There are times when it is very difficult to decipher the path that our investments in cryptocurrencies will take. Well... Why lie to us, it's more difficult than getting out of bed on a Monday morning to go to work. The world of investments can seem like a tough nut to crack, even more so if we also add the randomness of the market, the volatility of the crypto market and its oddities. Yes, by rarities we mean events that seem to be the result of chance but are not. So today we are going to deal with 3 oddities of the cryptocurrency market and how we can take advantage of them for our trading training.
What are the oddities of the market?
Market oddities are events that can seem totally random to the normal functioning of financial markets, as if it were a black swan. Usually they can go unnoticed by any investor, other times they can easily jump out at us but we cannot find any logic in it. These events can often play tricks on us because we do not have control of the situation, either due to a poorly placed stoploss, a limit purchase order that has not been entered by a couple of tenths or when the price reverses after being close to our take profit order. Other oddities are easier to see and operate, let's see which ones they are:
API failures.
The first oddity we will teach you in today's trading training is API glitches. Very roughly speaking, they can be considered technical errors in data provision between the source (exchange) and the charting platform we use (Tradingview, Metatrader, etc...). They can normally be seen on the chart when we see a candle with a long upward or downward wick represented with almost no volume. There are different types of API failures, which can be real or manipulated:
1. Flash crash.
Denominated as a price collapse in a short period of time caused by stock market panic and a lot of downward pressure. Usually when this event occurs, the bots begin to sweep stoploss orders that cause a massive drop in price. They can be seen with a lot of volume on the graph and it is usually a vertical drop.
Example of a flash crash that occurred in the Dow Jones Industrial Index (DJI). Source: Rankia.
Fat finger.
Referred to as human errors, as its name in English indicates, it is a human error when executing an operation in which investors with large capital make a mistake when directing their operation upwards or downwards. These errors lead to large price increases or decreases. They are appreciated with a lot of volume.
Barclays' fat finger, which caused the company to lose 4 billion. Source: Bloomberg.
Manipulated API bug.狼
In this case, the errors in the graph that are made on purpose are usually hidden messages sent by large investors (whales or sharks) to manipulate the future direction of the market. They can be seen when we see a candle with a considerable wick and the volume of said candle is almost zero. They are typically best seen on the 15 minute time frame and on exchanges like Kraken or Bitfinex with EUR parity.
API failure in the ETH/USDT pair on the Bitstamp exchange. Source: Tradingview.
How do we take advantage of this rarity?
In order to take advantage of API failures, it is enough to find out if it meets the characteristics that we have been reviewing in the previous paragraphs. We must keep in mind that, at first glance, not all API failures have to be. As a recommendation, it is best to look at 15-minute time frames on exchanges like Kraken or Bitfinex in parity with the euro. This is because strong hands usually leave these types of signals specifically on these two exchanges, although they can be found on others.
API failure in Bitcoin futures on Binance, August 26, 2021. Source: Tradingview.
The timing of API bugs can vary, as an API bug can be closed in a matter of minutes or it can take forever to close. It is a rarity that we do know how to identify well, it provides us with a clear objective if we want to take advantage of this opportunity, but we remember that the timing may vary, and could even not be met...
Futures gaps.️
The second market oddity that we are going to teach in this trading training is futures gaps. This rarity is based on the observation of market gaps between two candles within a chart when there has been no trading between them. Specifically, we will talk about the gaps of CME BTC futures. When the market closes on Friday at eleven at night and reopens on Sunday at twelve in the morning, a gap is created due to the fluctuation of the real-time price of Bitcoin in spot. When it opens on Sunday, a gap is left between Friday's closing price and the spot price of Bitcoin when futures open. This hole or gap is normally closed most of the time, although some may remain open. It is a phenomenon that occurs in various asset classes, such as indices or stocks.
How do we take advantage of this market rarity?
In the graph below we can see the explanation in parts of how to operate a futures gap. In this case we are going to expose a gap that recently closed in the CME (Chicago Mercantile Exchange) Bitcoin futures:
- We see how the futures market closes on Friday at eleven o'clock at night. During the weekend, the cryptocurrency spot market remains open, so the price continues to fluctuate up or down from Friday's closing price.
- On Sunday at twelve in the morning, Bitcoin futures trading resumes. In this example we can see how it has opened with a bearish gap, that is, the price of Bitcoin has opened lower with respect to its closing price on Friday.
- Now is when we must be attentive; We wait for the price to approach the bottom of the gap and establish our buy order (or sell if it is a bullish gap) waiting for confirmation and, obviously, our stop loss order according to the levels. established.
- Finally, we establish our take profit order, actively managing our position.
Example of investment operations in Bitcoin futures gaps. Source: Tradingview.
Green Saturdays, red Sundays.
Yes, this market oddity sounds like a Telepizza promotion, but rather it is a promotion of the crypto market. This last oddity of this trading formation is based on a statistical calculation of rises and falls depending on the day it falls on the weekend, we have come to the conclusion that with high probability Saturdays are usually bullish days and Sundays are usually bullish days. bearish days. This study is based on mathematical statistics, as any of them can fail. From our point of view, it may be because the money that has moved throughout the week in other markets (whether forex, raw materials, indices, or others) ends up in the cryptocurrency market, and the next day When they prepare to return to their respective markets, the cryptocurrency market suddenly deflates.
How can we take advantage of this market rarity?
The simple (but not most effective) way to take advantage of this oddity is to open a buy position during the start of Saturday, obviously setting a stop loss order according to the entry level. Next we have to actively manage the position, where we can use the Alerts tool available in Tradingview to be attentive to any movement that we set. To take advantage of the falls on Sundays we will follow the same procedure but in reverse; We open a short at the beginning of Sunday and do active management in the same way, setting alert levels. We remember again that this rarity is based on a probability study, so we must look at the market context before entering into this type of rarity.
Example of bullish Saturday and bearish Sunday in Bitcoin. Source: Tradingview.
Conclusions from this trading training on market oddities.
As we have been learning throughout this trading training on market oddities, there are no absolute truths. It is true that some of the oddities that we have shown, such as futures gaps, have a higher success rate than the other two. But as we repeat again, they do not assure us of the near future of the asset in question, which is why we must combine these rarity operating strategies along with other indicators and relevant information to enter the market with the meat on the grill without getting burned. the steak, or rather, our bill…