Two TA Strategies

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Ok, so we've already gone over how to find micro-cap's ripe for scalping... (here it is again in case you missed it: twitter.com/RobotDefi/status/1525497128692240384?s=20&t=ezBgQuMctlNT_-YfM7dCkQ) Now let's talk about a couple of actual strategies. Here's a thread (31 tweets) on using charting indicators for scalping. 🧵/1

First, I want to discuss a couple of my ground rules. 1. I don't do leverage (right now). 2. I don't short (right now). This means I'm only looking for upward momentum so I can buy. So I preface this by saying that in bear markets this can be more challenging. 🧵/2

So step one, I'm looking at the daily chart to determine the overall trend. I really want an obvious upward trajectory, but a solid rebound from a downturn works too. What that means is, NO TRADING CHARTS THAT LOOK LIKE THIS! ⬇️ 🧵/3

Now, while I suggest only trading obvious up-trends, it is possible to scalp and profit in sideways markets too. It all depends on the strategy. For this illustration I chose $LUNA (since it's all the talk these days). 🧵/4

Here is a segment from a single day. A 5-min chart between hours of around 9am and 5pm UST. I have 4 trades outlined (2 trades "round-trip") and I'll discuss the strategy next... 🧵/5

First, I used the 9 period EMA (exponential moving average) indicator. This is basically a smoothed average of the last 9 period close prices. This part of the strategy is simple: Wait for a green candlestick to CLOSE above the EMA. That's the buy signal... 🧵/6

Then, when a candle closes below the EMA, that's the signal to sell (ideally at a profit). This works GREAT in an obvious up-trend. But on a sideways day like this one, taking all of those trades would've likely ended up unprofitable. So we need to add some "confluence." 🧵/7

For this we'll use the MACD (moving average convergence divergence). That's the lines at the very bottom. Basically, this is a momentum indicator that bounces up and down around a "zero-line." Here, we don't want to take a trade on the EMA signal unless... 🧵/8

Only BUY if... 1. The MACD lines are below or very near the zero line looking to rise up. 2. The faster MACD line (the blue line) crosses over or is close to crossing over the slower MACD line (the orange line). 🧵/9

Only SELL if... 1. The MACD lines converge or cross over again. 🧵/10

So again...buy conditions are: - 5min candle closes above EMA9 - fast MACD converges or crosses over slow MACD line at or below the zero line Sell conditions are: - 5min candle closes below EMA9 - MACD lines converge or cross again 🧵/11

In our $LUNA example, this only happened twice during the day. Both times, however, were profitable. Following these rules would have led to around a $15 profit if $100 was used to enter these positions. 🧵/12

That would have been a 15% gain in a single day from a single asset. Many might point out, however, that buying a token in an obvious up-trend and holding it would lead to higher profits. This can be true, but there are two important things to keep in mind: 🧵/13

Without indicators, you don't know how long the trend will last. So you don't know WHEN to sell. And you won't know where the top or bottom is in the intra-day. Without knowing or even having any clue, you're trading blind. 🧵/14

NOW let's go over my favorite current strategy. This one is more of a swing trade strat though (meaning it spans over a longer timeframe). In this one we'll use TWO EMA lines and the MACD on a 15min chart... 🧵/15

Here's what we set the indicators to: 12 period EMA 26 period EMA MACD with default settings 🧵/16

Here we're looking to open a trade when the EMA12 crosses up over the EMA26 OR a 15min candle closes above BOTH... AND the MACD lines have converged (or the fast crosses over the slow) below or close to the zero line. 🧵/17

We want to exit the trade when either the EMA12 crosses under the EMA26 OR a 15min candle closes below the EMA26. Do not use MACD for confluence in exiting the trade. 🧵/18

In this example, there were two round-trip trades available over a day and a half period. The first would have yielded around $8 profit and the second around $15 if the trades were taken with $100 each. This represents a 23% gain in a day and a half. 🧵/19

That's decent, but we can do better. What if after we got into the trade, we decided to extend the EMA26 to EMA36? Look at what happens... 🧵/20

Now the two trades are consolidated into one, because the candles would no longer have closed under the bottom EMA triggering a sell. How did this impact the profit though? 🧵/21

This would have yielded a profit of just under $29. Definitely an improvement. Some important things to note about this strategy, however. First, in order to ensure you close at a profit, it's important to only trade on an obvious up-trend. 🧵/22

Also, because swings can span over many hours/days, you'll have to set up price alerts or find a way to automate the trade (I'm personally still working on optimizing this). 🧵/23

OK, last time, let's recap the swing strategy: 1. Set up two EMAs, one 12 period and one 26 period 2. Set up MACD 3. Enter trade when EMA12 crosses up over EMA26 or 15min candle closes above both 4. Look for confluence in MACD with converging lines near or below zero-line 🧵/24

5. After entering a trade, change EMA26 to EMA36 6. Exit trade when EMA12 crosses below EMA36 OR 15min candle closes below EMA36 7. While in the trade, set up a Telegram price alert with notification bell on before going to bed 🧵/25

Another *disclaimer These strategies are great for seeing likely (i.e. probable) swings up, but it won't always be accurate. In fact, looking over my last 34 trades, only about 40% of them were good calls (i.e. profitable). HOWEVER... 🧵/26

The average loss is around $5, whereas the average gain is over $11. This disparity makes it possible to still be profitable even with lower accuracy. Another important point is that you should be flexible about taking profits... 🧵/27

Out of the 34 trades, there were two where I pulled the plug early. You should definitely always follow your rules to the letter...however, in these two instances the volume disappeared for several hours. Here's why this is concerning... 🧵/28

The longer traders aren't trading, the less accurate your past indicators will be. So, if volume dries up for a time, then when it starts up again, it could go in any direction without much indication as to which. So better, in my opinion, to just take profits. 🧵/29

OK, so these are two strategies I've been using lately. I am a little bit fonder of the 5min EMA9 strategy because it's simpler (less indicators = better for me). BUT, it doesn't yield as high profits. 😞 🧵/30

If you decide to try these (#NFA #DYOR) I suggest back-testing and paper trading to see if they work with the assets you like to trade. I hope you found this helpful and educational. Remember to like, follow, and retweet if so. CHEERS! 🧵/31 #cryptotrading #TA

@0xLosingMoney @VirtualKenji