05/25/2021 |
$BTC Daily Candle Case Study: Anchored VWAP, Volume by Price, and Seasonality
What a fickle beast Bitcoin is. A lot of new entrants to the crypto markets found this out the hard way, after last week’s surprising market pullback to tag $29K on news that China is banning cryptocurrencies (again). As did Ahab, many cryptocurrency traders will try to tame this $BTC beast; and one’s success or demise will be determined by the tools, skills, and temperament at hand. Free charting software provides the basics, but trading with TrendSpider’s automated charting tools is the difference between a profitable trader and being krill for the Beast.
In this case study, we will explore how using TrendSpider’s Anchored VWAP and Anchored Volume by Price can help to target the high liquidity price zones that market makers might be also be targeting and allow you to swim safely with the whales.
Bitcoin Daily Candle
This is a daily chart of Bitcoin looking back since September of 2020. This chart includes both an anchored VWAP and volume by price from the September lows, looking at supply and demand as the market “reset” and moved up to new highs afterward. This chart also shows a graph looking at historical seasonality over the last 3.5 years since the previous bull run top.
- This number shows where the volume-weighted average price (VWAP) and volume by price are anchored from. In this case, this point is where the market bottomed in September of 2020 and reset before hitting new all-time highs. The “anchor” point is just where the VWAP and volume by price start measuring from.
- This number shows a “volume gap” above and below the volume shelf shown by #3. This “volume gap” is essentially an area where there is not a lot of volume holding. The price can move very quickly through these areas due to a lack of liquidity until it gets down to the next liquid area shown by the volume bars sticking out far on the right, shown by the green and red highlighted areas.
- This number shows the “volume shelf” and anchored VWAP in which price is respecting perfectly. Notice how many volume nodes are right in this area. These volume nodes show there is a lot of liquidity and generally where price stabilizes to the downside and to the upside. Notice the next “shelf” above is highlighted in red. This would be considered a supply zone (resistance) above as volume that is holding at an unrealized loss currently, is back to breakeven at this red area. When people get back to breakeven, they sometimes sell to get out of the position. If enough people “breakeven sell”, this can add supply on the market, making it a resistance zone.
- This number shows the historical seasonality tool on TrendSpider for bitcoin over the last 3.5 years since the 2017 top. As you can see, the summer months have some of the worst win rates other than June with a 67% win rate. May has a 33% win rate, July has a 33% win rate, and August has a 0% win rate. These win-rates simply show if the price of that month closes higher or lower than the previous month. For example, a 0% win rate for August means that August has closed above July’s close 0% of the time since the 2017 highs.
So we hope that this case study helped you to see the value in using Anchored VWAP and Volume by Price to spot potential entry and exit points. On TrendSpider, these tools have a unique feature that allows for adjustment to anchor to the candlestick/time of your choice to reveal the actual price and volume in the liquidity nodes for better decision making.
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