How to set the most profitable trade order?

By ModernEuler | Moderncrypto | 13 Feb 2019

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I have been trading for cryptocurrency for 6 months. In a bear market like this, it is very difficult to select a currency and set a buy/sell order at the right time, right level. Although it is difficult, it is possible. 

We need two things: Fundamental analysis and technical analysis. The fundamental analysis emphasizes the intrinsic value of the project. It is good for long term investment. Technical analysis, on the other hand, provides trends, formations, volatility, and momentum. It provides valuable information about price movements. Traders use some of the tools in this type of analysis and call them "indicators". 

There are basically four types of indicators: trend, volume, momentum, and volatility. Let’s cover them briefly.

Trend indicators tell us about the major direction of the price. When setting an order, it is very curial to know the direction of the price; is it uptrend or downtrend?  But the most important thing is to select the most appropriate timeframe. Are you a day trader or swing trader? What is your time horizon? As a guideline:

If you are a day trader use up to 30minute- chart,  

If you are a swing trader use 1 to 4 hour-charts,

If you are a Position trader, use a 4-hour chart or above,

You can use directly moving averages (MA) which are calculated by averaging the price over a period of time. For example, plot a 200-day and 50-day moving average on the chart, use a crossover, to set your order.

190903265-80c1534055675b5f329adcecaebad82189c4d2fe8198ca0abddebadc696e2733.jpeg

 

You may use MACD (Moving Average Convergence Divergence) which is constructed by MA’s: if the price is below the moving average, sell it vice versa. Common notation would be MACD (12,26) uses 12-period moving average and 26-period moving average.

 

190903265-059aed415fd32fe4c5b119e2332d5ab33277e4c3c73459166010bb723d796218.jpeg

source: Investopedia

 

Another indicator used is the Average Directional Index (ADX)  is between 0 and 100. If it is below 20 we have a weak trend, above 50 we have a strong trend.  We may add Parabolic Stop and Reverse (SAR) for our trend indicators list as well.

Momentum indicators tell us about the strong and reversal of the trend. Relative Strength Index (RSI) gives us overbought (due for a correction) and oversold (due for a bounce back) regions can take between 0 and 100.

190903265-a3a5784efe85ddcb7b7979989ea4998555e55dc5da5c36788849a8f48e7e8b4d.jpeg

source: Investopedia

 

We also have Stochastic which can be used to determine where a trend might be ending.

 

190903265-de50c217473570ba4a0b2830b4c298dc734afd704a6f405b46d85df2d99f6e2f.jpeg

source: Investopedia

Finally, we have Money Flow Index (MFI) for momentum.

Volume indicators give us the volume, and whether a stock is bought and sold over time. Volume, Chaikin Money Flow, On Balance Volume and Money Flow are major indicators in this category.

 

Volatility indicators tell you how much the price is changing in a given period. Mostly Bollinger Bands are used to determine volatility and trade opportunities that market. They consist of a simple moving average, and two curves plotted at two standard deviations on either side.

 

You must not rely on only one indicator. But you don’t need to get lost using all of them.

However, using a few them conveniently may make you rich.

 

Thanks for reading. I hope you’ve found it helpful.

 

 

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ModernEuler
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