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Bitsignal trades are generated by a trading system with strict rules regarding trade entry and exit, stops and targets. I am not going to disclose my proprietary system to you but for your trading education I am sharing its signals so that you can see the benefit of a systematic approach to trading.

However, there are many such trading systems and I will share them with you. On this page we will look at many trading systems with detailed instruction on how to set up and use them.

Dual Moving Average Crossover

A moving average is a widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random price fluctuations. A moving average (MA) is a trend-following indicator because it follows the direction of prices but it is a lagging indicator because it is based on past prices. The two basic and commonly used MA's are 

1. the simple moving average (SMA), which is the simple average of a security prices over a defined number of time periods e.g. 10 day SMA shows the average price of each rolling 10 day period
2. the exponential moving average (EMA), which gives bigger weight to more recent prices. This is useful where prices tend to jump quickly to different levels. Because it is weighted (more sensitive) to near term prices will follow such price jumps more closely whereas the SMA is much slower to respond to recent changes.

The most common applications of moving averages are to identify trend direction and to determine support and resistance levels. In the bitcoin chart below, two SMA's are plotted: a 7 period SMA and a 28 period SMA. In a dual moving average crossover system, a trading signal is generated each time the shorter moving average (7D SMA) crosses the longer moving average (28D SMA). When the cross is from below i.e. the 7D SMA moves up and through the 28D SMA, a buy (or long) signal is generated. When the cross is from above i.e. the 7D SMA falls below the 28D SMA, a sell (or short) signal is generated.

BitSignal - Dual Moving Average Crossover System

Money Management

Stops

The above system is a reversal system because you buy on a positive moving average crossover and then close and sell on a negative moving average crossover. But this means that an existing open position can potentially go into a loss larger than you account can sustain before it goes into profit. Stops are used as part of money management - to manage the capital in your account and to prevent large losses if you are unable to watch your positions in real time. With bitcoin, stops are valuable because the price is very volatile and can move rapidly. Such movements can trigger a margin call and wipe out the capital in your account.

One method of determining stops uses a calculation of recent price volatility called the Average True Range or ATR. Typically, a trader would place a stop on their trades at 3 x ATR. Most trading platforms provide an ATR indicator which is plotted below the price chart. When you are looking open a trade, you can see from the ATR chart the current value and place your stop at 3 x ATR value. 

For example, in the chart below the current 21 period ATR reading for Bitcoin is USD 60. Therefore, if I place  trade now the stop would be plus or minus USD 180 (3 x USD 60). When you are buying, your stop is below the buy value at (buy price - stop) and when you are selling, the stop is higher than the sell value at (sell price + stop).