Simple Trading Strategies for cryptocurrency in 2022 : Reversal Trading

We would like to recall you to remember that, most of the following strategies come from stock markets. The strategies come the book “How to day trad for a living”. Many well-known traders have used these strategies and they have prouved to work. However, we, the author of this article, are not responsible for your own riks, mistakes and losses.

Reversal Strategy

The reversal trading strategy requires 4 elements:

  • More than 5 candlesticks on a 5-minute chart upward or downward
  • The cryptocurrency will have a big 5-minute RSI indicator (above 90 or below 10).
  • The cryptocurrency is traded near a support or resistence level.
  • When the trend is reaching its end, indecision candkes (spinning top doji) is visible. Get ready.
Reversal Trading

How to enter the trade

  • Set up a scanner to flag cryptos with five or more consecutive candlesticks going downward or upward in an extreme manner.
  • When you notice a good crypto, quickly review the volume and daily levels of support or resistance near the stock to see if it will be a good candidate for a reversal trade or not.
  • Wait for confirmation of a Bottom Reversal Strategy:
    • (1) formation of a bullish Doji or indecision candle or, instead, a very bullish
      candlestick,
    • (2) the stock is being traded at or near a significant intraday support level, and
    • (3) the RSI must be lower than 10.
  • When the cryptocurrency makes a new 1-minute or 5-minute high, buy the stock.
  • Your stop loss must be the low of the previous red candlestick or the low of the day.
  • Your profit target is either
    • (1) the next level of support, or
    • (2) VWAP (Volume Weighted Average Price) or 9 EMA or 20 EMA moving averages (whichever is closer), or
    • (3) the crypto makes a new 5-minute low, which means that the buyers are
      exhausted and the sellers are once again gaining control.

Advices

  • Set the stop loss a the low of the previous candlestick or at the loss of the support level.
  • If I jump in long, buying stock and hoping the price will go higher, and instead the price ends up just going sideways, it’s a sign that I am probably going to see a consolidation for another move down, and that is an indication that the price is probably going to continue to drop.
  • keep adjusting the stop loss as the cryptocurrency moves up.
  • Many new traders end up trading with a very poor profit-to-loss ratio because they sell their winners too soon and they hold their losers too long.

Leave a Reply

Your email address will not be published.