Q5 The following figures show the price movements volume and

Q5. The following figures show the price movements, volume and open interest, and Relative Strength Index for March 2018 Bitcoin futures contract during the last two months. The last candle in the candlestick-chart shows yesterday\'s prices. The black line shows 20-day moving average, while the grey line shows 5-day moving average. The bars in the middle panel show the volumes of trade and the line shows open interests. The line in the lower panel shows the relative strength index. Analyze the chart and determine your trading strategy for today, and provide your justification. Btcoin CME Futures Mar \'18 (BTH18)-Barthart.com 20-Day MA ? nidi Fro 12

Solution

As per the chart given let us understand the details given in each of the subcomponent within Bitcoin future contract :

the candlestick chart shows the prices, black line shows the 20 days moving average, grey line shows 5 day moving average, the bars in middle panel depicts the volume of trade & the line shows the open interests, the line in the lower panel shows the relative strength index.

So now after knowing the depiction of chart let us analyse each of them in detail; -

if we see the price movement during last two months it was on a decelarating mode where it went to its lowest point during february and after that it is again taking the place of the prices in the beggining and getting constant.

the 20 day MA is moving almost along the prices in the near recent days but in the acute period of february the average was more stable and had not reduced to the extreme level, and that too is getting constant.

the 5 day moving average line is almost similar to the candle stick chart

the bar chart of volume of trade and the open interest line is going hand in hand on the same orbit, and there is no much extreme fluctuations but we can see a trernd that the points when the prices (according to the candle stick chart) went down the volume of trade has taken a hike. So this is tottally beneficiary that the prices go down as the volume of trade inceases. And if we look at the open intersest line it remains constant throughout and there is no effect of change with prices and volume.

The relative strength index slows a bit of change during the feb month due to the various changes with price and volume as explained above.

So looking forward to the trading strategy for today where the prices are not too high and looking to the last price of yesterday we can trade freely and sell more of future contracts and buy less as the prices are on the rising stage and due to which we will have to pay more as in future contracts we set the price today for the contracts that are going to be conducted in future.