Top five tools to master cryptocurrency trading

The cryptocurrency market is considered by many to be ‘too volatile’ and ‘too illiquid’ to trade successfully; altcoins posted up to 2,000% gains in 2017 before a 95% drop in 2018. However, with the right mindset and trading tools, you can make the cryptocurrency market a more profitable option than traditional legacy markets.

The key is risk management, and taking advantage of volatile swings in both directions. For example, if Bitcoin hits a high of $20,000 and you think the rally is coming to an end, trade in one of the USD or Euro-backed stablecoins so you have an effective cash position, then buy lower again. You can also ‘short’ Bitcoin on exchanges such as Bitfinex, BitMEX and Deribit, which will mean you profit when the price moves to the downside.

But aside from that, here are some hidden tools to give you an edge over other traders in the space.

Trade flow

Tradeflow is a market order aggregator that continuously updates market orders across Bitfinex, BitMEX and GDAX. The benefit of comparing orders across exchanges is to assess the overall confidence in the market. For example, if a $10 million market buy comes in from BitMEX, the other exchanges will most likely follow.

The tool also keeps a count of the total amount bought and sold within a predetermined time, this is important as you can see how much of the reported volume is due to buying and how much is due to selling, which is ‘ An important insight is in the ongoing market sentiment.

Trading flow has become increasingly important in recent weeks, as Bitfinex has often traded at a premium of up to 10% against BitMEX and GDAX. The order flow shows the live price orders against what is being bought, succinctly presenting the premiums across exchanges that can provide arbitrage trading opportunities to those watching.

Datamish

Datamish is a tool that uses Bitfinex and BitMEX’s API to present data on the long vs short ratio and liquidations. The benefit of using a platform like Datamish is the ability to assess market sentiment and any upcoming price action.

An example of this would be if the long/short ratio is heavily weighted on the short side, this could mean that a short push is coming, which will cause short positions to be liquidated during a move to the upside.

Datamish also offers statistics on the amount of liquidations on BitMEX, this can be a good indicator to assess the market sentiment over a certain period of time.

Bitcoinity

Bitcoinity is a tool that displays combined cryptocurrency order books, combining liquidity across all major exchanges. The benefit of using a tool like this would be to evaluate the levels of support and resistance, as well as to find out at which price point great liquidity lies.

For example, if the price of Bitcoin was at $6,400 and there were 40,000 Bitcoins on the buy side of the order book above $6,000, but there were 75,000 on the sell side below $6,800, this could be an indication that selling pressure is increasing and that price action can move to the downside.

Another important tool on Bitcoinity is its arbitrage table. It describes the price differences between exchanges, which can be capitalized through arbitrage trading. An example of how you can make money from this is if Bitcoin is priced at $6,400 on one exchange and $6,500 on another, you can simultaneously buy on one exchange and sell on another, capitalizing on the $100 difference in price.

Tensor maps

Tensor Charts is a free, advanced charting tool that allows users to chart and visualize the major cryptocurrencies using order book heatmaps. Heatmaps aggregate data from order books across multiple exchanges, and provide red and green blocks for filled buy or sell orders and blue and yellow blocks for orders waiting to be filled on each side.

Used correctly, Tensor charts can be an excellent way to predict price action, they allow you to see buy or sell walls as well as fraudulent orders, which in turn can give you an impression of what the market makers are doing. do. See the video below for a short tutorial on the heatmap visualization.

Crypto Clock

Cryptowatch is a free charting resource that allows users to track charts of every major cryptocurrency exchange. Owned by Kraken, Cryptowatch combines data from the likes of Bitfinex, Coinbase Pro and Bittrex, as well as Japanese exchange BitFlyer and Korean exchange Bithumb.

Users can use this to their advantage by looking at the BTC/JPY chart and comparing it to the BTC/KRW or BTC/USD chart, this will show if specific markets are ahead of others, for example in May 2018 Bitflyer 1,000,000 used. JPY as a key level of resistance, which eventually turned into support. This level was respected across all exchanges until BitFlyer finally broke, and downside across all exchanges.

Within cryptowatch, users can use common trading indicators such as exponential moving averages, RSI, MACD and many more, making it one of the main competitors to TradingView in the cryptocurrency space.

Disclaimer: The views and opinions expressed by the author should not be considered financial advice. We do not give advice on financial products.