My Favorite Short Term Chart Features

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Disclaimer: Reading the document below does not make me responsible for your trading losses. If you decide to give this a try, please start slowly with small amounts as you learn, and work your way up as you become more experienced.

Everyone has their own favorite indicators to look at when using charts. I use two well known indicators to make short term buying decisions for trades usually lasting between two and four hours. I am going to define below how I use those indicators. I am also going to show you how to create your own chart on TradingView.

It is important for you to understand my goals.

  1. Buy Low (at or near a bottom)
  2. Try not to catch a falling knife
  3. After my purchase goes up 10%, sell at the first sign of reversal
  4. Be prepared to sell if it drops 5%

Buy Low is obvious. We want to buy when the trend is reversing from mostly sells to mostly buys. The term ‘catching a falling knife’ refers to buying as the price is falling without knowing where the bottom is. Often, without a chart to give you direction, you will buy in with the price halfway down, and the price will continue to fall after you buy resulting in an immediate loss and an unwanted bag.

The goal on these short term trades is not to double your money in an hour. That is unrealistic. I try to make at least 10%, and to lose less than 5% on each trade.  On a good day using this technique I will find five promising opportunities, and will want to shoot for a 25% total gain.  Obviously the more time and money you invest, the more you will make. For example, if you are investing 1 BTC, your goal may be to end the day with 1.25 BTC. Some days will be better and some worse.  Each person’s goal will be different based on their experience.

Let’s get started creating a Chart on TradingView.com. Go ahead and sign up for the free account. This will save your charts for you and keep some of the annoying messages from popping up.  Once you have your account created, click Charts on the top taskbar.

Chart01

It will give you a welcome message. You can run through the tutorial, or skip it.  Let’s quickly change the color scheme to black. I just find it easier to read the chart in black.  Right Click -> Color Theme – > Black.

There will be a bunch of ads and messages every few minutes you will have to just close or ignore. That is normal.

Let’s change the data we are looking at to Monero/Bitcoin.  TradingView has all of the Poloniex currencies, as well as a few other exchanges. Change the defaul symbol (AAPL for me) in the top left to XMRBTC and choose the Poloniex exchange option. You will see the current Monero chart pop up.

Chart02

Let’s add a few of the basic charting indicators. This is done by pressing the Indicator button at the top. There is a guy named Chris Moody who creates and provides indicators for free. If you type CM_ in the search field, it will pull up his indicators. I use these 2:

  • CM_MACD_Ult_MTF – Custom Colors
  • CM_Williams_Vix_Fix_V3_Ultimate_Filtered_Alerts

Chart10

The indicators will take up a lot of your chart. You can squish them down to reduce their size. Your chart should now look something like this.

Chart11

I am going to keep it very simple here, but if you want more detail I added links below for you. The MacD indicator has two lines. These two lines waver up and down based on buying and selling. When they intersect it is a strong indication of a reversal. Looking at the chart above you can see they intersected at the point I have labeled as ‘A’, and started a downward trend.

BabyPips MacD Indicator

The Vix Fix Indicator is Chris Moody’s own creation. It attempts to find market bottoms by highlighting the bars green. You can see this in the example above at the point I have indicated as ‘B’. You can see when the bars turned green, the price shot up soon after. For more information on how this works try the link below.

Chris Moody’s Vix Fix Indicator

A combination of the MacD showing a reversal and the Vix Fix indicating a bottom can be a powerful charting tool for your decision making. On the chart above the time was set to 24 hours. This means every green or red bar represents 1 day. I am not interested in this type of long term trading here, I want to know what’s going to happen in the next 15 minutes… so go ahead and change 1D to 15 by pulling down the time interval drop-down menu on the top left. Your chart will change drastically.

Here is a real life example of what an ideal situation looks like. This is what you want to be looking for when searching for something to buy.

ChartBTSBefore

There are three things to notice here.

  1. The MacD Indicator shows a sharp downtrend, but the yellow and red lines have not crossed yet to indicate a turnaround. It is not time to buy quite yet. I typically only buy if the MacD lines are below the white line, which they are here.
  2. The green bars on the Vix Fix Indicator are tall and green, projecting the bottom is close. The longer these lines are, the stronger the indication of a bottom becomes.
  3. I manually added the green line on the chart to show there is support at this level in the past. This means the price is less likely to fall below this level.

Now we have a decision to make. It looks like BTS is about to turn around. Do we buy now, before the MacD lines turn upwards and cross? Or do we wait? I am not opposed to buying before the lines cross, but I do like to see the red line at least look like it is turning upwards. This could still continue to fall from here. I will choose to wait to be sure I am not catching a falling knife. Buying is very risky at this point.

While I am waiting, I can look into other news which might be causing this BTS to fall. Is BTC pumping? Did BTS delay a release? There could be outside factors dictating the fall which might make a chart less useful. Prices rise and fall naturally, and that is when charts work their best.

I am glad we did not buy based on the first chart. 30 minutes later you can see BTS blew through the resistance on the A Line (below). I went back a little into the past and I am now looking at the B Line resistance to see if if will go through that as well. Look what is happening at the bottom of the chart though. The green bars are even stronger, and the red line may have just started to level out.

ChartBTSDecision

I get very tempted at this point to buy. You can already see a green candle on the chart indicating the first buys from other people are happening. As long as I am watching closely and am prepared to sell if it drops down again, it is okay to buy here. It would be safer to wait for the lines to cross, but I might lose out on the first part of the recovery. It is a call you will have to make.

Selling is a bit easier than buying. When the price passes my goal, which is usually 10%, I start to put sell orders in at the 10% level. If it drops back down to 10% it sells, otherwise the trade keeps riding up. If it moves up another 5%, I move the sell up 5%. As long as the price is going in one direction I will continue riding the wave.

Of course, if the price drops, I will need to sell quickly. I am trying to determine the bottom and only buy when the price is going up. If it starts dropping again I have to surrender and look for a better place to buy. You will learn as you go. I still learn every day.

It has been 30 minutes. I went ahead and made the decision to buy now based on the chart below showing the lines being extremely close to crossing and the price already moving up. I rarely buy at the current Sell price unless I have no choice. Instead I will put in a high order on the buy side and hope it gets filled.  It usually does if there is still a little volatility in the price.

ChartBTSTime

I stuck a bonus chart at the end of this article to give you something else to look at also. Be sure to check it out.

Whenever someone asks about charts I always recommend taking the free classes at BabyPips.com and going from the Kindergarten class for Three Types of Market Analysis all the way through to 11th grade. You may have to break this into more than one day of study. Now that you have TradingView at your disposal, you can use it while going through the classes. By the time you are done you will be ready to try out different indicators and find ones that work better for you.

If you appreciate the time and research that went into creating this document for you, please consider sending a tip. This document may end up making you a significant amount of BTC if you decide to give it a try and are successful.  BTC Address:   1EPyFDbRtfxMvpAhCyXBH2xwMuJ77Wwb41

Update: Three hours later, after buying in at 570, BTS is in full recovery mode and approaches the 10% threshold. If the MacD line starts to turn down or levels out at this point I will sell early, but at the moment it is still moving up. If I have to leave and I am not going to be able to closely monitor the trade any more I will also sell. I don’t like to leave these trades out there unsupervised.

ChartBTAfter

Lastly, I want to leave you with this bonus chart you see on Poloniex every day. It can signal an absolutely amazing buying opportunity… the Market Depth chart.

MarketDepth

Isn’t that beautiful? The green on the left shows a mountain of Buys, while the red on the right shows very few people selling at any price.  The price of this currency literally only has one way to move, Up! If you can find the MacD & Vix Fix Buy Scenario I defined in the rest of the article, with an overwhelming buy wall on the Market Depth like this… well, I know what I would do. I would buy every coin I can get my hands on at the current price. This combination does not happen very often, but I always check just in case.