Mastering Day Trading Crypto in 2023: 5 Effective Strategies for Beginners and Advanced Traders

The Volatile Nature of Crypto Markets

Hello and welcome! Today, I’m revealing five crypto trading strategies to take advantage of the volatile nature of these markets. We’ll cover a breakout strategy, a sculpting strategy, a momentum technique, a fading strategy, and a reversal strategy. So, if you’re interested in maximizing your profits in the crypto market, make sure to stick around for the full video.

Breakout Strategy

The breakout strategy involves identifying key levels where the price clears a specified level. The goal is to find these key levels and take a long position when the price moves above resistance, or enter a short position when the price breaks below support. Volatility tends to increase after the price trades beyond these key price barriers, and prices also trend in the direction of the breakout.

To identify high probability breakouts, we’ll use the True Strength Index (TSI), an indicator that captures the flow of price action and filters out the noise. The TSI fluctuates between positive and negative, and the centerline of the indicator defines the overall bias. A signal to buy is generated when the TSI crosses above zero, while a signal to sell is generated when the TSI crosses below zero.

The goal of breakout trading is to enter the market right when the price makes a breakout and continue riding the trade until volatility dies down. The TSI is particularly useful in this strategy because it incorporates volatility in its calculation. By searching for breakouts and confirming them with bullish or bearish momentum indicated by the TSI, we can use volatility to our advantage.

Sculpting Strategy

The sculpting strategy involves using the Smooth Haikanashi, a modified version of the regular Haikanashi candlestick chart. This indicator is used as an overlay on the regular candlestick chart, and it helps identify trends. When the Smooth Haikanashi indicator is bullish or green, it indicates an uptrend, while a bearish or red indicator indicates a downtrend.

To increase the probability of successful trades, we can use a price action entry, such as a trendline breakout. When the price breaks a downward trendline and the Haikanashi indicator turns green, it’s a signal to enter a long position. Conversely, when the price breaks an upward trendline and the Haikanashi indicator turns red, it’s a signal to enter a short position.

The Smooth Haikanashi is a trend-following indicator, and during short-term uptrends, the price tends to stay above it, while in downtrends, the price typically stays below it. By using a 10 look-back period, we can stay on the right side of the minor market trend. This strategy allows us to take advantage of the increasing prices in uptrends and selling opportunities in downtrends.

Momentum Technique

The momentum strategy revolves around trading strong price moves in the direction of the main trend. To implement this strategy, we can use a price action ABC pattern and a MACD histogram. The principle is simple: for a trend to remain active, each successive impulsive swing must take out the previous swing.

In an uptrend, price will often make three points: point A, the lowest low forming a support level; point B, the highest point forming a resistance level; and point C, the second low point, which must be higher than point A. The breakout of price above point B signals the continuation of the uptrend with bullish momentum.

The entry for this strategy is straightforward: buy the breakout of point B only if the MACD histogram remains positive during the formation of point C. This ensures that the momentum is still bullish. By using a combination of price action and the MACD histogram, we can identify strong price moves and take advantage of them.

Fading Strategy

The fading strategy aims to profit from novice traders who enter the market at the wrong prices. Specifically, we look for bear traps, which occur when the market appears to be going down but then reverses and shoots higher. This counter move produces a trap and often leads to sharp rallies.

To implement the fading strategy, we can use the 50 simple moving average (SMA). First, we need to identify a move coming into support in an uptrend. We look for the price to make higher highs and higher lows and search for periods of corrections. Then, we look for a breakout below support to trap the breakout traders.

Once the breakout occurs, we look for a strong bullish move inside the support level. The final confirmation that the bears are trapped and long trades are on the cards is when the price closes above the 50 SMA. This strategy allows us to take advantage of trapped traders and profit from their losing positions.

Reversal Strategy

The reversal strategy is a more advanced strategy that requires extensive market knowledge and experience. In this strategy, we anticipate pullbacks and try to predict their strength using the Money Flow Index (MFI), an indicator that uses price and volume to confirm trends and warn of potential reversals.

Crypto traders who use volume in their analysis often look for divergences between volume and price. If volume is trending one way while price is trending in the opposite direction, it could be a leading indication of an upcoming change in the market’s direction. By looking for bullish and bearish divergences between price and the MFI, we can anticipate reversals.

To enter trades in this strategy, we can use reliable price action signals, such as trendline breakouts. For example, if the MFI reaches an overbought area and there is a divergence between the MFI and the price, it could be a bearish signal. Conversely, if the MFI reaches an oversold area and there is a divergence between the MFI and the price, it could be a bullish signal.

While the reversal strategy is more advanced and risky, it can lead to significant profits if executed correctly. By applying a higher risk-to-reward ratio and trailing our stop, we can potentially catch giant reversals in the market.

Frequently Asked Questions (FAQs)

Q: What is a breakout strategy?

A: A breakout strategy involves identifying key levels where the price clears a specified level. Traders aim to take a long position when the price moves above resistance or enter a short position when the price breaks below support. Volatility tends to increase after a breakout, and prices often trend in the direction of the breakout.

Q: How does the sculpting strategy work?

A: The sculpting strategy involves using the Smooth Haikanashi, a modified version of the regular Haikanashi candlestick chart. Traders look for trends by analyzing the color of the indicator (green for an uptrend, red for a downtrend). By using a price action entry, such as a trendline breakout, traders can enter long or short positions based on the indicator’s color.

Q: What is the momentum technique?

A: The momentum technique revolves around trading strong price moves in the direction of the main trend. Traders use a price action ABC pattern and a MACD histogram to identify these strong moves. The entry is based on the breakout of a specific point, with the condition that the MACD histogram remains positive during the formation of the third point.

Q: How does the fading strategy work?

A: The fading strategy aims to profit from novice traders who enter the market at the wrong prices. Traders look for bear traps, which occur when the market appears to be going down but then reverses and shoots higher. By using the 50 simple moving average as a confirmation, traders can enter long positions once the bears are trapped.

Q: What is the reversal strategy?

A: The reversal strategy is a more advanced strategy that requires extensive market knowledge and experience. Traders anticipate pullbacks and try to predict their strength using the Money Flow Index (MFI). By looking for divergences between the MFI and the price, traders can anticipate reversals. Price action signals, such as trendline breakouts, are used to enter trades.

In conclusion, these five crypto trading strategies provide different approaches to take advantage of the volatile nature of crypto markets. Whether you prefer breakout strategies, sculpting, momentum techniques, fading, or reversal strategies, it’s essential to understand the indicators and patterns used in each strategy. By incorporating these strategies into your trading plan, you can increase your chances of success in the crypto market.