If you’ve heard the term Hash Ribbons and wondered what they are and how you can profit with this indicator in 3Commas, read on!
Whether you are new to trading or consider yourself an experienced trader, you may have heard your favourite Crypto YouTubers or social media influencers mention Bitcoin “Hash Ribbons” from time to time. If you’ve ever wondered what this indicator can tell you or how it works, then this is the blog post for you!
What are Hash Ribbons?
Great question, let’s break it down a little and explore a brief overview of Hash Ribbons.
You may already know that Bitcoin Miners perform calculations to solve a computational puzzle to create more Bitcoins. The computational power required is measured in units known as Hash Rates which is the sum of all the processing power of devices dedicated to mine Bitcoin. The current Bitcoin Hash Rate at the time of writing this blog post was a staggering 125 Exahash per second! That’s a mindblowing 125,000,000,000,000,000,000 attempts per second to solve a mathematical problem with the reward being a single Bitcon!
Hash Ribbons, simply put, allow you to visualise the Hash Rate to perform technical analysis on this data using a combination of algorithms which are typically combined into an indicator you can add to your Bitcoin charts in platforms like TradingView.com.
It is normal for the Hash Rate to fluctuate every day as new mining devices are powered up or devices are powered down on the Bitcoin network but big swings in the Hash Rate can often be an edge to determine potential Bitcoin price movements.
How can I trade with Hash Ribbons?
We’ll take a look at the most popular Hash Ribbon indicator on TradingView at the moment.
This indicator works by taking the raw Hash Rate data at the end of each day and plotting this as two lines on a chart: a faster 30 day MA (Moving Average) and a slower 60 day MA.
Simply put, when the fast MA crosses above the slow MA, this indicates an increase in the Hash Rate, and typically an increase in the price of Bitcoin. The reverse is true if the fast MA crosses below the slow MA, Hash Rate decreases and price typically falls.
As the Hash Ribbon indicator is working on a chart time frame of 1 day, it is best suited for high time frames, for example, 1D, 2D, 3D, Weekly and possibly Monthly charts.
We will explain further on in this blog post how to create a 3Commas Bot controlled by the Hash Ribbon indicator, read on!
How successful have Hash Ribbons been in the past?
The chart below shows just over a year of price action of Bitcoin/USD and you can see for yourself why the Hash Ribbon indicator is so highly regarded!
If you’d have bought Bitcoin over the last year on a spot exchange when the Hash Ribbon indicator displayed a “Buy” signal, every trade would have been successful. In fact, this indicator is often used by people who are long-term investors in Bitcoin and use the “Buy” signal as an opportunity to add to more Bitcoin to their portfolios.
In fact, if we use the Bitstamp exchange chart for BTC/USD, we can go back as far as August 2011 and can see back test results of the Hash Ribbon indicator.
The chart below is using 1 week per candle time frame and is using Logarithmic scaling to fit all the data on a single screengrab:
The arrows drawn on the chart show the approximate date of a signal and a conservative estimate from the weekly close price (entry) and exit at the next local peak by the following red candle (exit). If you were to “follow the trend” during the August 2016 bull run, the price topped out at an incredible 2,450%!
Wait a moment… What about that last “Buy” signal?
Good spotting! It is worth pointing out that no indicator can offer a 100% success rate and professional traders will be the first people to point out that you should never rely on a single indicator to base all of your trading decisions upon.
It is still early in this current bull cycle for Bitcoin, and while it may seem that Bitcoin price has fallen since the last “Buy” signal has appeared on the Hash Ribbon, you should take notice and start looking at the 4 hour and 1 day chart time frames for when price starts to recover and create a trading plan to establish a long position.
Alternatively, you can take advantage of 3Commas DCA Bots and use the Hash Ribbon to start a Bot trade when a “Buy” signal is triggered and use Safety Orders to Dollar Cost Average the position entry price!
Linking the Hash Ribbon indicator to a 3Commas DCA Bot
Head to the DCA Bot (1) menu and click Create bot (2)
On the Main settings (3) enter a name for your bot, choose the exchange you wish to trade on and also the BTC/USD or BTC/USDT pair (depending on what your exchange or region supports as a trading pair). We will choose to create a Simple bot as we are only interested in trading one coin pair.
For the Strategy panel (4), we will choose Long and Quote currency (to take profit in USD/USDT). We will use a Limit order to open the position as this may save exchange fee costs on most exchanges.
For the Base Order and Safety Order sizes, we will set $100 but you can adjust this to suit your level of risk and funds available to trade with:
For the Deal Start Condition (5) choose “Trading View Custom Signal”, set the Take profit (%) (6) to a conservative 10%, you may enable trailing take profit if you wish.
We will disable Stop Loss (7).
We will set the Safety Orders (8) to use a Maximum of 3 Safety trades, and 3 Active Safety Orders, we’ll also set the Price deviation to place each safety order to 5%.
We will increase the Safety order volume scale to 2 but leave the Safety order step scale to 1.
You can review the Bot Assistant (9) and this will show we will use a maximum of approx $800 for this trade, and our safety order “Dollar Cost Average” settings will allow us to take advantage of a 15% drop in BTC price to capitalise on any dip or wick in chart price once the trade has opened.
You can now save the bot (10).
When you are asked if you want to Start the new bot, click the Start button and you will now be returned to the Bot Information page. Scroll down this page and copy the “message for deal start signal” by simply left-clicking your mouse once over the blue text:
Now open up TradingView.com in a new browser tab and sign in.
Open the BTCUSD or BTCUSDT chart on the 1 Day time frame for the exchange you are trading on (1) and click the Indicator button (2) and type in “Hash Ribbon” and select the indicator shown by “capriole_charles” (3):
Click the icon like an Alarm Clock, to create a new Alert (4).
For the Condition setting, choose the Hash Ribbons indicator and the “Alert — Buy” trigger, then choose the Once Per Bar Close option (5).
Some TradingView plan levels limit you to a fixed Expiration Time for the alert, please take note of this as it will need to be reset every month or so (6).
For the Alert Actions (7), choose Webhook URL and enter: https://3commas.io/trade_signal/trading_view
Note: The Webhook URL is not a webpage, so please don’t click it to visit it, there is no webpage there to see!
Finally, in the Message (7) box, paste in the Bot Message you copied earlier from our Bot Information page and click Create (8):
You have created your bot and linked it to the Hash Ribbon indicator, all you need to do now is wait until the next signal is triggered, and your bot will automatically create a trade on your exchange! You may choose to let the bot manage the deal until it is closed with a 10% profit, or reassess once the trade has opened if you’d like to use the “Convert to SmartTrade” option and use this as a longer trade, aiming for higher profits, with an excellent entry price achieved by your faithful 3Commas bot!
Warning: Trading with your funds is inherently risky, and while the rewards may be great, so are potential losses you can incur. If the price of the cryptocurrency you are trading falls dramatically, you may suffer a loss if you sell at a lower price than you bought the currency for. 3Commas blog posts are written to be educational and should not be considered as “Financial Advice”.