Bitcoin sees 27.6% Sell Off

At 08:15 this am, BTC sold off 27.6% in 1.5 hours. Maybe triggered by news from China that banks there are banned from handling Bitcoin but not individuals. Maybe it was just a wave of sellers looking to cash out their abnormal profits. In any case, Bitcoin started the rout at 1208 and ended up at 874 - a decline of 27.6 percent.

By the time I got to look at Bitcoin, the selling was done. So what was my next trade? After a quick look at the chart below, I saw that:

•  RSI was rising from very oversold levels and that on the 5m BTC chart
• there was a higher low (start of an uptrend?) after the 874 low and
• the short exponential moving average (pink line) had crossed the slower moving averages (blue/red) from below

These factors supported a long position. Also bitcoin daily volatility is approx 20% and, at the time of my purchase, the currency was about -20% on the day. I felt overall that the odds were in my favour for a long trade. So I bought 20 contracts at 1,004.89 and sold them at 13:11 at 1,057.24 for a profit of GBP 6.40.

My exit was determined by candlestick pattern - the doji (see below). This is a strong reversal pattern and I decided to exit. Additionally, with bitcoin being so volatile at the moment, time is an important factor: the longer the time your position stays open, the more chance you have of making losses. Or profits. My returns were already satisfactory and therefore I closed my position.

I will post the live trade details in a moment so that you know I am not retrofitting or trading with hindsight.