How to pick a market?

Technical Analysis is based on trends and human sentiment.
In this tutorial, we'll see which markets work best for technical analysis and how we can pick them.

When doing technical analysis, a good trading strategy isn't enough: you still need to pick the right markets.
A strategy can yield 30% a month on certain markets and lose 30% on other markets.
For instance, here are the results of a 2H turtle from Sept 10, 2018 to Nov 9, 2018

rsi strategy
Trading on ETH/BTC, 0.1% fee

In the two following sections, we're going to see why those results differ that way and what markets to apply technical analysis on.

1) Trends and human psychology.

Most cryptocurrency traders want to maximize their results in fiat money (eg: USD).
Therefore, trends will be most noticeable using stablecoins as base currency, as they are the currency traders are "thinking" with.

xrp btc
btc usdt

What we can see here:
  • XRP/BTC is very noisy. The first half of the chart is a nightmare for technical analysis. A lot of fast, big moves without any clear tendency. A bot would have bought and sold a lot of times, paying a lot in fees and spread.
  • BTC/USDT is way less noisy. Moves are clear, we can easily notice short-term supports and resistances that, when passed, launch big moves. A bot would have surpassed any humans not watching the market 7/24, as big green candles were only 2H large. Don't miss the train !
Our advice is, use stablecoins. It maybe is controversial but they're usually more stable than traditional cryptocurrencies and trends of their quoted currencies are way more tradable with.
And if one loses peg with its pegged currency, the price of the quoted currency you're trading with is going to skyrocket, saving your capital.

2) Avoid low volume coins.

Binance is known to host more than 400 markets, with only 70 having more than $1M 24H trading volume
The danger is, when running trend following strategies, to get trapped on false signals caused by market manipulations
For instance, on the ARK/BTC ticker, placing a buy order of only 0.9 BTC (~$3240, at the time of writing) would result in a 5% increase in price.
In those conditions, doing a trend following strategy would be pure suicide, as one person placing a small order could lead to a false signal making you enter a trade.
And with such a lack of liquidity, slippage would be very important, making it impossible to do any successful trade.

For this reason, we only recommend trading on the top 10 coins by market cap/trading volume.

ark/btc depth
ARK/BTC market depth

3) How to use that?

Whatever market you choose to trade on, large moves are short, and you'll only lose money by being too late in a trend.
Automated strategies are the only way to trade profitably, repeatedly without spending hours in front of a computer doing a computer's job.

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