This article aims to give a brief summary of a very efficient way to know how to position yourself in trades, having a notion of how to position yourself and the most appropriate percentage to look for in daytrade or scalpings.
The tools to be used in this simple setup will be trend-based fib extension and price range.
For a test example I will use this 1 hour BAT / BTC chart on the binance I was now analyzing to look for a trade opportunity. Initially it is noted that it is in a downtrend with a small period of lateralization with the face that will break negatively.
From now on we will search the chart with the price range tool for the most significant points of the trend (in case of a fall) and measure the percentage of it, from here I could see that the graph tends to fall between 7.5% and 10 % before rising again with this new pump being approximately 4%.
At this point I already have enough information to start working out my expected entry and return point in trading.
Now it's time to look for possible points where this chart will end, with the trend-based fib extension tool I'm going to look for one of those points where there was a 7% drop, I put the first point in the candle that started the fall, the second point in candle that marked the 4% reversal and the third point on the current candle showing the potential fall.
This brief study shows me that the seller flow, if it will follow the patterns of the last falls will stop near 2560 Satoshis as we have a lot of confluence near this zone and only a seller flow that leads to something lower in the 2519 Satoshis.
Now, saying that the 2560 Satoshis point is the point near reversal I draw the same trend-based fib extension or price range to determine the point that I will exit trading making my profits. It is clear here that the exact zone where the price for the fibonacci extension would stop coincides with a zone of resistance that would be formed after the price broke down, giving us a greater margin of safety on exit.
Knowing then that the seller flow tends to stop by analysis at a maximum of 2519 satoshis you could place the stop between 5 and 10 satoshis below this value depending on your risk tolerance. Also, if the value really fell near that zone and knowing that the price would return 4% could stipulate another zone to make the realization of its partial profits, that zone coincides with point 0.5 of that same fibonacci projection that is in 2620 satoshis, if you were not in front of the pc during this profit making this would result in 50% of the capital you put into the transaction making the partial profits and the other 50% taking the stop in the continuation of the fall ie you would not win nor would I miss the operation.
Finally, this operation would bring a risk / reward = 2.
Remember that depending on the time graph you are analyzing there may be greater volatility in the buyer / seller flow. In the example given I was looking at the one hour chart and at the next day voltr the 7% seller flow fell to approximately 4% and the buyer fell from 4% to 2.75% so take this into account when analyzing. Do not consider this analysis as an input signal, this is not the purpose here.
Using this setup correctly can produce great results, it all depends on your MANAGEMENT, remembering that you should never enter into an operation with all your capital. Managing your orders and positions is essential to successful trading.
I hope I have helped, success in your negotiations and thanks for reading so far :D