I've been experimenting with trading for a couple of weeks and I want to share 2 basic strategies that are working well for me.
Breakout Strategy
A breakout strategy can be used when the market is moving sideways instead of trending up or down. The beauty about the breakout strategy is you don't need guess which way the market is moving. set a buy limit above the current 'resistance/ support' line and set a sell limit below the current 'resistance/ support' line.
First I figured this was crazy because why would I sell below the current buy rate?
The theory is as follows. The longer a market moves sideways the bigger the breakout will be. Your main concern is to set a trigger to buy or sell beyond the current noise of sideways momentum.
Basically you are waiting for a signal that the market will start trending up or down
Here is an example of ether on the 15 minute chart that made me some easy money the other day. I took profit when the market bounced slightly back up by using my trailing stop.
Pullback Strategy
I like to use this one when the market is trending slightly up or down after a strong down or uptrend. I set a chart with 2 or 3 Keltner Channels.
- A channel with length 14 and multiplier 2 (2 times the Average True Range)
- A channel with length 14 and multiplier 2 (3 times the Average True Range)
- A channel with length 14 and multiplier 2 (5 times the Average True Range)
Whenever the bar hits the bottom of the channel above the simple moving average I choose buy and I'll take profit around the simple moving average or when I think the price will cross over to the other side (above the simple moving average). The same logic applies for Sell orders.
NOTE: I look at the MACD to see if it would be a the right time to apply the pullback strategy. Basically I'm guessing the strong trend will be over and the market will pull back to compensate.
You do this if:
- You missed the breakout, strong downtrend/uptrend
- You already profited from the breakout, downtrend/uptrend and have an indication that the market will shift.
Noob mistakes I made you'd want to avoid
Don't let your ego get in the way
I had been right 8-9 trades in a row. I was so sure I was right again and that the market would turn. It didn't... I left a position open for two weeks before I cut my losses. I lost 300 euro instead of 25 euro...
Always set a stop loss with your buy or sell order
Last friday I had a sell order for 9.44 euro. The market at that time was trading around 9.1 euro. My position was relatively high as it was almost at 2x the ATR of the 1hour chart and things were stable for a while.
Question for the experienced traders relating to the Ethereum hard fork
The market is moving sideways again as we are getting ready for the hard fork. This seems an ideal situation to apply the Breakout Strategy.
Would you or would you not set an order to open a leveraged position whenever the market makes a big/breakout move and why (not)?