Written by: PaxForex analytics dept - Wednesday, 02 January 2019 0 comments
Welcome to a very bright 2019 everyone! We are less than 48 hours into the new year, but all ingredients are ready to be mixed into one exciting trading year. I am very confident in stating that the bearish sentiment which remained in the driver’s seat for most of 2018 will no longer be dominant in 2019. December of 2018 marked a period where solid cryptocurrencies started the process of forming a bottom and we start 2019 by extending this move. This process started in the beginning of December and I outlined one of the biggest drivers in this post “Bitcoin - Forex Combo Strategy: Fundamentals Stronger Than Ever”.
One of the most important and often overlooked signs of confirmation is volume. A lot of traders focus on various technical indicators with the MACD being one of the most popular ones when it comes to quoted Bitcoin analysis. While they can provide trading signals, volume is the ingredient which confirms the validity of a signal. It is like the salt in a meal, it provides the right flavour if used properly and makes a meal complete. Cryptocurrency volume has been in the rise in December, quietly and away from the social media circus. The slow increase has confirmed the bottom forming process and is a much stronger indicator of an ascend in price action than most other indicators.
Another important volume related fact I would like to point out is that volume did not increase across the entire cryptocurrency sector, but was more focused. This points out the fundamentally stronger coins and separates them from the rest of the space which manages to hang in based on marketing hype. Traders can quickly sort through solid coins and those who are more likely to fail. Amongst the cryptocurrencies which posted an increase in volume in December as compared to November are Bitcoin, Ethereum, Tether, Eos and Litecoin. Ripple, Bitcoin Cash, Ethereum Classic posted contraction in monthly volume.
Ethereum, which has been amongst the biggest losers in the cryptocurrency space in 2018, has reclaimed the top spot in the altcoin space. It has lost this position to Ripple, but as of today it surged bast its competitor and currently enjoys a lead in market cap in excess of $500,000. Ripple has suffered from a dispute between the cryptocurrency and the Ripple payment network which weighted in sentiment and sowed confusion. Over the past few weeks, Ethereum has rallied over 80% and it is likely that the move will be extended far beyond this point.
Overall 2018 has ended on a solid footing as it ushered in the start of a bottom forming process and the pipeline looks bright for 2019. The rise in volume confirms that we are working through the lows and I believe we are in for a very strong start into the year. Even some governments are venturing into the cryptocurrency space with South Africa looking to establish crypto assets. Finance Minister Tito Mboweni stated that “It is anticipated that, following broad industry comment and participation, the crypto assets regulatory working group will be ready to release a final research paper on the subject during the course of 2019.”
The strong performance in Ethereum has boosted my portfolio as I currently hold 1,500 Ethers at an average entry price of $171.67. I am looking for this rally to retest the $200 mark and potential extend a breakout to $220. I am likely to exit my Ethereum position once we approach the $200 level and start rebuilding the portfolio as price action reverses. A series of higher highs and lower lows may form as stronger fundamentals in Ethereum will translate into bigger demand on the back of stronger volume. The image below shows my two entry levels into Ethereum.
Bitcoin has retreated from a quick move above $4,000 and is currently hovering near $3,800. A small sideways trend has emerged, but bearish pressures remain muted. Price action is located just above its horizontal support area and with bullish
sentiment on the rise I expect Bitcoin to once again pierce above $4,000. A breakout above it will clear a rally back above $6,000.I currently hold 100 Bitcoins with an average entry price of $5,130. The image below illustrates when and where I entered my long position.
Gold continues to shine and is on its way to challenge the $1,300 level. While I do expect price action to pause near that level, a breakout above it will likely take this precious metal to the $1,500 mark. Geopolitical tension are increasing, global economic conditions are decreasing, central banks are tightening and debt is out of control. All those factors will continue to support higher Gold prices. I own 100 lots which I purchased at $1,195.00, my margin requirement is $123,179 with a pip value of $100. The image below shows my current trade.
On December 31st 2018, my open EURGBP short position, 30 lots at 0.9000, was closed at 0.8940 as my adjusted stop loss was triggered. I closed this trade for a profit of 60 pips or $22,808. Also on December 31st 2018, my open 25 lots USDACD long position was closed as my take profit at 1.3645 was triggered. I booked a profit of 75 pips or $13,788. The first image below shows the entry as well as exit dates and levels for the EURGBP position and the second image shows my USDCAD trade.
The exit of both my open positions on December 31st 2018 has allowed me to start the new year with a clean forex portfolio worth $394,820. This represents my main trading account at PaxForex as I keep my Gold position in a sub-account and my cryptocurrency positions in their respective wallets. I did not take on any new forex positions during the last few trading sessions of 2018 as I do not trade in holiday shortened, low volume trading environments. It is good to take a few days and rest, so don’t forget that.
I did start this new trading year by taking a short position in the EURAUD according to this trading recommendation “EURAUD Fundamental Analysis – January 2nd 2019”. I sold 50 lots at 1.6325 and the margin requirement was $11,383 with a pip value of $349.27. You can see today’s entry in the image below.
I decided to add Ripple to my cryptocurrency portfolio and earlier today, January 2nd 2019, I purchased 300,000 XRP at a price of $0.3500 for a total consideration of $105,000. I plan to add more should price action retreat to around $0.2750. You can see my opening trade in the image below.