Strategies apply to many things in life. For instance, basketball coaches have their own unique strategies that gives them an edge over the opposing team. Heck, even participants of hotdog-eating competitions have imbued their own strategy to eat more hotdogs than their competitors.
In regards to trading, it is crucial for one to have a trading strategy like any other thing that we do in life. In this article, I will be discussing some of the trading strategies that are more commonly known and simple to follow. I highly recommend that you use a strategy if you’re not using any.
Failing to plan is planning to fail
- Moving Average
- Horizontal support and resistance
PSA: Moving Averages and Horizontal Support and Resistance work on ANY time-frame. However, lower time-frame trades produce more noise, which means more false signals are produced.
Many of you in the crypto space would have heard of the term ‘hodl’, but for the uninitiated, it simply is a misspelled version of the word ‘hold’.
The ‘hodl’ strategy is simple. It is seen as a form of long-term investing in a particular cryptocurrency. There are 2194 coins in the market as of now, but you must do your research and classify and narrow down which are the coins that you want to invest in for the long term.
First, one must form a thesis or idea. What makes a particular cryptocurrency worth investing in? Do you see a bright future ahead for this company? Does it solve any potential problem that requires blockchain? In a sense, these are all fundamental research that every investor should partake in when they invest into a company.
Second, the ‘hodler’ should devise a plan on how much resources and when to allocate to a particular investment. There is no fixed mantra as to how much a person should put into a particular investment, but it should always be about the investor’s risk appetite and how much he can afford to risk.
If your investments go to zero, can you still continue your daily routine and afford to eat, have a decent backup of cash for an emergency?
If the answer to the above question is yes, great! If your answer is no, I suggest scaling back your risk.
Now comes the next dilemma- where do you actually enter the market?
Let me give you an interesting statistic with regards to buying and ‘hodling’.
If you had invested $100 every month in Bitcoin for 2 years (May 2017 — May 2019), you would have put in $2400 and ended up with $3753.
Even better if you had invested $100 every month in Bitcoin for 6 years (June 2013 — May 2019), you would have put in $7200 and ended up with $120,349.
In my opinion, this is the easiest strategy for someone who is not interested in trading, but more interested in dollar-cost averaging. This allows the buyer to be less stressed out over periods of downturn, which they will continue accumulating Bitcoin.
Bitmore for ‘hodling’
Not long ago, Blue Helix came out with Bitmore. Bitmore is the perfect tool for ‘hodling’ because it rewards you for holding Bitcoin, Ethereum, and Tether in a Bitmore account with Blue Helix Exchange. If you deposit these 3 cryptocurrencies into your Bitmore account, you will be rewarded with a guaranteed 5% per annum (p.a) returns.
This 5% p.a return is computed daily, and the user can order or withdraw his or her funds at any point of time. For more information, you can visit this page on our BHEX website.
Example: John is BHEX user and he deposited 2000 USDT to his Bitmore account and hold for 15 days. He will receive a Bitmore daily reward of 0.2739USDT (15days total reward of 4.109USDT)
Thus, this is perfect for ‘hodling’ as you will be able to grow your holdings over time, thus killing two birds with one stone.
Moving averages (MA) have always been one of the most popular technical trading tool even till today. MA measures the average in prices over a certain period of time. A 200 period moving average on the daily chart would calculate the average price over a 200 day period.
Moving averages are a lagging indicator as it is based on past prices. The two most popular moving averages are the Simple Moving Average (SMA) and the Exponential Moving Average (EMA), with EMA putting more emphasis on recent price action.
Moving on to the strategy itself, there are 2 main options one can choose from.
- Moving Average as support and resistance
- Moving Average crossover
This strategy relies on treating the Moving Average as a moving ‘support and resistance’. This means that if price is above it, we can anticipate it bouncing on the MA and continue upwards, while if price goes below it, we can anticipate it bouncing off the MA and continue downwards. Also, price above the MA means bullishness, while price below the MA signals bearishness.
Lets see an example of this below.
In the chart, I used the 50 EMA on the Daily time-frame to illustrate this strategy. Note that price tend to find support when above and resistance when below. However, there will be times when this strategy does not work perfectly, and that’s fine as nothing in life is perfect.
Notice when Bitcoin made it’s rapid drop to $3200? It hovered below the 50 EMA for many days, before dropping. This signaled a bearish sign as price could not break above it.
Again, when Bitcoin hovered above the 50 EMA for many days, it signaled a bullish sign as price could not break below it. Bitcoin went on to $8400.
The Moving Average crossover is another strategy that is very common among people who use Moving Averages. This strategy requires 2 Moving Averages; one lower period MA and one larger period MA. A common pair would be the 50 & 200 day Moving Average, which traders dub the ‘golden cross’ if the 50 MA crosses the 200 MA from below- which signals a bullish market, or the ‘death cross’ if the 50 MA crosses the 200 MA from above- which signals a bearish market. Lets see it in the charts.
If we follow the buy and sell signals provided by the 50 & 200 MA, we would have been very profitable. The largest gain would have been a monster 6640% IF you had sold the top at $20,000 per Bitcoin.
Tip: If you spot something moving in a parabolic manner, it is always good to take profits along the way.
I encourage you to fiddle around with the period setting on the Moving Average so that you can find the one that you are interested in. For instance, some people really like the 7 & 28 MA crossover strategy on the daily time-frame. Others may like the 13, 21, & 50 EMA combined together to form another crossover strategy.
Horizontal Support and Resistance
Support and resistance is another important yet basic concept that everyone should know about. Contrary to popular belief, support and resistance gets weaker each time it is tested. There are many trading books or gurus claiming that support or resistance becomes stronger with each touch. If that’s the case, price will not even break through a certain level! Let me give you an example.
- Compare the two images. The first is from a physics textbook explanation on how a bouncing ball bounces lower over time as it loses energy.
- The second image shows Bitcoin bouncing on the red line, which was support at that time. It exhibits similar properties to a bouncing ball. When price touches a support multiple times, the bounces get weaker.
- Thus, it is crucial to remind yourself not to buy when a support is tested multiple times.
- When a support with multiple touches is flipped, it becomes a strong resistance and vice versa.
- When resistances get broken easily, we know that the market is BULLISH.
Simple words to live by: Buy support, sell resistance.
To conclude this article, we went over three strategies which are: ‘Hodl’, Moving Averages, and Horizontal Support and Resistance. It is highly encouraged to have at least a strategy or a plan so that you can be profitable and not panic when it comes to buying and selling any cryptocurrency. In future, I will be expanding on more strategies that you can use in trading cryptocurrencies. Don’t forget to leave some claps and happy trading!
Written by: Meredith, Blue Helix Community Manager. Forex and Cryptocurrency trader. With the help of Marcus, Blue Helix Community Manager.
NOTE: All investments carry a risk, and anything in this article should be taken as educational advice and not investment advice.
About Blue Helix
Blue Helix is founded by James Ju, a successful serial entrepreneur — he was the CTO of Huobi Global in the year 2014–2017, and Vice President of X-Financial (NYSE listed Company) thereafter. He founded Blue Helix in early 2018 and it has completed $15 million USD in its angel round financing and have received investment from a total of 56 institutional investors including top exchanges like Huobi and OKex. Blue Helix is an innovative crypto assets financial services provider. The in-house developed Bluehelix decentralized blockchain-based assets custody and clearing system is dedicated to providing world-class professional financial trading and assets management services to worldwide users. It has its self-managed Blue Helix Exchange (BHEX.com) and Open SaaS Platforms for institutional partners (BHOP).
About Bluehelix Chain
Bluehelix is a decentralized digital asset custody and clearing technology. Based on blockchain technology and community consensus, it uses cryptography and blockchain technology to support decentralized governance capabilities at the technical level. Through the BHPOS consensus mechanism, the digital asset custody and transaction clearing are jointly supervised and managed by the community through- the consensus mechanism of transaction data on-chain; hot and cold wallet separation; multi-signature + member nodes clearing- the goal of asset security and transaction credibility is achieved. All of these effectively solves the security and trust problems faced by the centralized digital asset management platforms.
About Blue Helix Open Platform
BHOP is based on Bluehelix’s decentralized digital assets custody and clearing technology along with BHEX’s underlying trading technology. It combines the core competitiveness of Bluehelix and BHEX to create an open SaaS platform with key advantages such as asset security, transaction reliability, and horizontal performance expansion. This can help in providing technical and operational services to partners who have or are preparing to operate the blockchain asset trading business. Through the capabilities of the BHOP open SaaS platform, partners can quickly launch their own business at zero cost, and also achieve full control of customers, data, brands and technology. Partners with technical research and development capabilities will achieve deep customization of products through BHOP authorized source code. BHOP can fully satisfy individualized transactions of different industries and different types of blockchain assets. The needs of the platform can effectively help partners create unique competitive advantages.