Bitcoin Trading Strategies

True Range Breakout Method (TRABOM)

Larry R Williams is one of the greatest commodity traders of all time. In 1987, he won the World Cup Trading Championship by parlaying $10,000 into $1.1 million over the course of 12 months. In addition to being a great commodity trader, Williams is an author and developer of many technical indicators. Throughout his professional career, he has written 19 books about commodity trading. These books provide a complete description of Williams’ various indicators, including the indicators that he used to win the World Cup Trading Championship.

In 1979, Williams developed a simple method for the purpose of capturing short-term moves in stocks and commodities. Williams’ system is based on the daily true range. What is the daily true range and how can this strategy be used to capture short-term profits in Bitcoin? Let’s discuss the details.

Range – The range is calculated by subtracting the daily low from the daily high. For example, the range on 2 December is 1,253 (53,184 – 51,931). The range is always a positive number. It would never be a negative number.

True Range – In order to calculate the true range, we begin by examining the closing price from the previous day. Is the previous day’s closing price above the daily high? Is the previous day’s closing price below the daily low? If the answer is “No” to both questions, the true range is simply calculated by subtracting the daily low from the daily high. If the answer is “Yes” to either question, the previous day’s closing price is used to calculate the true range. Most of the time, the answer is “No” to both questions. Therefore, the true range equals the range.

Please examine the price activity for 3 December. You will notice that the true range is greater than the range, highlighted in red. Please review the closing price from 2 December. The number is greater than the daily high on 3 December. Therefore, the closing price is used to calculate the true range (53,173 – 51,348 = 1,825). The true range is greater than the range on 3 December and 5 December.

TRABOM uses the true range to calculate daily buy and sell signals. For example, let’s calculate the signals for 3 December. The buy signal is the true range for 2 December plus the closing price. The sell signal is the closing price on 2 December minus the true range.

TRABOM Buy And Sell Signal For 3 December

  • Buy Signal 53,173 + 1,253 = 54,426
  • Sell Signal 53,173 – 1,253 = 51,920

The daily low on 3 December was 51,348. As you can see from the table, TRABOM generated a Bitcoin sell signal for 3 December @ 51,920. Therefore, TRABOM is short BTC futures @ 51,920.

The profit target for a TRABOM sell signal is low on the day of entry. The daily low on 3 December was 51,348. Therefore, the profit target for this trade is 51,348. As you can see from the table, the price of Bitcoin fell to 51,339 on 4 December. This particular trade generated a profit of 572 points (51,920 – 51,348 = 572).

Let’s calculate the TRABOM buy and sell signal for 27 December.

TRABOM Buy And Sell Signal For 27 December

  • Buy Signal 54,450
  • Sell Signal 47,670

If a buy signal is generated, the profit target is the daily high on 27 December. If a sell signal is generated, the profit target is the daily low on 27 December. All trades are held overnight. The profit target never occurs on the day of entry. If the profit target is not achieved at the end of the third day, the position is liquidated.

The protective stop is 75% of the trading range on the day of entry. For example, let’s assume a buy signal occurs on 27 December @ 54,450. Let’s also assume that the trading range is 3,625 points on the day of entry. Therefore, the amount of your protective stop is 2,720 points. The calculation is 3,625 x 75% = 2,720. The stop is 51,730 (54,450 – 2,720).

TRABOM is a very simple trading system. However, it continues to produce consistent results. This type of trading method works because it follows the underlying trend of the market. TRABOM never tries to pick tops and bottoms. Instead, it waits for the market to produce a bullish breakout or a bearish breakdown. TRABOM has been helping traders improve their results ever since Larry Williams introduced this method in 1979.

Keys To Successful Trading

Unfortunately, there is no “magic formula” to becoming a successful trader. It takes years of hard work, dedication, self-sacrifice, practice, and commitment. Many new traders are under the impression that profitable trading can be learned from reading a book or participating in an online trading course. This is simply not true.

According to most professional surveys, approximately 70% of all traders lose money. Based on my experience, I agree with this number. The overwhelming number of traders will lose money during their trading careers. Why do so many people lose money? Because they have no trading plan, and they lack the necessary discipline to develop a successful strategy.

Throughout my 32-year trading career, I’ve discovered that the most successful traders use very simple strategies for trading stocks, commodities, forex, and crypto. I have used several different trading methods over the years. Without question, the most consistently profitable methods are based on a few simple trading rules. Highly complex trading methods rarely work over long periods of time because these systems contain too many rules. Typically, the rules are “curve-fitted” in an effort to generate profitable results. A curve-fitted system looks great on paper. However, the system never lives up to expectations with real money trading. If you want to become a successful trader, always remember to “keep it simple.”

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WD GannBorn on 6 June 1878, WD Gann was considered one of the greatest stock and commodity traders of his generation. Gann devoted the majority of his professional career to the study of technical analysis, including chart formations, astronomy, astrology, geometric patterns and mathematical formulas....