My systematic approach to analyze and trade the markets
Current Market Trend Analysis:
Start by analyzing the current market trend using moving averages and price action. Determine whether the market is trending upwards, downwards, or sideways. This provides a foundational understanding of the market's direction.
Volumes Analysis:
Once you've identified the trend, analyze trading volumes to confirm the strength of the trend. Start with cumulative volume to gauge overall trading activity, then examine cumulative volume delta to understand buying and selling pressure. Finally, analyze volume profile to identify significant support and resistance levels.
Trend Confirmation:
After assessing volumes, confirm the trend using open interest and funding rates. Increasing open interest along with price movement validates the strength of the trend. Additionally, monitoring funding rates provides insights into market sentiment, which can confirm or contradict the observed trend.
Trade Entries:
With a confirmed trend, use machine learning algorithms to identify potential trade entries. Machine learning can analyze historical data and market patterns to generate trade signals. Incorporate these signals into your trading strategy to enter positions in line with the identified trend.
Risk Management:
Finally, implement risk management techniques to protect your capital. Calculate the Average True Range (ATR) to determine appropriate stop-loss levels based on market volatility. Additionally, manage your portfolio effectively by diversifying across different asset classes and sizing positions appropriately to minimize risk.
By following this organized approach, you can systematically analyze the market, confirm the trend, identify trade opportunities, and manage risk effectively. This structured workflow helps ensure that you consider all relevant market factors in making informed trading decisions.
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