This strategy combines several powerful technical tools to identify potential entry and exit points in the cryptocurrency market on the hourly timeframe. It relies on:
1. Fibonacci levels to identify potential support and resistance areas
2. Trading volume to confirm the strength of price action
3. RSI indicator to assess overbought or oversold conditions
4. MACD indicator to confirm momentum direction
Strategy requirements
- Chart: Japanese candlesticks (Candlesticks)
- Timeframe: 1 hour
- Tool: Any cryptocurrency pair (e.g., BTC/USDT, ETH/USDT)
- Indicators:
- Fibonacci retracement levels (Fibonacci Retracement)
- RSI indicator (default settings 14)
- MACD indicator (default settings 12,26,9)
- Trading volume (Volume)
• Steps to apply the strategy
1. Determine the overall trend direction
- Use fundamental trend analysis to determine if the market is trending upwards or downwards on higher timeframes (4 hours or daily)
- This helps bias you to trade with the overall trend
2. Drawing Fibonacci levels
- Look at the last peak and trough of the main price movement
- Draw Fibonacci retracement levels (23.6%, 38.2%, 50%, 61.8%)
- The areas around 38.2%, 50%, and 61.8% are the most important for entry
3. Wait for a breakout with volume confirmation
- Monitor price action near Fibonacci levels
- Look for a clear breakout of the Fibonacci level with increased trading volume
- Trading volume should be above the moving average of volume (e.g., 20 periods)
4. Confirmation from RSI
- RSI must align with the direction of the breakout:
- For buying: RSI above 50 and exiting the oversold area (below 30)
- For sale: RSI below 50 and exiting the overbought area (above 70)
5. Confirmation from MACD
- Look for MACD crossing with the signal in the direction of the breakout:
- For buying: MACD crossing above the signal line
- For sale: MACD crossing below the signal line
- Ensure that MACD is moving in the direction of the breakout
Practical example for buying (Long)
1. Overall trend: bullish on the daily chart
2. Price action: bearish retracement after strong rise
3. Fibonacci: the price has reached the 61.8% level of the Fibonacci retracement
4. Breakout: strong bullish candle breaking the 61.8% level with trading volume higher than average
5. RSI indicator: moving up from the 40 area (avoid severe oversold)
6. MACD indicator: bullish crossover with green bars appearing above the zero line
7. Entry: when the candle closes above the Fibonacci level with all previous conditions
8. Stop loss: below the latest low or below the 78.6% Fibonacci level
9. Take profit: at the next Fibonacci levels (38.2% then 23.6% of the original move)
Practical example for selling (Short)
1. Overall trend: bearish on the daily chart
2. Price action: bullish retracement after strong drop
3. Fibonacci: the price has reached the 50% level of the Fibonacci retracement
4. Breakout: strong bearish candle breaking the 50% level with trading volume higher than average
5. RSI indicator: moving down from the 60 area (avoid severe overbought)
6. MACD indicator: bearish crossover with red bars appearing below the zero line
7. Entry: when the candle closes below the Fibonacci level with all previous conditions
8. Stop loss: above the latest peak or above the 78.6% Fibonacci level
9. Take profit: at the next Fibonacci levels (61.8% then 100% of the original move)
• Risk management
1. Risk-to-reward ratio: no less than 1:2 (e.g., 1% stop loss and 2% take profit)
2. Position size: do not allocate more than 1-2% of capital per trade
3. Dynamic adjustment: the stop loss can be moved to breakeven after achieving part of the target
• Let's take a practical example of the strategy on the BTC/USDT pair assuming the current price is $90,000, detailing each step:
Scenario: Buy trade (Long) on the hourly chart
1. Analyze the overall trend (daily/4-hour chart)
- Suppose BTC is in a general upward trend on the daily chart, with a current retracement on the hourly chart.
- The last strong bullish move was from $82,000 to $93,500, then began a bearish retracement.
2. Drawing Fibonacci levels
- High: $93,500
- Low: $82,000
- Retracement levels:
- 23.6%: $91,230
- 38.2%: $89,630
- 50%: $87,750
- 61.8%: $85,870
- 78.6%: $83,210
3. Price action and reaching the entry area
- The price retraces downwards and reaches the 61.8% level ($85,870).
- A strong bullish news candle (Bullish Engulfing) closes above 61.8% at $86,200, with:
- Trading volume higher by 30% from the moving average of volume (20 periods)
- Confirmation of buyers at this level.
4. Analyze RSI
- Before the breakout: RSI at 35 (close to oversold but not too low).
- After the breakout: RSI crosses above 40 towards the upside, indicating new bullish momentum.
5. MACD signal
- Before the breakout: MACD below zero but the bars start to shrink.
- After the breakout: MACD crossing above the signal line, with bars turning green.
Trade details
- Entry point: $86,200 (after closing a confirmed bullish candle).
- Stop Loss: $84,900 (below the 78.6% level or latest low).
- Take Profit targets:
1. First target TP1: $89,630 (38.2% Fibonacci level) — taking 50% of the position.
2. Second target TP2: $91,230 (23.6% level) — taking 30% of the position.
3. Third target TP3: $93,500 (previous high) — taking the remaining 20%.
Calculate risk and return
- Risk: $86,200 - $84,900 = $1,300 (1.5% decline from the entry point).
- Potential return at TP1: $89,630 - $86,200 = $3,430 (reward/risk ratio ≈ 1:2.6).
Alternative scenario: Sell trade (Short)
If the overall trend is bearish, and a bullish retracement to a Fibonacci level with reversal signals:
1. Example:
- Drop from $95,000 to $85,000, then retracement to 50% ($90,000).
- Bearish breakout at $90,000 with:
- High trading volume.
- RSI indicator drops below 50.
- MACD indicator crosses bearishly.
2. Entry: at $89,800 (after closing a bearish candle).
3. Stop loss: above $91,500 (61.8% level).
4. Targets: $87,000 (TP1), $85,000 (TP2).
Important notes
1. Cryptocurrencies are volatile: you may need to widen your stop-loss points to avoid early exits.
2. Additional confirmation: can use:
- Traditional support/resistance levels.
- Candlestick patterns (like Hammer, Shooting Star).
3. News: Avoid trading before major events (such as inflation reports, central bank decisions).
Summary
In this example, we benefited from:
- Fibonacci to determine the entry area (61.8%).
- Volume to confirm the strength of the breakout.
- RSI and MACD indicator to confirm momentum.
The strategy works best when combining all elements and not relying on a single indicator.
• Additional tips
1. Avoid trading against the overall trend on higher timeframes
2. Wait for full candle confirmation before entering
3. Use additional filters like moving averages to confirm the trend
4. Apply the strategy during high market activity times (when major trading sessions overlap)
5. Choose high liquidity cryptocurrencies to avoid price manipulation
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