Despite the digital asset market being lucrative, its volatility has always been an issue to most crypto traders. If you’re new to crypto trading you are perhaps curious to know how traders keep track of market dynamics and continuously make profits from invested capital. Even though you have heard about simple candle habits and metrics, this really isn’t enough for you to succeed.
Crypto trading strategies are used widely and have been found to function more frequently than not when done appropriately. On that note, please mind that no crypto trading technique is always a winner. Even some of the best traders in mycryptoparadise don’t excel in any single deal, they only employ tactics that see them make a profit more frequently.
With lots of peaks and troughs for markets to benefit from when cryptocurrencies trended downward towards their bottom, sliding values lead to severe uncertainty. There are different trading techniques at the hands of every trader. So, what are the top three crypto trading strategies that you can rely on in 2021.
Relative Strength Index Strategy (RSI)
RSI was first developed by J. Welles Wilder Traditionally, RSI calculates 14 cycles of shifts in the price of a stock or cryptoasset, which may be days, hours, or weeks.
RSI Crypto Trading Formula;
RSI_14 = 100 − 100 / (1 + (AVERAGE_GAIN / AVERAGE_LOSS)
AVERAGE_GAIN = SUM_GAIN_PER_PERIOD / 14
AVERAGE_LOSS = -1 * SUM_LOSS_PER_PERIOD / 14
The method splits the price’s average benefit by the absolute amount of the average loss over 14 cycles.
The RSI is used by traders to detect market prices that are overbought or oversold. The RSI is higher (above 70) while momentum is growing and implies that an asset is being aggressively acquired on the market. The RSI is lower (below 30) and an indication that interest is decreasing and the selling pressure is growing as momentum declines.
Usually, RSI is designed with 14 intervals; however, traders may opt to increase or decrease pattern sensitivity by swapping the periods.
Moving Average Crypto Trading Strategy
A moving average (MA) is directed at smoothing market activity over a given period of time. A lagging measure is moving averages, which indicates that they are based on prior market activity.
Moving Averages are basic statistical formulas intended to help interpret individual data points over a sequence of time intervals to create a graphic instrument that can be used by traders to indicate whether to take a position or join a trade or not.
It is also possible to use Moving Averages to schedule exit points or establish stop-loss thresholds, making them extremely powerful instruments for traders. They will build a winning trading strategy when paired with chart trends for validation.
Moving averages will run over any time span, so it is important to use the calculator to ensure the right or more typical time frames are set. The 200, 100, and 50. moving averages are the most widely seen.
MACD Crypto Trading Strategy
The Moving Average Convergence Divergence indicator is a technical analysis measure developed by author and trader Gerald Appel in the late 1960s
The MACD is sometimes referred to as a lagging predictor and is one of the most often employed current technological research metrics. The instrument will assist traders in determining when shifts in patterns are about to take effect.
The tool provides extremely easy-to-read signals and includes a histogram to further assist traders in providing a visual representation of the strength of the trend and therefore any crossovers are clearly defined.
Among crypto traders, the MACD is a favourite, since it can also provide an early indicator of when a turnaround may arrive when the lines start to change, later verifying the signal as a convergence happens.
Trading each big high and trough in the regular Bitcoin price chart below figured the bear market may have been lucrative with the MACD, taking a long or short trade based on the crossover.
Just in two places did the market chop allow the predictor to offer bad or false signals, but waiting for the two lines to start diverging will keep the market volatility from crashing.
Developing a crypto trading strategy that matches your financial ambitions and personality style is not a simple feat. Mycryptoparadise has explained 3 best crypto trading strategies, so ideally you can find out which one is better suited to you.
To figure out what is really working and what isn’t, you can learn each trading technique – without violating the rules you set. It is also useful to build a trading journal or sheet so that you can evaluate the success of each technique.