Cryptocurrency trading is a quickly evolving interest right now. Brokers have added them to their available trading instruments, and traders are responding in high numbers. Cryptocurrencies offer the potential for huge gains if traded properly.
Its platform makes it an excellent market for employing Technical Analysis Trading Strategies. The information below may be a useful guide for anyone interested in exploring opportunities to earn significant returns.
What is a Trading Strategy?
A trading strategy delineates how a trader plans to execute trades. It is basically a set of rules a trader follows for conducting their trading enterprise.
A strategy is absolutely vital to trader success; without an established execution plan, trading is not trading, it’s guessing, and guessing is like gambling blindfolded. Having a trading strategy determines whether you are a successful trader or not. Trading success is dependent upon whether or not you have planned to succeed.
That plan to succeed is your trading strategy. Absent that plan, you are destined to fail from the start. That plan must be current and specific. It must address what you see on the chart in front of you. It cannot be based on what you hope might happen. It must be based on what is happening in the market right now.
How to Know What is Happening in the Market?
To know what the market is doing, we must have a way to quickly see the entire picture, to see the entire picture, traders have to use relevant information.
That pertinent information is derived from what the trading profession calls indicators. Indicators are the quickest way to summarize any market.
Technical trading is trading which uses indicators, such as Relative Strength Index (RSI), Moving Average Convergence/Divergence (MACD), Simple Moving Average (SMA), etc.
Indicators measure the market from just about any aspect that is useful. These different measurements tell the trader whether market conditions are favorable for potential profit or not. They also tell the trader the direction, up or down, for that trade.
Greatest Single Indicator for Technical Traders?
The cryptocurrency market, like all other markets, has one, single, all-important indicator. It is the indicator around which all other indicators get their worth or value.
This indicator drives the entire market.
What is that central, bell cow indicator? It is price. Price is the engine that gives the market its impetus. All experienced eyes are fixed on price first and foremost.
It defines the market. The question for every trade entry and exit revolves around price. Is it going up; is it going down, or is it remaining the same?
“Das ist die Frage! Das ist die zentral Frage!!”
Translation: German for ‘That is the question’ and ‘That is the central question’.
Another Critical Technical Indicator - Time Frames
Time frame, or Time interval is a word that defines itself. It is a frame or segment of time. Time frames often get too little attention for many new traders. Other than the centrally important indicator of price, time is the other important factor for trade decisions.
Many new traders mistakenly focus on a single time frame and neglect all the others. This is a misuse of the time element so central to trading success. The most effective use of time frames is to use multiple segments of time. Multiple times give the complete picture of the most recent activity.
Since the market is cyclical, meaning it often repeats the same behaviors over and over, a total time frame story is most beneficial. Your style of trading has the most direct bearing on which time frames you choose to incorporate into your trading analysis.
For instance, day traders most commonly use the shorter time frames. Traders who prefer longer term trades use longer time frames. The time frame must fit the trading strategy time frame.
Proper time frame use starts with a higher time segment and breaks that segment down into smaller ones to build the total time frame picture. For instance, a day trader may start with the 1-day time frame, go to the 4-hour time frame, then to the 15-minute time frame. This sequencing technique gives a much clearer summary of just what the cryptocurrency is doing at the moment, and what it is most likely to do within the proposed trade time frame.
The intelligent trader knows not only that they must know the current price path, but must also know the time for that price path. Successful trading is as much about precise timing as it is about price.
Additional Important Indicators for the Technical Trader
Not only must the trader recognize the current movement within time frame and price guidelines, they should try to find out as much as they can about what is happening as these two evolve.
Trend is the overall longer term direction of the cryptocurrency market. The trend is either in an up trajectory, a downward path, or in accumulation. Accumulation refers to the sideways movement.
Trading strategy here is to trade in the direction of the trend. For instance, if the trend is moving up, the trader should enter trades which buy into that trade. If the trend is going down, the trader should sell into the downward movement.
Trends move on momentum created by trader activity. If there is strong buying activity, the trend is said to have strong upward momentum.
Momentum cannot remain strong for very long. Buyers of the upward momentum hit their profit targets and exit by selling. Buyers become sellers at some point. This trading activity slows the upward momentum. Traders need to know when this is happening so they do not buy into a soon ending upward move.
Every broker has multiple momentum indicators. It is up to the individual trader to select the technical momentum tools which best fit their trading strategy.
Easy Ways to handle Technical Indicators and Trading Activity
People who are good at watching multiple things at once usually make good traders. Now, it is possible for those of us who are not good at multi-vision to do well with trading as well.
The answer is automated trading. Automated trading allows you to put all these different indicators together into your trading strategy. The automated bots watch activity and find the trading opportunities you have configured it to find. It not only finds the trades, it actually executes the trades on your behalf.
Check out these automatic trading technologies. Get a look at just how simple and streamlined your new trading strategy can be. Automated trading can really take a load off the trader’s mind.