & Shoulders Pattern

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You find the target by measuring from the low-

est point of the head to the neck line. Then
place this arrow on the breakout and you will
get the target, which was played out here re-
ally perfectly... Of course only after the nasty
backtest.

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3.5 Wedges
If we already attributed a nasty behavior to
Bitcoin in the previous section, pay attention
now. Wedges can also be very nasty creatures
if you don’t know how to trade them. They pre-
tend that the price is going up, even though the
probability of further upside movements is ex-
tremely low. Let’s take an example to illustrate
this.

Figure 3.12: Trade of Falling Wedge

The chart picture shows the bullish version of

a wedge, more precisely a falling wedge. It can
be recognized by its downward tapering shape.
Another feature is the decreasing volume as it
goes down. At first glance, such a price pattern
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looks quite bearish, but this is actually a very

bullish pattern, as the price target is the upper
beginning of the pattern. So the price targets
of wedges turn out to be a little different from
what is known so far. In addition, they are a bit
more difficult to calculate, because here your
own drawing somehow influences the target.
Therefore verify the target after the breakout
with any resistances on the way up.
At the beginning the stop-loss is recommended
just below the tip of the wedge, which serves
as support. At the confirmed breakout, the
stop loss is to be pulled up, as always.

The counterpart is the Rising Wedge, where

the price tapers on the way up so that the
candles become shorter and shorter. The bear-
ish version is exactly the same as the Falling
Wedge, with the difference that you should
shorten it, of course.

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This chapter was only a very brief insight into

the world of chart patterns. Since there are so
many different patterns, of course a small selec-
tion had to be made. If you can’t get enough of
them, why not use the link to Bulkowski’s pat-
tern site in one of the practical tips. There you
can browse until everything you see is patterns
in the charts.

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Chapter 4
Using simple indicators

"You and I, we’re in so early, we’re gonna make

massive gains...massive gains"
–Sunny Decree, Bitcoin Influencer
Unlike patterns in the Bitcoin price trend, indi-
cators cannot be read directly from price move-
ments, but are calculated and derived using
mathematical methods. What seems difficult
at first glance is, at least for the indicators dis-
cussed here, no more than high school math-
ematics. And don’t worry, the computer does
the calculating. All you have to do is switch on
the indicator in a software environment such
as Tradingview and draw the right conclusions.
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Some approaches to drawing the right conclu-

sions are given in the following sections.

4.1 Correlations
Bitcoin is often touted as an uncorrelated asset
to other asset classes, but unfortunately this
is not always true. Of course, the financial
world, especially in the area of institutional
investors, would welcome it if Bitcoin had no
correlations whatsoever to other asset classes
such as gold or shares. This has been the case
over long periods of time, but if you look at the
beginning of 2020, the picture is quite different.

Take a moment to look at this somewhat

chaotic chart image. Shown in candlesticks,
you can see the Bitcoin price, in blue the curve
of the gold price and in black the course of
the S&P500 Index. All three are shown in
comparison in their percentage change since
the beginning of the year.

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Figure 4.1: Performance comparison of BTC, Gold and S&P500

Apart from the fact that Bitcoin has the best

recovery performance up to May 2020 after the
crash in March, there are certain similarities in
the price trend of gold and the S&P 500 Index.
One must assume that the performance of the
established asset classes will influence that
of Bitcoin. The backgrounds are completely
opposite. While the American shares start
their recovery due to the money printing pol-
icy of the central banks, Bitcoin rises in the

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expectation of its halving and thus a supply

and inflation shortage. Gold is also rising due
to the fact that it is regarded as a "safe haven"
asset in times of crisis and at the same time
the gold mines are largely idle at the beginning
of 2020, so it is also suffering a supply shock.
What conclusions do we now draw from the
comparative curves for gold and equities?

As long as there are correlations between

these assets, it is more difficult to make a good
technical analysis of the bitcoin, for example
to trade patterns. Another crash in the overall
market will then cause the Bitcoin price to fall.
As long as the price of Bitcoin is not decoupled
from its correlation with other assets, trading
should be treated with caution. So in such
times you should also take a close look at the
market as a whole. The S&P500 Futures pro-
vide information about possible developments
in the Bitcoin price. So you shoudl think twice
about opening a long position even though
the S&P500 futures are trading 3% down and
Bitcoin is currently moving sideways.

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4.2 Trading Volume

The movements in the Bitcoin price can be
described very vividly as a constant fight be-
tween bulls and bears. While the bulls want
to push the price up with their horns, bears
wrestle the price down with their paws striking
down.
In the previous chapter we thought about the
breakout of a pattern. You can improve your
success performance in such a breakout trade
by closely observing the trading volume at the
time of breaking out of the pattern. Imagine
a fight between bulls and bears again. In the
first case, a single bull meets a single bear. The
bear briefly hits the bull on the lid and the bull
moves away. Not very spectacular. But what if
you see the dust cloud of a huge herd of bulls
rushing towards a forest edge full of bears
from miles away? An incredible spectacle! A
wild battle rages on, in which a vast number
of bulls and bears fight each other and in the
end a field completely mowed down by the
horn-animals remains.
In trading, the term "fake-out" can be intro-

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duced. This refers to a breakout from a chart

pattern that occurs under low volume and
therefore has a high probability of falling back
into the respective pattern.

For advanced volume considerations, the

VPVR tool is a good choice, but unfortunately
it is available for a fee at Tradingview. It
should be mentioned here anyway, because
it is helpful. So far we have always looked at
the volume over time as bars. But you can also
draw these bars on the other, vertical axis in
the chart. You can see the volume that has
been traded at this price level over the entire
time. A long bar at certain price levels can
then show us important support and resistance
zones.

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4.3 Fibonacci Retracements

Fibonacci retracements are a somewhat polar-
izing tool in the trading world. One could say
that it is a scientific indicator, in the context
of the golden ratio. If you have a degree in
science and technology, you have probably
had the pleasure of calculating, programming
or doing something similar with Fibonacci
sequences. We are not interested in that here.
It is important to understand that retracements
are first of all only retrograde corrections after
an increase or slight increases after a large fall.
A 50% retracement has nothing to do with the
golden ratio or Fibonacci.

It becomes interesting when you look at

the level to which these corrections are coming
down. Take a look at this beautiful colorful
chart picture. Each color section indicates a
percentage correction that the Bitcoin price
has made since the local maximum price. The
bottom is the previously found local low point.
The indicator tells us where a trend reversal
will most likely take place. In the picture, this

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is the area highlighted in blue, which makes

the trend turn bullish. Coincidence?

Figure 4.2: Example of a Fibonacci Retracement

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Another important price level in this context is

the upper yellow-green range. See how well its
lower edge acts first as support, then as resis-
tance? This is the 38.1% Fibonacci retracement,
the small part of the golden section. Consider
this indicator when finding price targets or
stop-losses. But this is not yet the most impor-
tant information that we will extract from this
indicator.

On the next page you will find another exam-

ple, but seen from the other direction. The
following Fibonacci retracement was formed
directly after the one above. Here we see, in
this case unfortunately only in retrospect, that
here too the price has turned its trend in the
blue-shaded area again, leading to the crash of
early 2020.

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Figure 4.3: Additional Example of a Fibonacci Retracement

We are looking at almost the same period of

time here and Bitcoin is most likely turning in
the blue-shaded area between 61.8% and 65%
retracement, which is the greater part of the
golden section. This is referred to in jargon as
the "golden pocket". You will surely find count-
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less other examples in the charts on absolutely

any timeframe. It is best to try it out for your-
self. Most platforms offer this tool for free. But
first we have to clarify how to use it correctly.
You will find this Fib-Retracement tool among
the drawing tools of a trading platform. In the
period you are looking at, you then search for
the low point and then drag the drawing to the
high point of the period. That is all. You will
also see the color ranges, which you can cus-
tomize to include in your technical analysis. It
also works from the price peak to the local low.
Just play with it a little!

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Practice hint: Breakout-Trading

with retracements
In the chapter about patterns we
discussed how to trade breakouts.
Retracements are great for adjusting
your stop loss. For example, if you
have opened a long position when an
ascending triangle breaks out, drag the
Fib-Retracement tool from the last local
low to the breakout peak that has just
been formed. Place your stop loss just
below the 61.8% retracement level. If
the price really drops below this level
again, it will usually not be a profitable
trade and you could at least secure small
profits. If the price continues to rise, you
will also continue to draw the indicator
so that you can increase your stop loss
again. This ensures your profits without
being stopped out immediately.

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4.4 Relative Strength Index

The Relative Strength Index, RSI for short, is a
measure of whether a market is currently over-
bought, neutral or oversold. It is a so-called
oscillator. These are indicators that always fluc-
tuate around a certain value. A neutral value
for the RSI is 50, where the Bitcoin price is in a
balanced territory. If the RSI rises above a value
of 70, one speaks of overbought. This means
that you can expect the price to correct to the
downside. This could be used to verify a short
trade, for example.
On the other hand, the Bitcoin is oversold when
the RSI falls below 30. Therefore, one should ex-
pect a compensating rise in the price. You can
use the RSI as an indicator on any timeframe,
but it becomes more meaningful the longer the
period under consideration. An RSI on the 5-
minute chart is, simply put, useless.

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Figure 4.4: Display of the RSI Indicator

In the corresponding chart you can see the

price of Bitcoin and the value of the RSI over

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time. The purple coloured area limits the RSI

between the above mentioned values 30 and 70.
After the sharp crash in early 2020, Bitcoin was
heavily oversold, which can be seen at the tip
down of the RSI. Conversely, Bitcoin has been
oversold since the last rise on the chart, which
may cause the price to correct downwards.

The RSI gives us another piece of informa-

tion that is a little more hidden. Sometimes
it happens that the Bitcoin price rises but
the RSI falls slightly. This is a sign that the
bulls are running out of power. Traders call
this a "bearish divergence". Conversely, this
phenomenon also occurs when the price falls
but the RSI rises slightly. In that case, it is a
"bullish divergence". So we can assume that
a contrary movement is imminent. Include
this in your analysis, but it is not meaningful
enough to open positions.

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4.5 MACD
The MACD is the final part of this chapter and
thus the direct entry point to the composite in-
dicators. MACD means Moving Average Con-
vergence Divergence. Very meaningful, right?
The first information that the MACD can give
us is the current trend. Before going into details,
let’s look at how this indicator is presented. It
is a kind of bar chart that can be seen in the
lower half of the next figure.

Figure 4.5: MACD Indicator Display

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At first glance, this trend indicator does not

appear to be of much use, as we are simply
shown which trend phase is currently under-
way. However, it is much more interesting to
find out when the trend is turning so that we
can act accordingly. This can also be read off.
Take a look at the first deep red section, for ex-
ample. The second part of this negative trend
section is only light red in color. From this we
can conclude the turn that the price trend an-
nounces. So, to justify your planned long trade,
you can see if the MACD has just printed the
first light red candles. The same is true on the
green, positive side. A light green bar can an-
nounce the start of a down trend.
The longer thereby the bars of the MACD are,
the more strongly the trend is pronounced. If
the MACD forms two or more curves one after
the other in the same direction, the probability
of an imminent trend reversal further increases.
The MACD indicator is nothing more than a
comparison between two exponential moving
averages (EMAs). A closer look will reveal
bullish or bearish divergences, which we have
already treated in the RSI. The indicator there-
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fore offers more information than if the two

averages were considered alone. This leads us
to the fifth chapter, in which it is about draw-
ing important conclusions about price behavior
from composite indicators.

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Chapter 5
Composed Indicators

"Bitcoin is a technological tour de force"

– Bill Gates, founder of Microsoft

This chapter will be the deep dive into the topic.

Price movements become many times more
probable if we find several indicators and pat-
terns that complement each other and confirm
our assumptions. Therefore, always use differ-
ent aspects of technical trading to solidify your
ideas for positions. A few indicators, which
in themselves are already composed of various
individual values, are compiled for you in this
chapter.

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5.1 Fear & Greed Index

The Fear & Greed Index is a psychological indi-
cator. It shows the current prevailing market
sentiment based on price movements. So what
can we do with it? A very extreme value of the
Fear & Greed Index is often well suited for a
so-called "countertrade". Or, to use the words
of Warren Buffet "Be fearful when others are
greedy, and greedy when others are fearful"
By way of exception, the following figure is
not a chart image, but a section of the website
on which the measurement of the Fear & Greed
Index is published.
You can find it with this link:
https://alternative.me/crypto/
fear-and-greed-index/

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Figure 5.1: Section of the Website of the Fear & Greed Index

Of course you should not base your trade on

this indicator alone, because this little insight
into sentiment analysis is not suitable for this.
However, this simple figure may be worth a
look as soon as the trade is almost finished
anyway.

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5.2 Hash Ribbons

You are probably familiar with the so-called
hash rate related to Bitcoin. The hash rate
is a measure for the computing power and
thus for the security of the network. We
can use it to improve our technical analysis.
For example, if the price of Bitcoin crashes,
many miners are no longer profitable in their
mining business and simply switch off their
mining computers. In the worst case, this is
called a miner’s capitulation. This moment is
the beginning of the Hash-Ribbon indicator.
We call a ribbon a band of moving averages,
where often the intersections are examined, as
you have experienced before with the Golden
Cross. With the Hash-Ribbons Indicator, we
look at two averages, but not at the price, but
at the hash rate. You can simply activate this
indicator on Tradingview.

In the example picture we see here the daily

chart of Bitcoin and the Miner capitulation
after the crash at the beginning of 2020. In the
lower part of the picture you can see that two

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averages cross each other, we take a short-term

and a long-term moving average (here 30 and
60 days). At this point the short-term MA falls
below the longer-term MA. All we do now is
wait and see.

Figure 5.2: Display of the Hash-Ribbon Indicator

If the miners resume operations after a cor-

rective increase in prices or a change in the
mining difficulty, the short-term MA returns to
the top and crosses the longer-term MA. This
generates a buy signal on a statistical past basis,
which has been very reliable so far. Do your

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own research and for a first impression look

at the price development in the chart after the
blue buy signal. This buy signal can be traded
wonderfully, considering other factors. Here,
however, you should carry out further analysis
to enter a position. This is due to the fact that
the buy signal tends to be long term and may
not start to yield profits until days or weeks
later.

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5.3 BEAM Indicator

The BEAM-Indicator, which you can also
use on Tradingview, works similarly. For
the background of this indicator, please
visit the corresponding website: https:
//bitcoineconomics.io/beam.html.

Roughly speaking, this indicator is based

on the cycles that Bitcoin goes through, based
on its halving events. This indicator is suitable
for long-term trades with low leverage as well
as for building the HODL position. It is there-
fore not recommended for fast, short-term
trades, but it does not make BEAM uninterest-
ing. As difficult as the calculation of the BEAM
indicator is, as simple is its statement. Buy at a
green signal, hold in the grey area and sell in
the red area. For this we go best on the weekly
chart since 2017.

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Steve Homes Trading Bitcoin

Figure 5.3: Display of BEAM indicator on weekly basis

Look at the lower half of the image. In the

bull run of late 2017, this indicator was able
to predict exactly the exit point marked by the
red zone. In late 2018, early 2019 it indicated
the buying opportunity with the green zone.
And even at the beginning of 2020 it performed
well.

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With this indicator we close the brief insight

into the somewhat more complicated, but per-
haps also more interesting, indicators. There
are countless other composite indicators, of
which there are always new ones appearing in
the online community. It’s fun to see the ideas
of the traders on Twitter and YouTube and what
conclusions they draw from them. It tempts
you to copy them in exactly the same way. But
that’s why you should always remember the
quote from the English statistician George Box:

"All models are wrong, but some are helpful!"

And now that you are almost done with your

entry into the world of trading, here is another
piece of advice: "Do your own research!" Find
out for yourself what works for you and what
does not.

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Chapter 6
How do I plan my first
trade?

". . . aaaand, we’re live guys!"

–Ivan On Tech, Bitcoin Influencer and Pro-
grammer

After all the chart images and explanations, you

now have a whole range of tools to make in-
formed trading decisions. Of course, the pat-
terns and indicators presented here are only
a tiny fraction of the huge hodgepodge that
the trading world has come up with over time.
Surely you will find many other exciting tools
in your further research that can help you make
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more profits. Build the portfolio that fits your

style. But first, find your own trading style.
It takes practice and practice takes time. You
will make losses, especially in the beginning.
Please excuse the directness, but no trader is
only profitable from the beginning. If so, con-
gratulations! In the hope that this book has
contributed to your success. And to take you
by the hand one last time before you are let
loose on the other traders, we are planning our
first real trade together.
Now we want to get into the right place and
look at the complete planning of a clean trade.
Before you read on, please try out everything
we have discussed so far in the following chart.
Make your own trade right here on the next
page. Draw in supports, resistances, trends,
patterns, maybe indicators and the correspond-
ing targets. Feel free! Then consider the entry
point, a stop loss and a take profits exit. Only
then do you turn the page and see the procedure
used here. Even if you come to a different con-
clusion, perhaps your trade would have been
better than the "sample solution".

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This is a movement that went down in the

history of Bitcoin Trading as the "Xi Jinping
pump and dump". At first glance, one would
assume that it is a perfect trade for a bull flag.
A steep rise and a parallel falling flag itself.
A super long trade! But what if we draw the
bottom edge horizontally? Take a look at the
next chart picture, but be careful, it will be a
bit more confusing now.

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With a horizontal bottom edge, the result is a

very bearish look and we should take a closer
look at this. A first indication that this is not
a flag formation could be the slight volume
spike, which would end an optimal consolida-
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tion phase and create selling pressure. Rather,

we expect a falling triangle. As we have learned,
we can neglect the wicks a bit when drawing,
but if they fit the pattern, all the better. You
get the target again with the measurement of
the opening, which is moved to the lower edge.
Our course target is exactly at the complete
retracement of the Xi Jinping pump. Make sure
that there is no important support between the
breakout and the target and then short it! The
best way is to use a Conditional Order just be-
low the horizontal line.
The leverage should be chosen in a way that a
stop loss just above the upper edge of the trian-
gle does not hurt you too much. For example,
as in the very last chart picture below.

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In the first moment after the order is exe-

cuted, the trade does not seem to be going well.
The strong breakout is missing! But the price
doesn’t jump too far back either, so we let the
trade go. You can draw the stop-loss down at
the upper edge of the triangle after some time.
But then, fortunately, the movement in the Bit-
coin price that we wanted to see comes after all.
The volume is not very high but we can pull
the stop loss into the plus using the Fibonacci
tool. In the end, the redeeming volume comes
with two longer red candlesticks and our trade
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is closed perfectly at our price target!

Practical tip: Practice makes perfect!

Before you run off and transfer your hard-
earned money to trading platforms, only
to lose everything as a lesson, here is an-
other tip. Many major trading platforms,
such as Bybit, offer a test or demo ac-
count where you can do dry runs. You
will receive an account with play money,
which you can use for practicing trades
without having to risk your own money.
In addition, you can familiarize yourself
with the many functions in a comfort-
able way. But even once you have gained
experience and start trading with real
money, the learning effect does not end.
It feels completely different with "skin
in the game", as the trader and author
Nassim Nicholas Taleb says.

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There is one last point we need to address. Isn’t

all this a glimpse into the crystal ball?

Yes, it is. But you are holding the corre-

sponding operating instructions in your hands.
Many fortune tellers use their crystal ball with-
out instructions. Therefore always proceed
rationally! Especially at the beginning of a
trading career, it is apparently appealing to
take every little movement in one direction or
another with you as a trade. You might even
think that the smallest movements could be
traded through extremely high leverage. This
often only leads to losses! Get used to always
going through rational, calculating steps, as
discussed in the previous chapter, before you
open an order. On this basis, you will then
decide whether to make the trade or not. This
will help to calm your finger twitching full of
FOMO. You must also soothe your finger if you
constantly want to change the stop loss for no
reason. Think about which indicators justify
a change before you start typing. A Stop Loss
set too high or Take Profits set too low will
take your position out of the game too early
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and cause real losses or take away your profits,

which you will hopefully make after reading
this little book!

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Disclaimer: Trading swaps, or similar finan-

cial products, as well as Bitcoin itself, as de-
scribed in this book, involves considerable risks
which may under certain circumstances lead to
total loss.
The methods described in this book are for ed-
ucational purposes or general information only
and do not constitute investment advice or an
invitation to buy. You are solely responsible for
your own actions. The author therefore accepts
no liability whatsoever for decisions made on
the basis of the information described in the
book.

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