A beginner-guide to trend-trading cryptocurrencies
Trading cryptocurrencies can be a nerve-wracking experience. It involves you being busy doing your due diligence all the time, but you probably are scared off by the rate of volatility that cryptocurrencies offer. This guide will educate you to do the right thing and trade clear patterns that dramatically reduce your risk. Let me take your fear.
Indicators to use for this strategy
Before we get started, we need to setup up our indicators. Indicators will help you find a reference point on the chart. You should not use them to find trades. Indicators are called Indicators because they only indicate, they will never show you the perfect trade opportunity. Keep that in mind. The combination of indicators, however, can point you towards some gem trades. Indicators we need are:
- Moving Average 10
- Moving Average 20
- MACD (Moving Average Convergence Divergence)
Identifying the trend
Trading is all about reducing your probabilities. Before we start identifying the trends, let me point out that you should start looking for trades not to take. By doing so, you trick your head into looking for options that fulfill the criteria that we will be defined below.
In theory, your chart looks somewhat like this. The black line indicates price movement, the blue line is the moving average of 10, the red line is the moving average of 20. The space between MA 10 and MA 20 is commonly referred to as the cradle zone. The cradle zone is where the magic happens.
Only knowing that so far, I bet you could go out there and already make some smashing trades. However, continue reading to get some more tips on how to spot entries and prevent risk.
Finding the entry
The red arrow indicates entries.
Finding the right entry as a trader is not easy. If the price is trending and moving into the cradle zone or scratching the MA 10, this could be the entry. Do this check-list before entering.
- Identify the trend.
- Price falls into the cradle zone on the entry timeframe.
- Check on the higher timeframe for trend confirmation.
- Wait until you find a small and green candle.
- Enter when the price breaks the high of the candle.
Use as a stop-loss. A common rookie mistake is to not use one. Just because you got the strategy, it doesn’t mean that you can not lose money. Set yourself a target and a stop. Ask yourself what you are willing to risk your portfolio (1 to 3% is standard), as you define how much you can afford to lose on your trade, you know your target already, the target defines what you want to accomplish while making the trade. So if you are willing to lose 1%, set your target to 1% too. If the price hits your target, move your stop-loss to your entry value. This reduces the risk of the trade going negative and you losing any money. After that, you have only profits to take. Use your target to trail the stop-loss. So if the price goes for another 1%, adjust your stop. If the trend were broken, you would be stopped out with a 1% gain.
To conclude, trading needs an edge. Find your reference in the market and stick to it. Being distracted by the noise in the markets is never helpful nor beneficial for your portfolio. Try on keeping your money, stop trying to make more. In attempting to preserve what you have, you will start taking the profitable trades.
If you want to find out more about trading, check out my content on various platforms. I also offer one-to-one mentoring, so if you are interested in hopping onto a call with me for 15 min for free, I could help you layout how to approach this the best.
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