Simple HFT Strategy - Red Bar Ignored (RBI)

RBI Crypto Trading Strategy – Introduction

The Red Bar Ignored (RBI) Crypto Trading strategy is about using and detecting a psychological effect on the 2-minute chart. It involves waiting for a single red price candle in an upward movement and betting on rising prices as soon as the subsequent candle crosses the open (entry price) of the red candle from the bottom to the top. Due to its purely technical nature, this strategy is well suited for HFT (high-frequency trading) and can also be used for short orders (Green Bar Ignored).

At a glance – Bitcoin HFT Strategy

Time needed 2 Minuten.

The 4 steps of the Red Bar Ignored Crypto Trading Strategy explained simply:

  1. Recognize Picture of Power

    For a long position, the current price must be above MA 20 and MA 20 must be above MA 200. For a short position, the price must be below MA 20 and MA 20 must be below MA 200.Picture of Power with 20 and 200 MA

  2. Open a position

    If there is a Picture of Power, you can open your position at the open price of the ignored candle (red for long and green for short).Starting with the Red-Bar-Ignored Strategy

  3. Set a stop loss

    Set a stop loss at the close price of the ignored candle to hedge your position.Stop Loss with the Red Bar Ignored Strategy

  4. Realize profits

    Realisieren sie Teilgewinne sobald sich ihr Trade im Profit befindet und ziehen sie Ihre Stop Loss Order in den Gewinnbereich sobald sich Ihre Position im Plus befindet.

Which indicators are needed?

For the implementation of this trading strategy we need the following indicators:

A moving average describes the average price of the past candles of its length. The current MA 20 thus describes the average price of the last twenty price candles. Due to the fact that a moving average reacts more slowly the longer it gets, we would usually have a constellation in an upward trend, in which first the price rises and then the MA 20 follows. Finally, the very sluggish MA 200 follows behind. Because of these sluggish characteristics, we use the moving averages for trend detection in our simple HFT strategy for Bitcoin and other cryptos.

Simple HFT Strategy – The Picture of Power

The so-called Picture of Power ensures in the RBI trading strategy that we do not bet against the trend. The idea behind the whole strategy is based on the assumption that we are in an upward or downward trend. For example, if we are in an uptrend and see a small red candle, we conclude that the green team is stronger right now. Based on this, we bet on rising prices and rely on the stronger team. This is a HFT strategy based on market psychology and minimal technical analysis.

Most importantly, in our strategy we must never bet against the trend!

Picture of Power für Long und Short

Picture of Power with 20 and 200 MA
Picture of Power with moving averages for long and short

We are in the Picture of Power for a long position if:

  • The price is located above the MA 20 and
  • The MA 20 is located above the MA 200

We are in the Picture of Power for a short position if:

  • The MA 200 is located above the MA 20 and
  • The MA 20 is located above the price

How to trade the RBI Crpyto HFT strategy

When trading with the Red Bar Ignored strategy, it is especially important to follow the rules of the strategy. Read the individual steps several times and test the strategy with small sums.

Step 1: Recognize Picture of Power – Long, Short or Wait

Wait until there is a picture of power in the long or short direction. For this, use the 2 minute chart and display the 20 and the 200 moving average. For this you can either use sites like TradingView or check if the indicators are available directly on your exchange. If there is no clear trend, no new position will be opened. However, if the Picture of Power is clear, you can move on to the next step.

Step 2: Find an entry point – open a position

To open the position, wait for long one or more green price candles, which are followed by a completed small red. If the weak red candle is followed by another green one – similar to a price candle sandwich with green-red-green – you open your position at the moment when the current green candle pierces the upper edge (the opening price) of the previous red one from below. Market psychologically, the red team has just shown weakness, which we are now exploiting.

For a short position, we wait for a weak green candle, which was preceded by one or more red ones and is followed by another red price candle. At this point, however, we use the lower edge (again, the opening price) of the small green candle to bet on falling prices.

In our chart you can see again the different entry points and the chart pattern for long and short in overview:

Overview of the RBI Strategy for Bitcoin and HFT
Overview of the RBI strategy

Step 3: Set and adjust a stop loss order

In order not to make any losses with this strategy, you should definitely use a stop loss order. Set the stop loss order on the lower edge (the open) of the small red candle if you are betting on rising prices. If you are betting on falling prices, place the stop loss order on the upper edge (also the open) of the small green candle.

Note: If your exchange supports so-called conditional orders, you can set the stop loss directly with the entry and thus further reduce your risk of loss.

Step 4: Realize profits with this HFT strategy

How you take profits with the Red Bar Ignored strategy is ultimately up to you. You can either keep taking small partial profits as soon as your position is in the plus or wait for your price target. If you are waiting for a specific price target, it is recommended to push the stop loss into profit as soon as possible. Alternatively, you can set a trailing stop instead of a stop loss order. This works similarly to the stop loss, but always follows the price at a certain distance and can therefore be used excellently for profit taking in the case of short but violent upward movements.

RBI HFT strategy FAQ

Can you use HFT for cryptocurrencies?

Yes, High Frequency Trading can be used for cryptocurrencies, even though the strategies used are often a bit more difficult to apply. A common difference with classic stock and commodity markets is the higher volatility of cryptos.

What is the best strategy for trading Bitcoin and Co.?

It all depends on your personal experience and risk affinity. On our trading strategies overview page, we have listed our best strategies for cryptocurrencies for you.

What are HFT strategies?

HFT stands for High Frequency Trading: High Frequency Trading. Strategies that use HFT are trading strategies that are executed with short reaction time and on small time horizons. For example, if you use our RBI strategy, you can also classify it as HFT. After all, you are trading on the 2-minute chart.

Also in / Auch auf: Deutsch

Similar Posts

Leave a Reply

Your email address will not be published.