A Momentum Indicator to Improve your Cryptocurrency Trading
Alex Wason | Thu Jun 18 2020
Why Momentum Algorithms are Important for Trading Bitcoin
Bitcoin is an extremely volatile asset. There can be massive price spikes and dumps in very short periods of time. So when trading Bitcoin, it is a good idea to incorporate a momentum algorithm to help you get a sense of a price’s stability.
We at Quantify Crypto have developed an AI driven trend indicator which signals bullish or bearish price movements. Slow, steady Bitcoin price increases often lead to major Bitcoin price spikes. When our trend mean score reaches 75 or higher, a bullish signal is triggered. Conversely, when the score reaches 25 or lower, a bearish signal is triggered. This algorithm is used to determine good entry and exit points when trading.
Quantify Crypto Trend Scores:
0-5: Exceptionally weak
6-25: Weak
26-74: Neutral
75-94: Strong
95-100: Exceptionally strong
You can access crypto trend scores on our website here: https://quantifycrypto.com/coin-screener
Here is an example of our algorithm correctly predicting a bullish Bitcoin price movement on October 24th, 2019.
The first chart shows the 27-hour "pre-move pattern" where the price of Bitcoin increased from $7,420 to $7,677, a 3.5% price increase.
The next chart shows the next 12 hours, with Bitcoin increasing in price from $7,677 to $10,500, a gain of 36.8%.
As you can see, there was a tremendous surge in price. Now let’s take a look at a bearish example from March 7 to March 12 2020.
On March 7th, 2020 the Bitcoin price was at $9,198; its price would continue to decline over 24 hours to a price of $8,570. The Bitcoin price would then have over a 50% decline on March 12th to prices below $4,000.
Once again, our algorithm correctly predicted a huge price drop. We have compiled 12 more cases that show our algorithm’s accuracy, which you can view in the following link:
When using algorithms to trade cryptocurrency, be careful not to simply apply stock market algorithms or indicators and assume they’ll work the same way, because stocks and crypto are two very different animals. Keeping that in mind, momentum algorithms can be a great way to get a better look at the markets and help you make the best investments possible.
The platform Quantify Crypto provides live cryptocurrency prices, technical analysis, news, heatmaps and more. Our flagship product is the trend algorithm, designed to be on the correct side of significant cryptocurrency price moves. We are a new site, please check us out and let us know what you like and do not like about the site.
None of this is meant to be financial advice and I do not have any financial expertise. Although I worked at the New York Stock Exchange for over 23 years, it was as a developer supporting computer systems, not as a stock trader.
Full discloser: I do own Bitcoin and have stock positions.