82rPE9Ok_FM

g'day Traders welcome back to another
pine script lesson today's video I'm
going to be answering the question
that's been on my mind for the past few
months which is when is it a good time
to buy back into crypto so if you
followed my channel for a while you know
I've been involved in crypto since 2017
and I've been through some crazy ups and
some pretty nasty downs and over the
past year we've seen yet another nasty
bear Market in the crypto space the
problem is with crypto you never know
how low it's going to go during the good
times I'm always Blown Away by just how
exuberant the Market's getting how far
crypto Rises and when the bear markets
hit I'm always shocked at how bad they
can get and how low prices can go I'm
always underestimating the upside and
underestimating the downside which is a
big problem when you have a lot of money
at risk and so today I'm going to share
some thoughts I have on how I'm
addressing the bear market and when I
plan to reinvest the profits I took
during the last bull market so what I
have here on my chart is essentially a
regime filter that is taking trades this
is to test my theory so when this band
at the bottom turns red I go into
defensive mode and I remain in cash or
stable coin however you like to trade
your crypto and when it's green I am
invested in the markets now before I
continue this is not investment advice
I'm not an investment advisor financial
advisor I don't know your risk tolerance
I don't know your financial situation so
take all of this is just my opinion and
just how I personally am managing my
money in crypto so let's zoom in a
little bit here and I'll explain what
the script is doing
um let's have a look at
the most recent Bull Run that started in
late 2020. so if I bring this regime
filter up a bit What's Happening Here
is the regime filter my momentum filter
my Trend filter is red all the way along
here and then in late 2020 it suddenly
turns green
and so on this bar here
the regime filter goes from red to Green
and once we get a green bar confirmed a
green filter confirmed on the next bars
open we enter our position we use a
trailing stop this red line is a
trailing stop and the trailing stop uses
what is called a ratchet kind of system
so it ratchets up closer to price action
when the regime filter enters defensive
mode so you can see it turns yellow here
or orange when it turns orange the
trailing stop Rises much closer to price
action and once we get a candle that
closes below that trailing stop we exit
our position and if the market turns
green again so you can see here we had a
closed below our trailing stop we got
out of our position but on the very next
bar the filter turned green and so we
enter long on the next open so this is a
long only investment technique for
Bitcoin in particular and you can see
it's had pretty nice metrics here and
nearly ten thousand percent gain with a
20 Max drawdown is pretty damn good when
it comes to crypto given the volatility
of crypto now obviously this is back
testing from the very very first sort of
inception of Bitcoin so all the way back
in 2015 realistically
um I mean I didn't start trading crypto
until early 20s so mid 2017 around here
around June so if I want to I can apply
a date filter to June 2017 and now the
script will only take trades from June
and we get slightly more realistic
returns here but keep in mind the bulk
of exponential profits made in crypto
are made in alt coins obviously buying
and holding Bitcoin is the quote-unquote
safest option when it comes to investing
in crypto but the big money is typically
made in all coins these days and so the
way I would use this filter is I would
only invest into my old coins when this
filter is green and Bitcoin is healthy
because if Bitcoin is healthy the rest
of the market tends to Trend upwards
when Bitcoin is unhealthy the crypto
markets tend to slowly or sometimes
rapidly bleed right back down to
valuations that they were in before the
most recent bull market cycle so I've
added a few settings to this indicator
if I turn RSI momentum filter off this
is how I would use this regime filter
during the next cycle
so whenever this turns orange I would
become extra conservative with my open
positions so I'm either going to
increase my trailing stop to lock in
profits or I'm going to start scaling
out of a position you know depending
where we are in the cycle during this
period here when we were hitting 60k
when this turns orange I'd be inclined
to sort of DCA out of my position start
selling you know maybe every time this
turns orange sell 10 of my Holdings and
start taking that profit off the table
and then when the filter turns red
I would just stand aside and do nothing
and wait until it turns green again so
as you can see here after that initial
sell-off we were red for quite a while
and then eventually the market recovered
this key moving average and a few other
metrics that I used to analyze the
Market's momentum and then I would
reinvest capture most of this next Bull
cycle and then as soon as this turns red
around here I would go to cache and
stand aside and you will get some fake
outs like here we had a bit of a fake
out the filter bought back in once
Bitcoin recovered this key moving
average but then it immediately went
into defensive mode the trailing stop
was significantly raised and we exited
for a small profit here and then again
for a small loss here and then once we
fell back below this 20-week EMA we went
back into defensive mode and we have
been in defensive mode ever since which
is a good thing since we've only bled
lower since this little fake out
so anyway with all that said that
description out of the way let's jump
into the source code for the script and
I'll show you how I built this out
obviously the source code as always will
be below the video in the video
description and you can play around with
this if you have your own ideas to
implement into this concept I definitely
encourage you to do that so let's open
up the pine editor so the first thing is
always I lay out my strategy parameters
we're drawing to the Chart my initial
capital is 10 000 and I should also set
my default currency currency Dot
USD T why not you could set this to USD
or whatever you want but I'm going to
leave mine as us tether for now so 10
000 us tether is our starting balance
our default quantity type is a
percentage of our total equity and the
default trade amount the position size
we are going to invest in each trade is
100 of our Equity so the first trade
would invest the full 10 000 and we keep
reinvesting our profits on each
subsequent Trade Commission type is set
to a percentage of our overall position
size and I've set the commission value
to 0.1 percent because that is what
binance charge and binance is my main
trading platform for crypto but
obviously if you use a different
platform or you're on a different
commission tier whatever you want to
change this number to reflect that then
finally I set the decimal Precision of
this indicator to three decimals that
was for debug purposes and I don't
really need that anymore so get rid of
that we have one two three four five six
seven user inputs here the first one is
the time frame of our regime filter its
default value is the weekly chart let me
indent these a bit to make it a little
easier on the eyes so we have a time
frame resolution weekly by default a EMA
length uh this is our regime filter our
higher time frame so by default it's a
20 week EMA on the current market the
market time frame is our trading time
frame so by default that's set to the
daily chart use RSI is this setting here
use our assign momentum filter and RSI
mom is short for momentum that's set to
70 by default this is turned off by
default what this does is if this is
turned on the current RSI value must be
above this number in order for our
regime band to turn green
so if I drop this down to let's say 30
we'll see a lot more green
on this regime filter because the RSI is
obviously going to be above 30 more
often than it will be above 70. now in
crypto generally that means that
momentum is strong especially during
bull markets during bear markets 70
could be oversold but when we're trading
above the 20-week EMA typically a high
RSI reading is a good thing that means
momentum is strong so that's why I
included this filter here you'll notice
that if you set this to a lower number
our drawdown increases quite a bit our
return doesn't increase very much
but our drawdown definitely does because
we're taking more trades during week
market conditions so I like to leave
this at least 50 or above that gives us
an even better reading 31 with an 11 000
return but 70 drops the draw down quite
a bit so obviously all a matter of
preference how you would set this up and
past performance is not indicative of
future results so don't depend on this
data even though these numbers look
really good there's a non-negligible
chance that these numbers won't hold up
into the future indefinitely but they
should be better than just simply buying
and holding the market and hoping for
the best at least you're taking
defensive action when the market turns
bearish that is key in crypto anyone can
make a fortune in crypto I've met
countless people who made tons of money
in crypto especially during the last
Bull Run and I know very few who kept
that money I know a lot of people who
are very disappointed right now because
they didn't have a strategy they didn't
have an Exit Plan and they just thought
this would go up forever and ever crypto
does not do that it goes up quite
strongly and then it eventually
capitulates and this system can help
protect your open profits so by being
defensive in your crypto not getting
married to your coins and selling them
when the market takes a turn for the
worst you protect your Capital so that
you can accumulate even more of those
coins you like later on so don't be
afraid of selling your crypto the big
question is when do you sell when do you
buy that's what this script can help
with so anyway those are our user inputs
we also have a Time filter so this is a
start date and day end date I showed you
already how that works that just tells
the script when to take trades and when
not to take trades which helps you do
some in-depth analysis on how this
technique performed during various
periods of time next thing we have here
is some custom functions so there the
first one is just a Custom Security
function that uses the standard
request.security function this is the
function we use to reference a higher
time frame so we pass in our Market we
pass in our resolution our time frame
and we pass in the expression we want to
get from that higher time frame and the
reason I have this custom function here
is to eliminate repainting which is this
code here now if you're not sure what
repainting is I'd encourage you to go
and check out my Mastery course where I
explain a lot of these higher level
Concepts in great detail that's the
whole point of that course if I were to
explain some of these Concepts in every
video on YouTube my videos would be so
much longer I just don't have time to do
that on the channel so if you're new to
plan script and this line of code looks
confusing to you I definitely suggest
you go and check out the Mastery course
but anyway in this particular script
repainting is not that big of a deal
since we are trading the daily time
frame and weekly time frames when you're
trading those higher time frames it's
not the worst thing in the world to have
repainting in your script but I like to
address repainting when I can it's just
a habit I've gotten into the next thing
we have is our date filter function so
this function takes two integer inputs
they're time stamps so St stands for
start time
ET stands for extraterrestrial and end
time and if the current bars time is
greater than or equal to the start time
or less than or equal to the end time
then this function will return true and
we are permitted to take trades Within
These two time windows or timestamps we
use these two functions these custom
functions later on in the script to get
our data and filter our trades but we'll
get to that soon now the next thing we
do is we get our higher time frame EMA
value so to do that we use our Custom
Security function that eliminates
repainting we pass in the current symbol
ticker so that's BTC USD we pass in our
resolution our time frame setting so w
by default which is the weekly time
frame and then we pass in our expression
that we want to get from that higher
time frame so in this case that's a EMA
so we're getting the EMA based on the
closing price over this look back period
which is 20 bars so we're getting a 20
week EMA here you can change that in the
settings if you have a reason to and
that is what is drawing onto the chart
here you can see this stepped line
that is the 20-week EMA drawing over the
daily chart so obviously there's seven
days per week so we have seven bars
plotting before the 20 week EMA updates
at the end of that week when that Weekly
bar closes and that's why we get the
stepped effect it's quite a useful
indicator actually on multiple time
frames I have created strategies where I
can use this higher time frame EMAs kind
of like a supporter resistance level you
can see getting tested here and then we
get rejected obviously that won't happen
all the time but by combining market
conditions and rules you can actually
build a strategy around trading tests of
these higher time frame EMAs especially
during strongly trending markets but
anyway I digress so that's our EMA
higher time frame EMA the next thing we
do is get an ATR value so this is on our
trading time frame in this case the
daily chart we're getting a five bar ATR
value and then here is where we actually
calculate our filter our regime filter
conditions so the first thing we need to
do is get the market price of our Market
time frame so in this case if I scroll
up that is the daily chart so market
price is going to be set to the current
daily charts closing price value or in
this case we're using a function that
eliminates repainting so it would
actually be referencing yesterday's
confirmed closing price so that's what
this line of code gets and then regime
filter checks is our market price so in
this case the daily closing price of
yesterday's bar the last confirmed daily
price is that greater than our higher
time frame EMA so this red line here is
our market price greater than the higher
time frame EMA plus the current ATR
value of the past five bars multiplied
by 0.25 so the closing price of the
daily bar must be at least a quarter of
it of an ATR above that line so if the
bar closes right on that line Channel
just slightly above it that does not
count as bullish because we might just
be testing that EMA what we want is a
sustained move beyond that EMA by at
least a quarter of an ATR and if we
close above that EMA by a small margin
then a regime filter is considered true
the next thing we do is we get an RSI
value not a macd value I did initially
create this script using a macd I found
that the RSI was simpler to use and gave
slightly better results so it's a matter
of preference what you use here but for
today's purposes I found the RSI to be a
simpler more appropriate tool so we get
our 7 bar RSI value based on the closing
price and then
this is where we decide whether or not
to paint this regime filter green so the
only time this will turn green is if our
regime filter is passed so the current
market price is above our higher time
frame EMA so the daily bar must close
above the 20-week EMA and our current
RSI value is greater than our RSI
momentum setting the setting here or we
are not using the RSI momentum filter so
either the RSI value needs to be greater
than this number or this needs to be
unchecked in order for this to return
true so we need our regime filter to
pass and the RSI momentum filtered to
pass in order for bullish to be true so
by not using the RSI momentum filter
this could be a useful tool for managing
altcoin positions as I mentioned earlier
so long as this is green or even Orange
we don't have a lot of reason to panic
we can sit tight when the regime filter
turns orange we should probably be a
little more defensive a little more
cautious maybe prepare to sell your
coins if you've got them in cold storage
or something you might want to move them
onto an exchange whenever this turns
orange or stays orange for a little
while
um that's one potential use case for
this filter there's an active Investment
Management technique if you turn this on
then this becomes more of a Bitcoin
trading strategy than a overall
Investment Portfolio management
technique or tool but anyway how you use
this tool is up to you I've already
explained how I plan to use it I'll be
using this to manage probably a
significant portion of my Bitcoin
positions but also managing my altcoin
positions when the next bull market
starts cycle starts which could be years
from now to be honest so I'm being
patient I'm not expecting that to happen
anytime soon it may never happen but I
would expect it will in the next few
years and having this tool built in
advance will be really helpful in
managing those positions and knowing
when to buy back in because who knows
how much lower Bitcoin will go but I do
know that when it's above this 20-week
EMA we tend to see big bull rallies and
when we fall below that 20-week EMA
things are not so good it's a very
simple objective way to decide which
side of the market I want to be on so
this line of code here is what turns our
little band orange and what this does is
it checks are we bullish so is this
condition mad so we are trading above
the 20-week EMA and our RSI momentum
filter is met
if that's true but the distance from the
most recent swing high so this gets the
highest high over the past seven bars
and then subtracts the current bars low
so here's a good example
um first of all that this regime filter
is a little bit off you can see it's
turning red here even though price is
above the 20 week EMA the reason is
because I've set the size to huge if I
set this to Auto or something smaller it
will actually track much better with
price action so there you go you can see
that it didn't turn green until this bar
here
um but it gets a little hard to read
when you zoom out or hard to see what I
might do is set this to top and set the
size to normal that's a bit better
it's kind of kind of in the way a little
draw of a price action but at least we
can see what's going on a bit better
here so if I zoom in here on this top
here you can see that this turns orange
on this bar here the reason this turns
orange is because caution is true and
the reason this is true is because the
highest high over the past seven bars up
here somewhere minus the low of the
current bar
so this distance here
is greater than our five period ATR
value multiplied by 1.5 so the distance
between
our high
and our low
on this bar is greater than one and a
half atrs that means volatility is
picking up just by definition if the
current bar is low is greater than one
and a half atr's distance from the
recent swing High then we have
volatility picking up and when this
happens our trailing stop Rises to lock
in profit and be more defensive and this
code here is where we set the color of
our regime filter so by default it's set
to red but if the previous bar was
bullish so we had a confirmed bullish
close on the previous bar
it's set to green and if on the previous
bar caution was true so we had we were
bullish but the current bars low was
greater than one and a half atrs from
the high
then we set the color to Orange and then
here I use the plot shape function to
draw this band you see at the top we
just plot one so it's always drawing on
every single bar in our chart and we set
the color to BG color this variable here
and then the style is just a square you
could change this if you wanted to to
pretty much anything we could make it a
diamond for example it's really a matter
of preference what you like to look at
when you see this on your chart we set
the location to wherever we want we
could set it to the bottom we could set
it to the top
um I've currently got it set to the top
let's set it to the bottom so it's a bit
more out of the way of price action and
then the size you can set this to
whatever you want
if you set it to large then what happens
is some of these will draw over the top
of other ones and you won't get an
accurate reading on um when the regime
filter turns green or red so you
probably want to keep the size at normal
or below then the next thing we do is
just plot our higher time frame EMA this
um
depth line you see here and we change
the color of that line based on whether
the current bar is trading above or
below that key moving average and then
here is where we handle our strategy
code so the first thing we do is declare
our trailing stop our ratchet stop loss
it's a float type it's persistent VAR
means it will not reset on every new bar
it will stay saved across all the bars
in our chart which is what we want with
a trailing stop loss and then after we
declare our stop bus we enter our
position when our entry conditions are
met so the entry conditions are is the
market currently bullish so is our
regime filter green and do we not
currently have any open positions so is
our position size equal to zero and do
we pass our date filter check so we're
trading within our start time and our
end time and the market is not orange
our regime filter is not orange if it's
orange we don't want to enter a position
we want to only enter a position when we
get a green light we simply use the
strategy.entry function to enter that
long position this is a long only
investment strategy we're not shorting
Bitcoin today's lesson is about how to
manage a long investment positions and
then once we've entered long we reset
our trailing stop to n a so if we
already had a trailing stop from our
previous trade we override that to Na
and start a new trailing stop and the
trailing stop code is handled here so
what we're doing is we're getting the
highest low over the past seven bars so
we're looking back at seven bars
whichever bar has the highest low that
is what we anchor our trailing stop to
and then to get a long trailing stop we
need to subtract
from the low to get our red line and
what we do here is we check is the
previous bar orange is our regime filter
orange on the previous bar
if so then we want to have a really
tight trailing stop so we Trail 20 of
the ATR below that swing low if I zoom
in here you can see that the initial
trailing stop is all the way down here
that's one ATR below the swing low and
as price moves up it moves up to lock in
profit but then on this bar
we get our caution warning volatility is
picked up on this bar here the low is
greater than 1.5 times ATR from the high
and so our trailing stop ratchets up
significantly to 20 of the current APR
below that swing low and our red line is
here now we don't exit our trade unless
we get a close below that line so it's
okay if the market tests this line if we
get Wix below that line that's fine but
once we get a close below then we sell
our position so that's how this ratchet
trailing stop Works in today's script so
this gets calculated on every single bar
on our chart
and then to update our trailing stop our
red line here we check is our position
size greater than zero so do we have an
open position if so then we check if our
temporary trailing stop is greater than
our saved trailing stop our red line or
we have not yet set a trailing stop so
Trail stop is n a and we've just opened
a position if either of those conditions
are met so our new trailing stop is
greater than our old trailing stop or we
don't have a trailing stop then we save
our trailing stop value to Temp Trail
stop our temporary trailing stop so this
ensures that we only update the stop
loss by moving it higher so whenever a
new stop loss is calculated and it's
higher than the previous stop loss our
current Red Line then we update our stop
loss we don't want to move the stop loss
down as that defeats the purpose of a
trailing stop to lock in profits and
will never exit our position if we do
that or if we haven't set a trailing
stop we you obviously need to set one to
begin
trailing our position and then that's
pretty much it for the script the final
bit of code here just checks if the
current Bar's closing price is less than
our trailing stop our red line or the
current bar has closed below our 20 EMA
this stepped line here 20 week EMA if
that happens then we exit our position
we close our Buy trade so let's see if I
can find an example of that happening it
should be quite rare uh here's an
example of that happening
so technically we close both below our
trailing stop and the 20-week EMA but if
our trailing stop had been below this
20-week EMA we would have exited our
position as well because that's our
regime filter if the market is not
trading above the 20-week EMA then the
market is not healthy and we want to get
out so that's what this line of code
here does
then finally we just draw our trailing
stop so if our position size on the
previous bar was greater than zero then
we plot trailing stop otherwise we plot
nothing we draw nothing and we use the
line break style and that's it the
script is done let me change this back
to square and now we have a tool for
managing our Bitcoin positions actively
and potentially our altcoin positions as
well depending on how you like to trade
or invest again none of this is
investment advice or trading advice this
is just some ideas some food for thought
for you guys to go and play around with
make it your own get the source code
below this video and go and modify it to
suit your personality and your beliefs
about the markets your preferences in
how you analyze price action maybe you
want to use a different moving average
or a different time frame or different
indicator momentum filter I definitely
encourage you guys to go and play around
with my code and make it your own having
this ratchet technique letting the
market ride when things are good having
a wider stop loss when the region filter
is green and then when things turn red
bringing that stop loss up much tighter
allows us to exit much closer to the
highs and avoid holding through these
sustained bearish moves and so what I'd
be looking for in the month to come is
for Bitcoin to probably most likely
capitulate at some point before
bottoming that tends to be what Bitcoin
does but regardless if it doesn't do
that if we just go sideways here for a
while and create a sort of accumulation
Zone a consolidation and we just go
sideways for a few months eventually
this moving average will come down
Bitcoin will break above it and then
potentially start trending higher we get
fully invested yes we might miss some of
that initial profit by buying at the
bottom but again where is the bottom how
do we know that this wasn't the bottom
this wasn't the bottom this wasn't the
bottom
is this going to be the bottom who knows
we could fall another 50 from here
easily by having this sort of regime
filtered investment Technique we wait
until this moving average comes down
price action breaks above it starts
trading above it and then we get
invested and ride that next Bull move
or maybe we get faked out maybe price
breaks above it and then we fall back
below it we take a small loss and we
wait for this moving average to get
lower and lower you know maybe Bitcoin
comes down to 5K unlikely but possible
uh and it gets down there we save our
Capital throughout this whole decline
because we're not invested and then when
the markets do turn around we have
plenty of dry powder in our Arsenal to
take advantage of that Trend reversal so
I hope you guys found this idea
interesting the source code will be
below as always best of luck with your
trading be careful out there don't risk
more than you can afford to lose
remember that good defenses win
championships more so than being
aggressive and I'll speak with you in
the next lesson take care and have a
great day