This is a simple five-step training strategy that you can use as a framework and basis to trade against and really input your own analysis and techniques on. I’m gonna go through these five steps in this video, you can do this on each and every trade to really get a good repeatable strategy going. I’m going to trade bitcoin for this example over on MEXC. So, I’m going to leave the timestamps for each step down. Then we’ll go through them step by step.
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Step 1: time horizon
So, first obviously come to your trading platform. I’m going to use mexi for this. I’ll leave a link to them in the description. They give a deposit bonus if you deposit crypto or fear on the platform. They’ll give you, I think up to about four thousand dollars as a deposit bonus in your futures trading account. So, if you trade futures that’s a good bonus so what we’re going to go through first really is what exactly are you trading right. So, you have to decide first what is your time horizon and trade type right and that’s going to depend on many different things for right now as of making this video. We are in a space where there’s actually an announcement coming out today from the FED.
Jerome Powell is going to be doing a speech and the market is kind of hanging on his words to see where the market might go over the short term now. This is a trading event. It’s a day trade day tradable event where there is a specific point in time where there’s a news event that will change the market. So, it’s probably going to either go up or down from there, more volatile than it has been. So, that is a specific tradable event. So, for me, I’m going to be going into a day trade for this right for this example now. If you had something else like an event or an upgrade in crypto that was maybe a month or two out. Then that’s a different type of trade right, so you have to get that trade in your head and the time horizon first before doing anything else because that’s obviously going to give you some pointers on how long you want to be in the trade. How volatile it may be and where you think the price can go. Then do your technical analysis on top because the price will move a lot more over a month than it will over a day. So, you need to make sure that your entry level stop loss and your take profit are commensurate to how much the thing can actually move within your time horizon.
Step 2: trend
The next is trend identification and this has two parts one is technical analysis or TA. The other is fundamental analysis FA or you can call it market analysis in general technical obviously relates to the specific technical patterns and areas on the chart that you want to trade around fundamentals. Market analysis is also really important as it’s going to really give you a pointer into. If you’re bullish or bearish when we’re talking about trend identification there are only two things that you can do: you can either buy and go long or you can sell and go short right. So, there’s only two things you can do with a trade: either buy or sell now. The only choice that you have is do you think the market is going to go up or down from here? That’s literally it, that is what you’re trying to analyze. So, what you want to do is the trend from a TA perspective and then the fundamental market analysis perspective.
This is just a daily thing where you absorb what the market is doing the sentiment the news. The events central bank policy and everything like that that’s obviously a daily thing that you need to be plugged into the market for technical analysis a lot easier. So, what we’re going to do now is just put some very simple T on the chart. What I’ve done here is really seen the two consolidation patterns. As you can see on the chart which is this one, so that was back towards the start of the year in may it’s now august. Then we have this one which is a really long pattern that has been going for a few months right hitting higher lows and so potentially this is an uptrend. But, what you can see my analysis right here is that I’ve done what is essentially a rising wedge which isn’t always bullish. In fact, it’s a bearish pattern now you can obviously need to use TA. I’ve got some videos on technical analysis that go through all of that step by step all the different kinds of ways to analyze the chart. So, I’ll leave that in the description of the kind of day trading guide. But, essentially, you want to get your technical analysis here to say what the pattern is telling me. Maybe, I can kind of see am I bullish or bearish based on the technical analysis and the really important thing is to get some areas where you think the price may get to depending on. If you’re bullish or bearish. So, what i’m going to do here is see support and resistance levels right down here is a support level.
Step 3: Momentum
I’m just going to draw that on the chart right here. Then i’ll make that red so it stands out. So, for me that price is a support level that is the low price on this short trend right here. If the price falls I would expect it to go down to this level. So, we’re not making a kind of one-way bet yet we’re just saying if the price does fall. It will probably come down to here because that is the support level previously now. If the price moves up, where will it get to probably around this level here which is the previous resistance. You can see that we’re getting previous resistance right around here that is where the price went up previously and got sold off and found resistance. All right. So, that’s really important right here that you get that price level in mind, so now we have these price levels. So, you see that resistance here price is right down here so now we have the price levels we can say these are kind of like the best and worst case scenarios for both for where the price is going to move right. So, the price is here. We know the worst case it’s going to go down here and best case.
If you’re long it is going to go up here depending, if you’re long and short. So, you can get your TA on the chart and make sure to give yourself an idea of the pattern. That’s playing out as being considered bullish or bearish and also where are the kind of levels the price levels. Both to the up and down side where it might get to based on previous support and resistance. I skipped over a lot of TA basics there, but I’ve got a video about technical analysis step by step. I’ll leave that in the description. But, what we want now is to figure out where the momentum is and try to figure out some entries. So, what I mean by that is again you can do technical and fundamental. The fundamental analysis of momentum is what news is coming out. What do you think traders seem to be doing are analysts coming out and saying we’re actually more bullish.
Step 4: Risk management
We’re going to be buying dips or are they saying we think there’s further to go in a downtrend or something. So, all of that has to influence you. But, from a technical point of view what you want to do here is just look at the momentum of trade. So, I use something like the MACD. But, you can also use rsi or other other indicators. There’s many of them specifically for momentum though I prefer MACD. So, what we want to see here is really a change in momentum or an area where the momentum may suddenly come out of nowhere now. What you can see from the price is that we’ve just been consolidating here and you usually usually do consolidate into a news event because people are kind of hedging their backs and waiting to see what will happen. The MACDis also showing us that the momentum of trade is neutral.
You can see in the middle right here, it’s just a neutral momentum. So, nothing’s really happening. So, we’re going to get a breakout, we’re going to get a different momentum from this for sure based on if that news is going to be something that changes the market which it probably will usually do. So, the momentum is telling me we’re going to get a breakout either way we could either get bullish momentum up here or bearish momentum to the downside. But, there is going to be a breakout.
So, that’s why it’s a day trade or a breakout trade. You have to obviously take a flyer on which way you think the market is going to going to go based not only on your technicals. But, also on the fundamentals of where you think sentiment is and what you think the policy or the news event is going to actually change the market. Now notice I haven’t even made a call yet on whether the price will go up or down because it actually doesn’t matter that much you have risk management in place that means that if you’re wrong, you get out the trade a small loss. Then you move on to the next one so determining whether the market will go up or down is? The most simple thing that you have to do is will the market go up or down from here. Then place your bet either long or short depending on how you want to trade the most important thing though based on your technical analysis. If it’s showing you that this is fairly a bearish pattern or if you think the sentiment in the market is going to push us higher you have to get your risk management in place. So, what we’re going to do here is just use one of these indicators or drawings right here to show us exactly where the risk and reward is in the trade. So, you can use a long position or a short position indicator. So, I’ve got the long position right here and you can see you can set this right here to change your entry level. So, my entry level is right at the current price now.
Step 5: Exit
For me, if I’m going to go long. I’ll just get this one off. If i’m going to go long, where do I want to get out at and where do I want to set my stop loss to get out of the trade. If I was wrong, if I get in here and the price moves down. I’ve identified this price level around twenty thousand like if the price gets to twenty thousand. I think I’ve essentially guessed wrong going long and it’s going to go against me. I wanna go to get out so that’s where you place your stop loss right there and you can see that loss now for me. If the market takes this news very bullishly I think it’s going to pop the price will pop. I can very easily take profits, I can either let the trade run out or I can take profits around this level which would be getting into previous resistance levels where sellers might come in now this risk reward ratio is pretty good right. You can see it’s actually 1.72 risk reward ratio which is really good and that would be a good trade to go into as long now.
If you thought we’re in a rising wedge and I don’t think the news is going to be very good. Then just take a short position at the exact same level and then we just have to do our risk reward again. So, where is the stop loss right if the price moves against you? I would say up to this level and you can see that on the chart like if it gets up to here. That’s probably the wrong trade for me. The price is going to move up against me. I’ve gone short so i’m wrong so I need to get out of that level now for me. If it does come down and the market takes it negatively I’m looking at taking profits down around this level before the bottom resistance. But, at a level where I think buyers may come in and start buying again. So, that would be a trade for me to the short side now. As you can see here this is essentially a good risk reward ratio for both trades right because you’re right in the middle of a trend because you have the upper bound and the lower bound.
This article is a transcription of a video made by MoneyZG
Original video: https://youtu.be/5pEhDUSW6yo
