Today I will reveal my three secret strategies. The first is for quick speculation, the second is for swing trading, and the third is for long-term trading. In this article I will also explain the advantages and disadvantages of each strategy and at the end I will share some tips about each strategy, using them you can increase your profits. Complete Guide to Cryptocurrency Trading #CryptoTradingGuide is here now. So, let's first take a look at the name of each strategy:
1H Gainer Strategy
RSI & Price Divergence Strategy
Chart Pattern Based Strategy
1. 1H Gainer Strategy
This strategy is mostly used for quick speculation purposes and not for medium or long term trading. So, let's start discussing it.
Strategy Steps:
1. Open the Binance app on your desktop.
2. Go to the Markets section.
3. Divide the amount you will invest into three equal parts.
4. After going to the markets, choose the 1 hour time frame.
5. Sort the currencies in order of highest gains in the last hour by clicking on the down arrow button ⬇️.
6. Now, look at the coin that ranks first. Open it and choose the 5 minute time frame.
7. If the coin is falling after making a high on the 5-minute time frame, ignore it.
8. If it is rising, look at the percentage of its rise in the last 60 minutes.
9. If it goes up 3 to 5%, buy it, otherwise ignore it.
10. After purchasing, set your profit point at 3 - 5%.
11. If the first currency in the list of highest gains is declining, go to currency number 2 and analyze it in the same way as above.
Tips For Better Result:
1. Buy with the first of the three parts we divided after getting the opportunity to buy according to the above criteria.
2. If the price drops by 2%, place the second part to buy.
3. If it drops an additional 2%, place a third entry.
4. In this case, do not wait for 3 or 5% profit. Exit at the middle entry point.
Advantages:
In a bull market, you can make profits of up to 7-10% every day.
The best strategy for making short-term profits.
Disadvantages:
In sideways and bearish markets, this strategy will not work.
If you don't do dollar cost average (DCA), you will lose money.
2. RSI & Price Divergence Strategy:
The divergence strategy between the Relative Strength Index (RSI) and price is a powerful tool in technical analysis. This approach is based on identifying potential turning points in the market trend by monitoring movement differences between price and RSI.
Bullish divergence:
Bullish divergence occurs when the price makes lower lows while the RSI makes higher lows. This indicates that the downward momentum is waning and a bullish reversal may occur soon. For example, in the attached chart of RUNE/USDT, a bullish divergence can be observed where the RSI has risen while the price has fallen, indicating a potential price bounce higher.
Bearish divergence:
Bearish divergence occurs when the price records higher highs while the RSI records lower highs. This indicates weak upward momentum and a possible bearish reversal.
How to use the strategy:
Identify divergence: Look for situations where price and RSI are moving in opposite directions.
Move Confirmation: Use additional confirmations such as Market Structure Break (MSB) as seen in the chart, where the price breaks an important resistance level.
Entry and Exit Points: Determine the entry point once the divergence is confirmed and adjust the stop loss and take profit accordingly.
This strategy enhances traders' ability to identify potential reversal points and make informed trading decisions based on the RSI and price divergence indicators.
Tips For Better Result:
Applies to spot trades only.
Use it in a bull market only.
Use it on 1D or higher time frame only.
Use stop loss correctly.
Advantages:
Best strategy for swing trading.
Provides good profits in the medium term.
Easy to use and analyze chart.
It works well in a bull market.
Disadvantages:
Not suitable for futures trading.
They lead to huge losses if stop loss and risk management are not used properly.
It does not work perfectly on short time frames.
Real-Life Success Story: Trading with RSI and Price Divergence
Handled by: Linda Raschke
Strategy: Use the Relative Strength Index (RSI) and price divergence for trading signals
the background:
Linda Raschke is a well-known trader with decades of experience trading futures and stocks. She was distinguished by her technical analysis skills and ability to develop effective trading strategies based on indicators such as the RSI.
Main elements of the strategy:
Relative Strength Index (RSI):
RSI is an oscillating indicator that measures the speed and change of price movement. It fluctuates between 0 and 100 and is usually used to identify overbought or oversold conditions in the market.
Price difference:
Price divergence occurs when the price of an asset moves in the opposite direction to an indicator such as the RSI. This can indicate potential changes in trend direction or momentum.
Trading signals:
RSI combines RSI and price divergence observations to identify trading opportunities. For example, if the price of an asset is recording new peaks, but the RSI does not confirm these peaks (forming lower peaks), this may indicate weak upward momentum and possibilities for a reversal.
Implementation:
Based on its analysis of RSI levels and price divergence, Rashk makes trading decisions. For example, you might enter a sell trade when the RSI reaches overbought levels and shows divergence as prices fall, anticipating a decline or reversal.
Impact and legacy:
Linda Raschke's strategy of using RSI and price divergence has been crucial to her trading success over the years.
Her ability to effectively interpret these indicators and incorporate them into her trading decisions highlights the importance of integrating technical analysis with practical trading insights.
Conclusion:
Linda Raschke's success story shows how traders can use the RSI and price divergence strategy to identify high-probability trading opportunities. By understanding market dynamics and using these indicators effectively, she has been able to achieve consistent profitability and establish herself as a respected figure in the trading community. Her approach highlights the importance of disciplined analysis and strategic execution in achieving trading success.
3. Chart Pattern Based Strategy:
A strategy based on chart patterns involves using technical analysis to identify patterns in price charts that indicate potential market movements. Here's a structured approach to creating such a strategy:
1. Identify the main chart patterns
Learn about common chart patterns, which can be classified into reversal patterns, continuation patterns, and two-way patterns.
Reversal patterns:
Head and Shoulders: Indicates a trend reversal from bullish to bearish or vice versa.
Double Top and Double Bottom: Indicates a reversal after a large price movement.
Triple Top and Triple Bottom: Similar to the double top/bottom but with three tops/bottoms.
Continuation patterns:
Triangles (bullish, bearish, symmetrical): indicate the continuation of the current trend.
Flags and pennants: Short-term continuation patterns that indicate a temporary rally before the trend continues.
Two-way patterns:
Wedges (rising and falling): can indicate continuation or reversal depending on the context.
2. Develop entry and exit rules
Establish clear criteria for entering and exiting trades based on identified patterns.
Entry rules:
Confirmation: Wait for pattern confirmation before entering. For example, a breakout above the neckline in a head and shoulders pattern.
Size: Use size to confirm the pattern is correct. An increase in volume often supports a breakout.
Technical Indicators: Use additional indicators such as moving averages, RSI, or MACD to confirm the trade.
Exit rules:
Price Targets: Set price targets based on the high of the pattern or previous support/resistance levels.
Stop Loss: Use stop loss orders to manage risk. Place stop loss levels slightly outside key support/resistance areas or pattern boundaries.
3. Test the strategy
Test the strategy on historical data to evaluate its performance.
Steps to test the strategy:
Collect historical data: Obtain historical price data for the assets you wish to trade.
Identify patterns: Use automated tools or manual analysis to identify patterns in historical data.
Simulation: Simulate trades based on your entry and exit rules to evaluate profitability and risk.
Performance metrics: Value metrics such as win rate, average profit/loss, maximum drawdown, and total return.
4. Risk management
Use risk management techniques to protect your capital.
Determine trade size: Determine the size of each trade based on your risk tolerance. A popular method is the fixed ratio rule, where you risk a fixed percentage of capital on each trade.
Diversification: Avoid putting all your capital into one position or asset. Sort across different assets or patterns of risk allocation.
Risk to reward ratio: Make sure the potential return outweighs the risk. A typical ratio is 2:1 or higher, which means that the potential profit should be at least twice the potential loss.
5. Continuous improvement
Review and update your strategy regularly based on performance and changing market conditions.
Performance review: Periodically analyze the performance of your strategy to identify strengths and weaknesses.
Adapt: Adjust your strategy as needed to adapt to new market conditions or insights gained. This may include modifying entry/exit rules, incorporating new patterns, or improving risk management techniques.
Education: Stay up to date on new developments in technical analysis and market trends. Keep educating yourself to improve your trading skills.
Example of a strategy
Here is an example of a simple strategy based on the head and shoulders pattern:
Pattern identification: Identify the head and shoulders pattern on the daily charts.
Entry rule: Enter a sell trade when the price breaks the neck line with an increase in volume.
Stop Loss: Place your stop loss slightly above the right shoulder.
Price Target: Set a price target at a distance equal to the height of the head from the neck line.
Risk management: Risk no more than 2% of your capital per trade.
By following these steps and principles, you can create a powerful trading strategy based on chart patterns, designed to meet your trading goals and risk tolerance.
Tips For Better Result:
Combination with other indicators:
Enhance the reliability of chart patterns by combining them with other technical indicators such as moving averages, RSI, MACD, or Fibonacci retracements. This can confirm signals and reduce false signals.
Use multiple time frames:
Confirm patterns across multiple time frames (e.g. daily, hourly) to enhance signal validity. Having a pattern on a longer time frame can be more influential than on a shorter time frame.
Waiting for confirmation:
Be patient and wait for confirmation before entering a trade based on a particular pattern. Confirmation can include price action, volume, or a breakout from key levels.
Implementing effective risk management:
Place appropriate stop-loss orders to protect your capital and minimize losses if the trade moves against it. Use position sizing techniques to ensure that the risk on each trade is proportional to your risk tolerance.
Monitor news and market events:
Stay informed of economic events, earnings reports, and other news that could affect the assets you are trading. This awareness can help anticipate potential market movements and adjust trading strategies accordingly.
Strategy testing and performance analysis:
Continuously test your strategy using historical data to evaluate its performance in various market conditions. Analyze metrics such as win rate, average win/loss ratio, and maximum drawdown to identify strengths and weaknesses.
Adapting to changes in market conditions:
Markets evolve, so be prepared to adapt your strategy. Adjust parameters, entry/exit rules, or incorporate new patterns based on current market behavior and trends.
Avoid excessive trading:
Stick to your trading plan and avoid entering trades rashly. Excessive trading can increase transaction costs and reduce potential profitability.
Continue learning and improving:
Continue learning technical analysis, market dynamics, and trading psychology. Stay updated with new developments and improve your skills to make informed trading decisions.
Advantages:
Historical proof:
Chart patterns have a proven track record in predicting market movements based on historical data.
Clear entry and exit points:
Provides systematic and disciplined decision making with clear entry and exit points.
Simplicity and accessibility:
It is easy to learn and familiarize with, making it accessible to both novice and experienced traders.
Disadvantages:
Lagging indicator:
Patterns depend on historical data, so optimal entry points may be missed.
False signals:
It can produce false signals, leading to potential losses if not managed properly.
Subjectivity:
Interpretation can be very subjective, leading to inconsistent trading decisions.
A True Success Story: Paul Tudor Jones and the 1987 Market Crash
Trader: Paul Tudor Jones
Strategy: Using chart patterns to predict the markets and make profits
the background:
Paul Tudor Jones is a legendary trader famous for his successful predictions and trades during the stock market crash of 1987, also known as "Black Monday." His approach was heavily influenced by technical analysis, and in particular chart patterns.
Main elements of the strategy:
Identify chart patterns:
Jones used technical analysis to identify prominent chart patterns, including head and shoulders patterns and trend lines, to predict trend reversals in the market.
Market timing:
In August 1987, Jones noticed a head and shoulders pattern forming in the stock market indices. This pattern indicates the possibility of reversing the current uptrend.
Implementation:
Based on his analysis of chart patterns and market sentiment, Jones decided to take a large short position (a bet that the market would fall) before the crash occurred.
Making profits from the collapse:
When Black Monday occurred on October 19, 1987, and the stock market experienced a sharp decline, short trades brought Jones big profits. Thanks to his foresight and strategic use of chart patterns, he was able to successfully act and profit from one of the most significant collapses in the history of the markets.
Impact and legacy:
Paul Tudor Jones' success during the 1987 market crash, and the strength of his reputation as a professional trader, made him a prominent figure in the trading world and highlighted the effectiveness of chart patterns in predicting major market movements.
His approach demonstrated the power of technical analysis, including chart patterns, as valuable tools for traders seeking to predict significant market fluctuations and vice versa.
Conclusion:
Paul Tudor Jones' success during the 1987 market crash demonstrates how careful analysis of chart patterns can provide traders with valuable insights into market behavior. His ability to effectively recognize and interpret these patterns enables him to make informed trading decisions and significantly influence his investment performance during periods of extreme market turmoil.
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