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Crypto Trading Strategy

Crypto Trading Strategy – Here are my top tips for crypto trading!

To those who are familiar with crypto-trading, here are some tips for you.

Trading cryptocurrency successfully requires a robust strategy. Most crypto holders don’t have this kind of ETH, which is why they often end up in the red.

There are day traders on one side of the spectrum who think that a bull flag on the 15-minute chart means everything is going to change. Hardcore hodlers are on the other extreme, unaware of what a bull flag is.

Most traders end up losing money because they’re trading too much. Most holders lose money because they don’t know when to sell.

My crypto trading strategy has evolved after years of learning from my mistakes and spending time at both ends of the spectrum.

Let’s talk about my personal crypto trading strategy today, including when I buy and sell, as well as how I select cryptocurrencies to trade.

Bitcoin-Altcoin Cycle

Whenever I trade crypto, I use Bitcoin as the basis. Bitcoin’s price has a huge influence on other cryptocurrencies simply because it is the most dominant.

There are three reasons why Bitcoin’s price changes at any given time. The price of the cryptocurrency fluctuates goes up or down or remains relatively stable.

BTC’s price begins to rise gradually along with altcoins – most often Ethereum and Cardano – especially when the price of BTC is increasing gradually. In contrast, when Bitcoin’s price rises hard, altcoins tend to be left behind.

Due to the fact that BTC is viewed as safe, this is the main reason. The people who profit from altcoins often move the profits into BTC so that they can travel to the moon safely.

The price of BTC tends to go down gradually, and therefore some of the larger altcoins also go down with it. However, if BTC’s price declines, it obviously affects everything else too.

This occurs as if the crypto market were crashing, and so traders pull the plug on altcoins en masse while clinging to the Bitcoin life raft.

It is natural that money flows between altcoins and bitcoins are somewhat cyclical, and I use the Bitcoin dominance indicator to assess where we are in this cycle.

Based on the crypto market cap, bitcoin dominance measures how much bitcoin makes up that market. Money is moving from altcoins into Bitcoin if Bitcoin dominance is increasing.

Money is moving from bitcoin to altcoins if Bitcoin dominance is declining. So I examine Bitcoin dominance first, then I compare that to the total cryptocurrency market cap to confirm whether the market is heading in the direction I expect.

Since we are on the verge of a dip when Bitcoin dominance goes down and the market cap of Ethereum is also declining, I usually avoid trading cryptocurrency together with ETH.

As an alternative, if Bitcoin dominance progressively decreases but the total market capitalization increases, we’re starting the altcoin season.

The Bitcoin market cap is increasing despite the low dominance. A market cycle peak occurs when we reach levels of this magnitude. Now, I think that the peak might happen between mid-and late September.

Bitcoin Strategy

I then estimate how long we are likely to see this phase of the Bitcoin altcoin cycle last once I’ve established where we are. An analysis of technical indicators is necessary here.

It is likely you will not get any context out of analyzing time frames shorter than a day, as I discussed in the third installment of my technical analysis tutorials.

Therefore, if I’m buying or selling BTC, I always start with the weekly and monthly time frames. On BTC’s monthly chart, I believe there’s a price pattern indicative of future price movements.

I’ve been spotting bottomless letter P’s quite a bit lately. When the price pumps, pulls back and then pumps again to reach the initial pump price.

According to this pattern, the maximum price gain between the top and bottom of the pump is roughly equal to the maximum price gain if the pattern is followed through.

The coming months look like a 90K to 95K price range for BTC if this is indeed a topless P. If this is the case, I’d invest in the range between 58K and 70K.

On the weekly, I’m getting the same trend for BTC that we saw earlier this year, although a little limper.

Here I start to add indicators to the daily timeframe. Most of the time, I just use moving averages — 200-day MAs, 50-day MAs, and 128-day MAs.

Market participants rely heavily on the 50- and 200-day moving averages. It is considered a strong indicator of support when the 200 day MA is above and below.

Given that we are currently comfortably above the 200 days MA, this is a sign that swing trading is safe, no matter where we are in the altcoin Bitcoin cycle.

In addition to the 50-day MA, there is also a significant level of support provided by the 200-day MA.

If we cross the 50-day MA over the 200-day MA from above, we’re on the verge of hurt.

Normally, a gold cross is a crossing from below the 50-day MA to the 200-day MA, indicating that our gains are about to start.

Benjamin Cowen points out that the gold cross will likely appear sometime in mid-September as Bitcoin begins to form on the daily chart. It’s a complete coincidence, I’m sure.

My trading strategy includes a day MA that I added more recently. When BTC’s price is falling, I pay close attention to it. It’s because the 128-day MA is historically a very solid support zone, and you probably saved yourself from a lot of pain if you used it back in May.

In the weeks to come, I will remain focused on the 128-day AMA, and if we break down below it again I will make sure to cut my losses.

Altcoin Strategy

With BTC’s performance established, I can now turn to my altcoin holdings and see if I can make any gains or losses.

I update my portfolio approximately every two weeks if you subscribe to my weekly newsletter. I typically invest more than half of my trading funds in BTC and ETH, regardless of that fact, and I do things differently with these two cryptos than I do with others.

Because BTC and ETH are on the crypto market for a longer period of time, I apply the strategy I mentioned earlier. I set a realistic price target after I spot a bullish pattern on the daily, weekly, or monthly chart, then take profits as the price rises toward that target.

Assuming the topless p on the BTC monthly is my template, I would expect the price to reach 90K to 95K within a reasonable timeframe, and any corresponding resistance zones should provide me with the opportunity to profit along the way. For this example, it would be 50K, 52K, 54K, 56K, 59K, and 63K.

I am going to sell based on how the market looks when I hit these targets. The news about BTC just came out and is destroying every penny I made, so I’m going to sell less than usual. Keep your eyes open for a blow-off top.

Usually, I park my profits in USDC, but recently I’ve started to park some of them in PAXG, a gold-backed crypto coin issued by Paxos.

When the crypto market crashes the PAXG pumps far off its gold peg, which is why I hold more of my profits in PAXG.

I can sell the top of that devalued pump and possibly profit a bit extra if I am able to mitigate crypto market volatility through PAXG.

I take profits because I believe in buying dips. In another post I detailed my buy the dip strategy, so here is the short version. This, to me, represents a good opportunity by the rise of the RSI on the daily chart for BTC, ETH, and other large altcoins.

Portfolio Adjustments

Let me now discuss how I trade my other 10 cryptocurrencies.

Let me start by explaining why I don’t own all the cryptocurrencies I say I’m bullish on, and why I didn’t buy all of them. It’s mainly because I believe that other cryptocurrencies will have greater future potential. My portfolio consists of these.

My profit goal depends on several factors, including whether we’re in an altcoin season or not. It becomes irrelevant if we are deep into an altcoin boom and everything is pumping like mad.

The AR coin from Arweave continues to pump against all odds. In such cases, I pay more attention to my percentage gains rather than a coin’s price or any indicator.

A few days after an altcoin has doubled in price, I typically decide to take some gains off the table and transfer them to either BTC and ETH or USDC and PAXG depending on market conditions.

I sometimes add to my holdings of altcoins that have been gradually growing over a prolonged period of time, such as my Solana holding. If the top blows off, I’ll still be there again to take Profits based on percentage gains since I bought the coin or token.

The more gains I make, the more profit I’ll take, keeping in mind all the other things going on at the time in that crypto market.

When I’m holding on to underperforming altcoins, I usually bail out if they’re looking extremely bearish in comparison to others I may hold or decide to hold.

Based on the weekly and monthly price charts drawn from my Wall Street Cheat Sheet, I determine whether I need to do this. It’s time to move on to greener pastures if I can see the tail end of this cycle on the price chart, assuming that there are still green pastures around.

Choosing Altcoins

I always do as much research on any altcoin I come across as I can before I put money down.

My crypto investments are primarily driven by the fundamentals of the project rather than by a technical analysis of that coin or token.

This time I added Arweave to my portfolio when I realized Solana’s blockchain data is hosted on Arweave. The tokenomics of AR are also excellent.

I was bullish on Solana, so I held AR since it pays for storage fees and as Solana’s use grows, so too will its demand for AR to store all that data.

My primary criteria for selecting a cryptocurrency is its demand drivers. With enough demand, a coin or token can still reach new all-time highs even if its tokenomics are poor.

Before copying new crypto to trade, I also look at its market cap, which is not necessarily fundamental. This can sometimes be misleading because a coin’s sticker price can be deceptive, but the market cap ultimately determines how high it can go.

For my crypto trading strategy, I use the market cap to estimate how much a currency might gain if it goes crazy. As an example, I will use Arweave once again.

Currently, AR resides around 2 billion dollars and assuming Bitcoin maintains its current rate of growth and Solana continues to rise, I think AR could close out this year at 3x.

Having that in mind, I can set a price target for the sale. Due to the low price I paid for the stock, I was able to resell at a small markup, which is $80 and $120 at my 2x markup.

The rest can ride until I’m satisfied with the percentage gains I’ve made, depending on how things look at the time. If I was dealing with a brand new cryptocurrency, I would definitely take advantage of the low prices.

Arweave is roughly where I got in with Arweave on the other side of the topless P. I’d have gotten in AR earlier if I hadn’t seen a pattern.  

Disclaimer:

I‘m not a financial advisor and this article is simply for educational purposes. It should not be used to make any decisions regarding your finances. If you need investment advice, please contact a qualified financial advisor.

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