Lately I have read so many stories of people who are trying to trade bitcoin and other crypto but really do not know how to trade and consequently are loosing again and again.
This article will teach you how to trade crypto (and even forex) and actually make a profit. As there are so many ways to make profit from the markets I will describe a rule set that is great for new traders and meant to get you started and into profit asap.
This method is applicable when there is a strong trend; you will catch parts of trends and get in and out of the market quite frequently. You will not catch the absolute top or bottom of a trend but rather take a bite of the best part of the trend. If you want to buy crypto really low and sell when it does X100, this is not the right strategy to use. If you want to trade actively, keep reading.
Tools and setup
When you start trading you should make sure you’ve got the right tools.
Just like a carpenter needs a hammer, you will need proper charts.
I recommend using tradingview as they offer the most versatile charting available right now. (And you can use it for free). You can even set alerts when price reaches your level which is really handy.
So…get started and set up your charts with three exponential moving averages (EMA); EMA5 (orange), EMA8 (Blue) and EMA18 (Red). These exponential averages will tell you everything you need to know how to get into a trade or get out of it and take profit.
Use charts on a timeframe of 4hours and above.
You can trade bitcoin on a smaller timeframe but for trading alts it really useless trading the smaller timeframes.
Your charts should look like this.
You can see a downtrend and then a flip of the moving averages when the downtrend changes and becomes an uptrend.
Identifying the trend
Now if the three moving averages are all pointing upwards we have a healthy trend. You can see a clear separation of the lines. If the moving averages are tangled up and horizontal there just is no trend and you really do not want to be in the markets.
I am going to repeat the last part…if there is no trend you really do not want to be in the markets!!! So if you see a chart like the picture below…..do not trade!
Your EMA’s can tell you a lot:
The 5 and 8 EMA reflect what price is doing.
The EMA18 tells you what the trend is doing.
That’s right…there is a difference.
When the momentum of price (the EMA5 and EMA8) is stalling you can see the EMA5 and EMA8 closing in on each other. You can see both EMA’s closing in on the EMA18 and sometimes even cross the EMA18.
When the EMA18 is pointing downwards obviously there is a clear trend downwards so don’t even think about buying.
If the trend is up and price retraces back down between the EMA8 and EMA18 and closes below the EMA8 you have a setup. Because there is a healthy uptrend we can assume that the trend will resume it’s way up so we can set a pending buy order just above the high of the signal candle that closed below the EMA8.
Your stop loss goes just below the low of the signal candle or if it’s a small candle below the low of the previous swing. (safest)
If price prints another down candle you can follow it with your order. Once your order is filled and you are in the trade you can stay in the trade as long as the trend stays healthy or until price closes below the EMA8. In that case you exit the trade and take profit but you also have a possible new setup. Using this strategy you will also have loosing trades but will most likely benefit from the multiple profits you will collect.
- Only trade if there is a healthy trend
- Only trade if there is a valid setup
- Use a stop loss
- Get out of the trade if you get a counter signal
- Do not use the smaller timeframes
- Take your profits!
This is the most simple trading strategy I could think of that should get you in and out the markets at the right times. While doing so you will have the time and peace of mind to learn more about trading and learn different and better ways to profit from the markets.
I would advice to start and review this strategy in retrospect using your tradingview account and see what you would have done. When you feel comfortable….start trading!
Let me know how you are doing!