ETH has pushed through to some new ATH’s. It is consolidating at around 1500 while all the ALT’s get ready to make their moves. Are you ready?
Is Bitcoin pulling back? Is Ethereum not pushing to new all-time highs? Uncertainty takes the markets over. What do you think will be the next move?
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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No magic, just the way I do it.
Investing and trading have become my passion. The sheer amount of time I have invested in Bitcoin and other cryptocurrency markets is not comparable to anything else I did in my leisure time last year. The lockdown really gave me the perfect opportunity to sit down, find an approach, and learn it as good as I could. By doing so, I did not even realize that I created my own little training summer camp. The training camp result was an approach that worked and aligned with my specific understanding of how the cryptocurrency market performs. Trading and investing give me a long-term perspective and the urge to create a better future for me and everyone around me, this shift in my time preference was made by my approach.
This is not the “holy grail” of trading but merely a guide to help you find your own approach to the market. What I want to give you in this post is a starting point, from where you can start working yourself through the market.
Use this guide, write it down, copy it, and reuse it. The more people that know about this, the fewer people spend money on overpriced courses that teach a strategy that might not even be understandable for you. Let us dig into this.
- Shift your time preference – Trading and Investing is not a “get rich quick scheme,” if you are here intending to make money today to buy your Lambo tomorrow, you are probably better off using that money elsewhere. If you think that you can quit your job tomorrow, you could not be more wrong about the market. Most think this way, underestimate the risk and get spit out by the markets empty pocketed very in no time. The longer you stay in the markets, the higher your chance is to turn up again in the long run. Learn to increase the probabilities of success, continue reading, and get some tips on achieving this.
- Due diligence – Back to school! Do your homework, be sure to understand what you are doing and investing in. Learn how to handle the tools and indicators you are given before making your first purchase. “But the cryptocurrency market is so complicated,” some of you might be thinking now. But that is how it works with all investments. If you want to buy a house, you first want to check it out before moving in. Since we have sources like YouTube or Reddit, learning about crypto can be good fun. You just need to be up for it. Understand Bitcoin, start there, and see if you really can learn about what it is and how it works. Find out if you can do the same with other projects. Having basic knowledge about what the market is will never hurt.
- Consistency – Turn up every day. Look at it as if you would be working or studying something. Taking a break is good and needed, but being successful with anything means you have to turn up again, overcome your comfort, and scan the charts daily. Bringing the routine into your approach is essential. It will help you to get a relevant perspective on the market.
- Security – Dig yourself into this. Cryptocurrency exchanges and hot wallets (wallets that store your money online) get hacked often. Be sure to keep your money safe. Dealing with cryptocurrencies is like becoming your own bank. Every bank needs a vault. A cold storage wallet can help you out here for sure.
As we defined before, your time preference needs to shift, kill the “oh I need it now” mentality. Overcome your inner-slacking-you, do your homework, and do it consistently. Learning how markets work is like learning a new language. It has its own vocabulary, structure, grammar, and culture. Accepting and tolerating is the key. Forcing your own perception onto something much bigger than you makes no sense. Go with the flow and become part of it.
It is crucial that you got those 4 points ticked off before running into the battle. Let me give you some tips on how you stay in the markets for longer.
- Find your exchange – An exchange is like the dictionary to the new language. The easier the dictionary is for you to understand and find what you need in there, the faster you are becoming in mastering the language. Find an exchange that suits your need. Do you want exposure to a lot of coins? Do you want an easy setup that just gets you started? Do you want an exchange that makes bank transactions most straightforward? Find your questions in this regard, and be sure to choose wisely. An exchange can make or break your experience trading or investing.
- Swing or Day Trading or just investing? – This question is fundamental because it will have a direct impact on your strategy. Be sure of what you want and stick to it. Having consistency in your approach is paramount in this stage, be sure to know how much time you are willing to sacrifice here.
- Never invest more than you can afford to lose – Investing more than you can afford to lose is never a good idea since you will lose for sure, especially in the beginning. This is a common mistake. Moreover, over-leveraging is the number one reason many newcomers leave the markets with heavy losses. Do not go all-in on a single coin. That mentality gets you nowhere and is best compared to gambling. Many trading critics argue that trading is just gambling, and it is if you go all-in on a coin. Diversification is vital. Get yourself a good portfolio of promising coins to be exposed to a greater variety of moves and reducing your risk of losing money.
- Use a strategy – Have an approach. I often get the answer, “oh, I can sell before I am in negative anyways,” this is an approach to get wrecked fast but not to trade or invest. Use tools such as the stop-loss or indicators (or both combined) to find entries or exits while trading. Cryptocurrencies do not behave like stocks. Losing 20% in one day is often seen. Moreover, a strategy keeps you from being too emotional. Emotions are not good while trading. Stick to your guns. That is the plan!
- Plan your trade and trade your plan – This tip combines consistency and experience and makes you unstoppable! No, seriously, have a plan in place. It is much easier to comprehend what you were doing and thinking when you have to look back onto your trades and judge yourself for not being consistent. Having a plan in place makes it much easier to buy and sell and naturally gives you more confidence that transforms into the experience.
- Review your trades – Judging myself is a fixed part of my routine. Sounds weird, but it is the best way to improve and to trade or to invest. I screenshot every trade I made, and I write down my plan I had in place at that time. Coming back at the end of the week and judging myself on my bad trades became very important. A positive trade with a negative execution is a negative trade with good execution is considered a good trade.
- Do not trust anyone when it comes to crypto – I see too many people falling for scams. Double-check everything, be sure that the news you are checking is official. There are more scammers out there than people trying to be honest. Never trust anyone when it comes to your investments.
- Knowing when to stop – Overworking yourself and trying to get every possible investment opportunity out there will not help you become better. Find the profitable trades, execute them, and leave them be. Trust your strategy but also listen to your inner self. Breaks are important. They help to process and reflect on your accomplishments.
By following these steps, your crypto journey will be more likely to be a successful one. Good investors are investors that plan to stay in the market for a long time. Many tools help you to accomplish this, so why not using them? Thinking that you know everything better might work for you in real life, but crypto can be ruthless, and people who know things better tend to fall harder. Do yourself a favor and use a cushion before falling. Standing up first will be much more comfortable that way.
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My new workplace in my office was in a different room with entirely new faces sitting next to me, due to corona I got seated away. A co-worker and I got into a casual talk; we did not know each other at all. Nothing was going on at work, so we had a lot of time to chat. We got to know each other throughout the day, and as it got darker outside, he started talking about his investments in cryptocurrencies. I exchanged stocks before, so I wanted to know more, and I was interested in discussing it. He spoke, and I listened. He was very confusing, and I honestly did not understand what he tried to tell me. But there was something about Bitcoin, something that really caught my interest.
The next thing I know is that I went home, opened my laptop, and went straight for YouTube and other sources of information. What I learned was more than just life-changing. It was a real eye-opener. The quantity of knowledge about economics I acquired has really impacted me and my political thinking. The vast amount of business ideas it sparked in me is incredible. I discovered an entirely new side of myself.
Fast forward a year, here we are, Bitcoin bull running, and I am trying to realize new visions and dreams of mine. Let me help you on your journey. Let me share some of the tips I learned during this journey.
Listen to yourself whatever market you are investing in
There are tons of analysts out there, and every single one of them knows it better somehow. Understanding that every approach to the markets is highly subjective is paramount and should be kept in mind accordingly. Trade only when you feel yourself. Doing what others tell you to do or what others believe is best for you rarely works out the way you want. This is very simple to explain: These people cannot think like you.
When I started trading cryptocurrencies, I fell for the analyst trap. I wanted to know every little detail about the market and what I forgot was my own subjectiveness. The noise completely blinded me because I need my own approach and not someone else’s.
However, there might come a time where finding a mentor or doing a course would not be a bad idea. But be sure to find the one that suits you and your approach the best.
Dig yourself into it. As soon as you feel comfortable with your approach to investing or trading, repeat it as often as possible, especially in the beginning. This is important since it can tell you how to improve in the long term. Investing is about staying in the market as long as possible. Therefore, you need consistency to be there in the long-term. Being lazy or blinded by the ideology that stocks and cryptos make you rich quickly is quite foolish. Turn up every day and get rewarded in the long term. This is how it works.
Stick to what you know
Short term noise can be a distraction, and many suffer from impulse decision making because of it. Buying and selling your assets because of speculative news or noise is rarely a good idea in the first minute.
I stuck to my guns. Even though XRP (cryptocurrency) dropped, I kept on holding it. It came back above my entry, and thanks to that, I sold it with a profit. I did not enter the trend and dumped it while everyone else was. I kept on doing what I planned, and it got out of it. Plan your trade and trade your plan is the best advice I can give here.
Do not over-invest in one project
Going all-in has nothing to do with trading or investing, especially when you are starting out. You are probably better of going to the casino with that cash. Diversification really can help you cover up mistakes in your trading history that you otherwise would have regretted. Being exposed to a certain amount of assets will increase your likeliness of finding one that moves better than the majority. Or if one goes south, you still have the gains of the other investments to make it look better.
Never invest more than you can afford to lose. A critical point, especially for the ones planning to turn up in the long-term. Over-leveraging yourself is never a good idea since you increase your risk dramatically. Instead, reduce your order value and split it into 3 or 5 separate entries to level out the natural market volatility and misjudgment.
Do not give up
Learning from your mistakes and not doing them again is crucial. Everything has a price, especially when you want a long-term return. The money you lose in the market is the price you must pay for the experience. By looking at it in this way, losing money will become more comfortable for you. Be critical with yourself, do not fall into the habit of making the same mistake repeatedly. Use a system that allows you to control yourself and even judge yourself.
I screenshot every trade that I make. Coming back a week later and reflecting on the trade really makes it worth it. What I learned from that is how to judge myself properly. A positive trade with a negative execution of that trade is not considered a fair trade anymore. Learning to think for yourself, no matter what the outcome has been before, is the clue.
Just because professionals do it, it does not mean you have to do it too
Do not try to be the Big Short. Listening to professionals will not help you develop your own understanding of the market. They will blind you. Stick to your rules and your perception. You are far more likely to do the right thing by sticking to your own guns. Wallstreet produces much noise. Best not to care about the noise at all.
Starting out with trading or investing is never easy. The more you do your homework about it, the better you will eventually get. Remember, it is all about staying in the market for as long as possible. The more you feel good about your approach, the better you will get in the long run. Right investors know what they add to their portfolio and have a strategy in place on how to deal with this investment. Do the same but add your subjectiveness to create a mix that suits you and your perception of things. This will surely propel you to becoming a more successful investor.
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Bitcoin and the Alt’s are consolidating, now we have to wait and see what the markets bring as their next move. Some Alt’s indicate bullishness.
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