Trading Strategies

Becoming A Deadly Trader

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Chapter 4

Trading Strategies

In this portion of the guide we will go over a few of the trading strategies I use to consistently generate profits. Not every strategy is right for every person. You should do as much research as possible to learn about all the possibilities and options there are in trading. The strategies I use may not be right for all. However, you should do your best to understand them and use them yourself in your own trades. You can consume all the knowledge in the world but until you start to apply it, you will never truly understand it.

Understand that while some of these strategies mention specific time frames, do not disregard multiple time frame analysis. You will need to check daily and hourly charts for each and every trade you make to confirm that you are trading with the trend in order to give you a statistical edge.

Strategy 1: Trend Surf Strategy

The “trend surf strategy” is my favorite. You can think of this pattern as “surfing” the trend of a currency pair. By “surfing” you can do a very good job of following the trend in the market and profiting off of it. Additionally, the surfing pattern is very hard for algorithms and bots to detect, unlike the human eye that can find it quite easily. This means that we won’t have trading bots or high-frequency traders trading against our strategies, which happens very often with simpler strategies or using lone indicators.

This is a manual trading strategy, meaning you must actively monitor this trade and make edits to it in order to secure the maximum profits possible. Not all strategies are like this. You can still set it up in 3commas SmartTrade terminal, it will just require that you edit your take profit goals and stop losses later.

A pattern you will see very often in the markets is what I’ll describe as price “surfing” a moving average. Since this pattern happens quite often, this is also one of the strategies that you can trade quite often as a day trader. Here’s what it looks like when price is surfing a moving average:

The moving averages on the chart in this photo are the 9, 26, and 50 MA respectively, counting from the top. As you can see, price is bouncing repeatedly off of the MA’s in the sections that I’ve highlighted. Price touches the moving averages finding support, then moves slightly higher, then comes back down and finds support at the moving average again, then moves slightly higher again, and it repeats this pattern. This is what surfing the moving average means, price is essentially “surfing” the moving average as it goes up.

This pattern is usually only found on clear uptrends or downtrends. If you find it in other situations, you shouldn’t take the trade. As you can see in the chart above, the moving averages cross in the green circle and are all in order in a clear upward direction, rarely touching each other. This is a sign of an uptrend, and that’s how you want them to look when trading this strategy.

Uptrend Surfing Rules

Here are all the rules for trend surfing strategy on an uptrend:

  1. The 15-minute chart must be on a clear uptrend.
  2. The 1-hour chart must be on a clear uptrend.
  3. The ADX indicator is above 25.
  4. The 15-minute candles must be surfing off the 9 or 26 EMA. If the candlesticks break below the 26 EMA, then the formation is no longer valid.
  5. Price must be forming a flag formation.
  6. A buy order must be placed above the high of the first corrective candle that finds support on the 9 or 26 EMA.
  7. Place your stop loss below the low of the candlestick you placed your buy order above.
  8. When placing your take profit order, it is good practice to at least place it as far from your buy order as your stop loss.

Let’s go over the uptrend surfing rules one at a time with a little more depth.

Rule #1 — The 15-minute chart must be on a clear uptrend

This strategy trades on the 15-minute time frame, so this step is essential. To see whether or not the 15-minute time frame is on a clear uptrend, plot the 9 EMA, 26 EMA, 50 EMA, and the 200 EMA. If the 9 EMA is above the 26 EMA, the 26 EMA is above the 50 EMA, and the 50 EMA is above the 200 SMA, then the 15-minute chart is on a clear uptrend and we can potentially find a trading setup. Remember, the MAs should be in the following order:

9 EMA > 26 EMA > 50 EMA > 200 EMA

Rule #2 — The 1-hour chart must be on a clear uptrend

The second rule is essentially the same as the first – you will plot the exact same moving averages and be looking for them in the exact same order. The only difference is that now you will be plotting them on the 1-hour timeframe instead of the 15-minute. Like I told you in the Technical Analysis section, it’s essential to use multiple time frames in your trading. So, by confirming that the 1-hour is also on an uptrend, we’re certain that we’re not trading against the trend.

Rule #3 — The ADX Indicator is above 25

Remember, the ADX indicator measures the strength of a trend, so we will use it to determine if a trend is currently weak, or strong. If the ADX line is below the 25 level, then that means the trend is currently weak. If the ADX line is above the 25 level, then that tells us we have a strong trend. So, when trading with this strategy the ADX Indicator must be above 25.

Rule #4 — The 15-minute candles must be surfing off the 9 or 26 EMA.

As I explained briefly earlier, the key of this strategy is finding areas where price is surfing the moving averages. At first it will be hugging the 9 EMA, and then move slightly higher. After a couple candlesticks, the price will come back down and touch the 9 EMA again. This will happen over and over again.

This only happens with smaller periods for the moving averages, such as the 9 or 26. You will almost never see this happen with the 200 EMA. Since the period is small on these moving averages, that means that the price of the moving average is much closer to the current price, which allows for this surfing pattern to occur.

Even though we plot 4 moving averages in this strategy, we’re only trying to find price action that is surfing either the 9 EMA, or the 26 EMA. If price action is surfing the 50 EMA or 200 SMA, that’s great but that is not the surfing we are looking for. The 50 EMA and the 200 SMA are only there to help us make sure that we are in an uptrend.

At times, prices will not have a lot of volatility and will barely be moving higher. During these times, price will be continuously touching the moving average, not moving up or finding support on the moving average. These moments also count as price surfing the moving average.

How can we profit when the price is surfing a moving average? After the price has bounced upwards off of the moving average, and is now retracing back to the moving average, that is when we want to look to enter. If price is already surfing the moving average, then there is a higher probability that price will keep surfing the moving average once price retraces back to it.

This is often the case, however, it is not always true. If price is surfing a moving average, and we enter whenever price retraces back to the moving average expecting support to be found every time, then we would not be profitable in the long run. There will come a point in time where the price will cross over an EMA, and then the EMA’s will cross each other, signaling a possible trend reversal. However, there is a specific formation in these situations where the price action has a higher probability of bouncing back to the EMA called the “flag formation”.

Rule #5 — Price must be forming a flag formation

There are multiple rules when looking for a flag formation, but here are the basic rules. Don’t worry if they are confusing at first, I will show you what these visually look like.

  • There are three or more impulsive candles that each form a higher high than the previous candle, with at least the first candle finding support on the 9 or 26 EMA. These candles do not all have to be green.
  • There are multiple corrective candles forming lower highs, until one of them finds support on the 9 or 26 EMA. If there is only one corrective candle that immediately finds support on the 9 or 26 EMA, that is also a valid setup.
  • The correction may not go below the low of the first impulsive candle, the 26 EMA, and preferably the 61.8% Fibonacci retracement level.
  • The formation is complete once the corrective candles stop forming lower highs, and a new high is formed.


Take a look at these photos. They are the same chart. As you can see in the second photo, inside the first flag formation the candlesticks find support on the 9 EMA, and after that we see a sort of wedge pattern inside the flag. There are bullish pin bars as well as bullish engulfing candlesticks in and around the flags.

There is a small pullback inside the beginning of each flag. Higher highs are being formed by candlesticks surfing the 9 EMA after the pullback candlesticks. Then we see a lower high, and that is when the outbreak candles begin. In the first flag we have a candle close outside of the flag signaling another bullish outbreak. A second candle touches the support of the EMA, breaks out of the flag and closes outside of the first flag, creating the mast for the second flag formation.

It might be easier for you to think of it like this: The higher highs are forming the mast that holds up the flag, while the lower highs form the flag itself. Once the higher high is formed, price is beyond the range of the flag and the formation is complete.

In this photo example, price would keep surfing the 9 and 26 EMA and keep moving up, giving us a winning trade. If you notice, below the chart is the ADX indicator that was above 25, so all of the rules were met to create this trade. Now that you understand what the formation itself looks like, let’s take a look at the entry and exit rules.

Rule #6 — Buy Order Rule

If you set up your initial take profit and stop loss orders at your trade setup, you can absolutely let those ride and take a small profit or a small loss. In this strategy, however, you make edits to your SmartTrade as it develops. You will need to move your take profit targets and stop loss up as the price of the currency pair you are surfing goes up. Moving your take profit and stop loss targets in a trending market is what the more advanced traders do in order to secure maximum profits. This is known as a “dynamic order.” A dynamic order simply means that you are not setting the take profit and stop loss orders and then forgetting about them, you keep changing them until one finally gets hit.

For this strategy, once we have a corrective candle that finds support on one of the moving averages, we check all the previous rules. If they are being followed, we will plot our entry. We set our take profit order above the high of the corrective candle, and our stop loss below the low of the same candle. If the following candlestick does not hit the take profit order and creates a lower high instead, then we will cancel our take profit order, and make a new take profit target order for this new candlestick instead. If price action is bullish, ADX is ascending over 25, if the 9 and 26 EMA’s are wide and far apart from each other, and especially if you see additional flags developing, you can move your take profit order higher as well as your stop loss order. We will repeat this process until the take profit finally gets hit due to trend reversal scenario one, or the stop loss gets hit due to a sudden sell off. Let’s take a look at an example.

If you look at the formation I circled, you can see the potential for a valid trade. The first candle finds support on the 9 and 26 EMA, and the 4 candlesticks following it create 4 higher highs, so far so good.

Now let’s go through the corrective candles one by one, so you can understand how a dynamic order works. The first candle with a very thin body forms a lower high which signals the start of the corrective candles, but it does not touch the EMAs so we must wait for the next candle.

The next candlestick also forms a lower high, and this time it closes below the 9 EMA. This is not a problem since we still have the 26 EMA below us, and if price closes above the 9 EMA in the following candlestick then that still counts as finding support on the 9 EMA.

Price does in fact close above the 9 EMA in the following candlestick. At this point we can enter this trade; we would place a buy order at the top of this candlestick, and a stop loss at the low of the previous candlestick where it met the 26 EMA.

Rule #7 — Stop Loss Rule

However, let’s say our buy order does not get hit and the following candlestick forms a lower high, and finds support at the 26 EMA. The setup remains valid and this is now the newest corrective candle, so we must cancel the previous buy order, and instead place a new buy order at the high of this candlestick instead. The stop loss would go below the low of the candle away from our entry point. Here’s how it would look.

The following candlestick does hit our buy order since it makes a higher high, so we have now officially entered the trade. That is how you set your dynamic buy and stop loss orders, and it’s pretty simple once you understand it. In this case it took us 2 candlesticks for our buy stop to get hit, but in certain cases it might take you up to 6 new buy orders before your order gets hit.

Remember however, that if the corrective candles close below the 9 or 26 EMA then you should probably cancel your buy stop order because the setup will no longer be valid. If the 9 EMA gets broken but 1 or 2 candlesticks later you find support on the 26 EMA then that’s fine, but if there are 3 or 4 candles in a row that closed below the 9 EMA, then you should close your trade. This only applies if the candles are surfing the 9 EMA, if they are surfing the 26 EMA instead then you shouldn’t worry about where the candles are in relation to the 9 EMA.

Rule #8 — Take Profit Rule

What about the take profit order, you might ask. In this case, since the flag formation meets every single rule we are a bit more confident, but we want to stay within our guidelines. In a regular scenario, we would take note of how far the initial stop loss is for the trade and set the take profit target to the same percentage, at the very least. Since we feel more confident about this trade, we would double the distance from the buy order to set our take profit order.

Downtrend Surfing (Short Setup)

If you fully understood the rules for how to trade in an uptrend, then understanding the rules when trading in a downtrend should come to you easily. I won’t go too much into detail because I personally do not like to surf downtrends. If a currency pair is down trending, I try to avoid it altogether. However, I felt it necessary to include the rules for surfing a downtrend in this guide.

Hopefully you have a good idea about how to use the trend surfing strategy on an uptrend, let’s look at the rules for a downtrend. The rules are very similar to when trading an uptrend.

Downtrend Surfing Rules

  1. The 15-minute chart must be on a clear downtrend.
  2. The 1-hour chart must be on a clear downtrend.
  3. The ADX  indicator is above 25.
  4. The 15-minute candles must be surfing off the 9 or 26 EMA. If the candlesticks break above the 18 EMA, then the formation is no longer valid.
  5. Price must be forming an upside down flag formation. (There are three or more impulsive candles that each form a lower low than the previous candle, with at least the first candle finding resistance on the 9 or 26 EMA. These candles do not all have to be red.  There are multiple corrective candles forming higher lows, until one of them finds resistance on the 9 or 26 EMA. If there is only one corrective candle that immediately finds resistance on the 9 or 26 EMA, that is also a valid setup. The correction may not go above the high of the first impulsive candle or above the 26 EMA. If the formation is surfing the 9 EMA and then starts surfing the 26 EMA instead, then the setup is no longer valid. The formation is complete once the corrective candles stop forming higher lows, and a lower low is formed.)
  6. A sell order must be placed below the low of the first corrective candle that finds resistance on the 9 or 26 EMA. (If the next candlestick does not form a lower low and hit the sell order, then the sell order must be moved to the low of this new candlestick instead. Repeat this process until the sell order is hit. If the setup no longer becomes valid for any other reason, then remove the sell stop.)
  7. Place your stop loss above the high of the candlestick you place your sell order below.)
  8. Place the take profit as far from your sell order as your stop loss.

Strategy 2: Impulse Pull Back

The “Impulse Pullback” is a strategy that looks to buy currency pairs that have pulled back after just starting a new uptrend and sell currency pairs that have just pulled back after starting a new downtrend. In other words, before going long/short we look for a trend reversal signal.

This is a day trading strategy which I use with the 1-minute, 3-minute, and  15-minute time frames. In this strategy, I am looking for EMA crossovers on the chart. Here is what a trend reversal with an impulse pullback strategy applied would look like.

The custom moving average we use is the 9 EMA and 26 EMA. When going long we will look for the 9 EMA to cross over the 26 EMA from under. Note that in this example the 9 EMA is the red line and the 26 EMA is the line in green.

You can see in the example photo above that there is a downtrend formed by the lower lows displayed by the candlesticks and the way they are bouncing off of the moving averages. The RSI reaches the oversold line twice. There is a bullish pin bar candlestick right beneath the active downtrend line. The very next candlestick was also bullish and closed above the downtrend line. At this point, the asset is moving from “cheap” to “expensive” on the RSI. The moving averages cross, indicating a trend reversal. Being able to read all this information displayed would indicate here a good buy time.

You can actually see my entry on the chart in the photo above indicated by the green capital “B” and the green triangle underneath the candlesticks. You can not see an exit in this photo because I ended up holding this trade longer than anticipated as the trend did in fact reverse and became more profitable than originally intended. However, a trader could have met their daily quota in this trade alone in 15 minutes if they were able to observe the price action with these indicators and make an exit accordingly.

This is how you can use candlesticks, moving averages, and the RSI to better analyze the information displayed in your charts to find better entries and exits to maximize profits. The EMA crossover alone can be found in many different setups, but even if you find them in other situations, it doesn’t mean you should take the trade. There are rules to follow before placing the buy order.

Uptrend Impulse Pull Back Rules

Here are the rules for the impulse pullback strategy on an uptrend:

  1. Confirm Swing High.
  2. The 15-minute chart must show a 9 EMA and 26 EMA crossover.
  3. There must be no more than 3 pullback candlesticks.
  4. Confirm Bullish pin bar/ice cream bar Trigger Candle.
  5. Price must not pull back below the 50 EMA.
  6. Place a buy order at the high of a bullish pin bar/ice cream bar candle.
  7. Place a stop loss at the bottom of a bullish pin bar/ice cream bar candle.
  8. Place the take profit as far from your sell order as your stop loss.

Let’s go over the uptrending impulse pullback rules with a little more depth.

Rule #1 — Confirm Swing High

The EMA crossover on its own is very common to see, but what makes this strategy great is the accuracy of the price action analysis prior to and after the crossover. We look for a candlestick prior to an EMA crossover when the 9 EMA is heading towards the 26 EMA. This will be called the Swing High (SH) candle. In order for it to be a valid Swing High, the candle that follows must make a lower high for it to be a valid setup. In the example above, the Swing High, makes a higher high than both the green candle on the left and red candle on the right, which signifies a confirmed swing high.

The most important thing to understand about this strategy is that the swing high must strictly appear only before, at the cross, or right after the cross but no later than that – if it appears any time later it is no longer a valid trade.

     

For example, if there is a higher candle than the one at the cross between the 9 EMA and 26 EMA it becomes the new SH, because it makes a higher high than the previous candle. It can come right after the cross, right at the cross, but no later than that.

Rule #2 — There must be a 9 EMA and 26 EMA crossover

To verify an EMA cross over, plot the 9 EMA and the 26 EMA on your chart. If the 9 EMA is crossing over the 26 EMA, then price action could be amidst a trend reversal and we could potentially find a trading setup.

Rule #3 — No more than 3 Pull back candlesticks

After we identify our Swing High there should be no more than 3 pull back candlesticks. Any more than that and the setup is disqualified.

Rule #4 — Bullish pin bar/ice cream bar trigger candle

After confirming our Swing High, we look for a trigger candle as final confirmation that the chart we are looking at is a valid setup. The candlestick right after the SH is known as a pull back; and as you’ve learned before candlesticks have different shapes. For this strategy, now we are looking specifically for a bullish pin bar or ice-cream bar to trigger our buy order into the trade.

In the example above we see a bullish pin bar after two pullback candlesticks, so we could set the buy order above that candlestick high.

In this case, the trigger candle was right after the pullback candles. It is common in most cases to see several corrective pullback candles after a Swing High. To find quality setups, we wait to observe these before we can enter the trade. Remember, at this point in time we are looking specifically for either a bullish pin bar or ice cream bar.

Rule #5 — Price must not Pullback below 50 EMA

Our final rule before placing a buy order is that the price should not pull back below the 50 EMA. In the example earlier, the 50 EMA was not mapped. However, you should know that the 50 EMA serves as a dynamic support line, and by breaking that the setup will no longer be valid.

Rule #6 — Place a buy order at the high of a bullish pin bar/ice cream bar candle

We will use a conditional market buy order to enter this trade. This means that we will only enter the trade once the target price is reached. We will place our conditional market buy order right above the high of the trigger candle.

The candlestick after the SH is a pullback and in this case it has a bullish pin bar, making it our trigger candle. We place our conditional market buy order above the high of the trigger candle, and as explained in the previous paragraph, the order will only be executed when the market price reaches the desired price level. If the price starts moving the complete opposite direction and it becomes no longer a valid setup you can cancel the conditional market buy order.

Rule #7 — Place a stop loss at the bottom of a bullish pin bar/ice cream bar candle

Place a stop loss right below the trigger candle. Note that your stop loss distance will vary from setup to setup and you are encouraged to look for support and resistance zones. In any case, using this strategy, we would want to place our stop loss below our trigger candle. I know that a lot of you will ask me how much percentage away that would put the stop loss – it depends. The stop loss distance will never be a fixed number and will depend solely based on your analysis. However, for this day trading strategy I recommend having it be between 1-4% away from your conditional market buy order.

Rule #8 — Place the take profit equidistant from your sell order as your stop loss

Generally speaking, we want to be able to gain as much as we are willing to lose. You should place your take profit order at least as far from your buy order as your stop loss. In some cases you can double or triple the distance of the take profit order, or alter the take profit order by adjusting it higher as price action moves higher. You can even set multiple take profit orders using this strategy.

This strategy does not have to be treated as a manual trading strategy – meaning it does not require constant monitoring or adjusting like the trend surfing strategy. You can set up a trade like this in the SmartTrade terminal of 3commas all at once, confirm the trade, and let the market do what it will do while you watch and make profits.

Downtrend Impulse Pull Back (Short Setup)

Let’s now talk about the short setups. If you understood the long setup, you shouldn’t have much trouble with the short setup. It is basically just the opposite. I won’t go too much into detail on a short setup as I have said before, I do not particularly like trading down trending markets and try to stay away from them altogether.

When going short in a crypto pair we are looking for a new downtrend signal. The signal is a 9 EMA crossing below a 26 EMA. We want to see an immediate corrective pullback after the downtrend. The candle before, at, or after the EMA crossover signal is known as the Swing Low (SL) candle – the lowest low of the movement down. It can come right at or after the cross, if it comes later it’s not valid. The next candle after the SL must make a higher low for it to be a valid setup. We then would look for either a bearish pin bar or ice cream bar as our final confirmation. Then, we would set our sell order, take profit orders and stop loss.

Downtrend Impulse Pull Back Rules

Here are all the rules for the impulse pullback strategy on an uptrend:

  1. Confirm Swing Low.
  2. The 15-minute chart must show a 9 EMA and 26 EMA crossover.
  3. There must be no more than 3 pullback candlesticks.
  4. Confirm Bearish pin bar/ice cream bar Trigger Candle.
  5. Price must not pull back above the 50 EMA.
  6. Place a sell order at the low of a bearish pin bar/ice cream bar candle.
  7. Place a stop loss at the top of a bearish pin bar/ice cream bar candle.
  8. Place the take profit as far from your sell order as your stop loss.

Strategy 3: Trend Continuation Entry

In the Trade Continuation Entry (TCE) Strategy you are looking to buy a currency pair as it dips on a strong uptrend and to sell a currency pair as it rallies on a strong downtrend.

To confirm an uptrend you want to see a series of higher highs and higher lows. On an uptrend, the price moves in impulse and corrective waves. An impulsive wave will not continue forever though. After the impulsive wave  there is a corrective wave that pulls prices back down. On an uptrend the corrective wave is also known as a dip. This pattern continues until a trend reversal occurs. Your job is to identify these patterns and place a buy order right at the dip before it goes to the next impulsive wave.

To confirm a downtrend you want to see a series of lower highs and lower lows. On a downtrend the impulsive wave will move in the direction of the trend, so in this case it’s going downward. The corrective wave goes up. On a downtrend, the corrective wave called a rally. We are looking to place a sell order at the peak of the corrective wave to catch the next impulsive wave down.

We will use this strategy on the 15-minute time frame with major currency pairs only.

Uptrend Trend Continuation Entry Rules

Here are all the rules for the TCE Strategy on an uptrend:

  1. The 15-minute chart must be on a clear uptrend.
  2. Price finds reliable support in the current Swing Low at EMA lines.
  3. A bullish pin bar, consolidating breakout or engulfing trigger candlestick pattern is formed above the 50 EMA.
  4. Entry price is neither too far from the current Swing Low nor too close to the current Swing High. Place a buy order at the top of the trigger candle.
  5. Place a stop loss right below the trigger candle.
  6. Place the take profit goal at least as far away from the buy order as your stop loss. Ideally, your take profit goal for this strategy should be equivalent to the most recent Swing High. If the distance to the most recent Swing High from the buy order is not at least the same distance to your stop loss, the trade is not valid.

Let’s take a close look at each of these rules so that you can get a better understanding of them.

Uptrend Trend Continuation Entry (Long Setup)

Rule #1 — The 15-minute chart must be on a clear uptrend

The first rule of the strategy is that you only want to trade on a confirmed uptrend. This means that prices are making higher highs and higher lows.

Similar to what we do with the other strategies, plot the moving averages to observe that 26 EMA, 50 EMA, 200 EMA show an uptrend on the 15-minute time frame. Additionally, you should check the 1-hour time frame for an uptrend as well.

Again, to ensure that price is in an uptrend, the current high must be higher than the previous high, and the current low must be higher than the previous low.

Rules #2 — Current Swing Low at a reliable support

Once you identify the uptrend you will be looking for the most recent Swing Low. In order for it to be a valid setup you want the current Swing Low to find support in either the 50 EMA or 200 EMA.

Rule #3 — Bullish Trigger Candle

Once you have seen that the moving average has been tested as a reliable support level, you wait for the trigger candle to appear before entering the trade. You are either looking for a bullish engulfing pattern, pin bar/ice cream bar, or consolidating breakout pattern. In this example, we have a bullish ice cream bar. It was actually the second Swing Low in this example, indicating that this would have been a strong buy.

Rule #4 — Entry Rule

Before you enter the trade you want to ensure that price has not moved too far from the most recent Swing Low and that it is not too close to the most recent Swing High. The most recent Swing High may act as a resistance level, so if you wait too long to enter the trade then the price might retrace back down before you can hit your profit target. Ideally, you would want to place your buy order at the top of your trigger candle.

Rule #5 — Stop Loss Rule

You should place a stop loss order just below the most recent Swing Low. In this scenario, the trigger candle was our most recent Swing Low. Looking back, the next closest Swing Low was in a similar zone and both recent Swing Lows touched the EMA.

Rule #6 — Take Profit Rule

You should always set your take profit goal at least as far away from your buy order as your stop loss. However, when using this strategy you can feel comfortable setting your take profit goal just before the most recent Swing High.

As you can see in this example, the  take profit order would have been placed almost 3x the distance from the buy order as the stop loss would have been placed. This is due to the price of the most recent Swing High.

Downtrend Trend Continuation Entry (Short Setup)

Now we will briefly go over how you can use this strategy to make money when the price of a currency pair is in a downtrend. As I have said before, I try to avoid a currency pair that is in a downtrend in general, but it is important to understand how it works. It’s basically the opposite of an uptrend TCE.

First, you want to have a clear downtrend. It’s clear that you have a downtrend when price action is making a series of lower highs and lower lows.

Next, we want to see that the price is retracing upwards and testing the moving average. The price should go up to hit the 26 EMA, then fall back down, then test the moving average again but get rejected and come down once more. So, the first time the price touches the moving average is a test, and then the second touch is our confirmation that the moving average is acting as a resistance level that the price struggles to break above.

Then, we want to see a bearish pin bar/ice cream bar or bearish candlestick pattern forming on the moving average.

As such, you would place a sell order below the bearish trigger candle. You would place your stop loss right above the high of this pattern.

Downtrend Trend Continuation Entry Rules

Here are all the rules for the TCE Strategy on a downtrend:

  1. The 15-minute chart must be on a clear Downtrend. The current SH is lower than the previous SH, and the current SL is lower than the previous SL.
  2. Price finds resistance in the current Swing High’s 50 EMA or 200 EMA lines.
  3. A bearish pin bar/ice cream bar, consolidating breakout or engulfing trigger candlestick pattern is formed below the 50 EMA
  4. Entry price is neither too far from the current Swing High nor too close to the current Swing Low. Place a sell order at the bottom of the trigger candle.
  5. Place a stop loss right above the trigger candle.
  6. Place the take profit goal at least as far away from the sell order as your stop loss. Ideally, your take profit goal for this strategy should be equivalent to the most recent Swing Low. If the distance to the most recent Swing Low from the buy order is not at least the same distance to your stop loss, the trade is not valid.

Intro to Scalping

When it comes to trading cryptocurrencies there are many different strategies and techniques. Scalping is a specific strategy that targets very small profit margins. Oftentimes scalping targets will be between .15-.20% for scalp traders, sometimes even smaller. A scalp trader can close trades much faster than day traders and swing traders. While a day trader may have one or two trades completed each day, a scalp trader may make one or two trades each hour. The scalp trader is able to do this because the market movements are much easier to manipulate when you are targeting such small movements.

While it is always recommended to use multiple time frame analysis to be more precise in your trades, a scalping strategy will focus on the smaller time frames such as the one-minute and three-minute time frames. Usually when I am planning a scalp trade I will observe the three-minute time frame. It is in this time frame that I will do my technical analysis and draw my trend lines. When you are trading larger time frames, you can use a lot of different indicators to confirm or deny your ideas. When you are trading the smaller time frames, however, you must rely heavily on candlestick information to guide your trades.

If you are unfamiliar with candlestick analysis, it is suggested you learn about them (above) before attempting any scalp trades. The combination of candlestick analysis alongside valid trend lines (also above) is a potent combination. It’s not exactly “simple” for one to become a scalp master but it’s not extremely difficult either.

Here we see an example of using trend lines to plot our trades.

In this photo we can see BTC/USDT forming a wedge on an uptrend channel . We have a larger ascending channel that seems to have been breached. However, candlesticks find support along a second lower dynamic support line. We find that as the wedge draws closer to an outbreak there is a short term support as well forming a second wedge.

Here is the same photo now with the ascending wedge in green, the dynamic support as purple, the wedge line as red and the short term support as yellow. These lines are respected multiple times so can be considered valid trend lines. It is along these trend lines you would find the most optimal entries. You take long positions on the bottom of uptrend and downtrend lines. You take short positions along the top of uptrend or downtrend lines.

Looking at the information before us, you could take a long or short position. To show an example of how to long scalp this, I will use technical analysis.

After finding valid trend lines on the three-minute time frame, I would open the one-minute time frame to find my optimal entry and to identify my take profit and stop loss target.

Then I would map a risk/reward ratio I am comfortable taking (considering leverage if using leverage).

Then finally I would plot my take profit targets along previous areas of support/resistance. I would set them with very little space between each one to increase my chances of getting something filled.

If you set just one TP target the chances of it getting hit are less likely. Price could revert and change direction and hit your stop loss for a loss. If you instead pay attention to your scalp trades once you hit TP1 you can move your stop loss up to your entry to ensure you do not lose anything as you have already gained a small percentage of profits. Now, as the price moves up towards and reaches your TP2 goal, you move your stop loss up to your previous TP1 and now you will ensure you get stopped out for profits. You continue this process until you reach your final take profit goal OR you get stopped out by your adjusted stop loss for profits. This process of adjusting targets in a live trade is known as dynamic trading. You can maximize scalping profits with this technique. If you were truly scalping this without a dynamic trading strategy, your first TP1 goal would have been your only TP target and could ultimately make you miss out on potential profits.

Now on the same note if you do not think you can adjust targets in a live trade, then you may prefer to set just one very small take profit goal and really hunker down on that position by using a lot of funds or even by using leverage. Here’s something to consider about scalping: the take profit targets are very minuscule. In the photo above the initial target was .94% but after charting other goals moved the final goal up to 1.19%.

If you were just doing this on a spot exchange you would have to use a lot of capital to make reasonable profits with a scalping strategy. Trading a futures exchange however will give you the option to apply leverage to your trades. Using 10x leverage would amplify that return to just over 10%. Get this – using the example trade above if you used $1000 with 10x leverage you would get approximately $100 back from the trade. It would be the same return as using $10,000 on spot with no leverage. Do you see how leverage can be beneficial to scalping?

Conclusion

If you have made it through this portion of the guide and understand everything you have read, congratulations – you now have the tools and strategies to conquer the markets. The technical analysis part of trading is the most difficult part to grasp and usually takes the most time for traders to understand. The rest of the course from this point forward should be easier to digest. However, if you have any issues with any of these concepts, remember you can always book me for a private consultation. 

 


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