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In this article i am going to be revealing a simple strategy that you can use to enter the crypto market at the right time, but before we start Be sure to follow to me so, that you don't miss on any of mine new articles.
When comes to crypto the world then is time for starting to realize the potential of crypto.
Hence, the interest in cryptocurrencies is on the rise but, the problem is that there are so many new coins and tokens that are coming into the market every single day. How do you know which coin to buy.
After you decide to acquire a certain coin.
Do you blindly buy it or you have a certain strategy to enter at the right time ?
So, a crypto investor has to perform two tasks.
- 1 is fundamental analysis
- 2 is technical analysis.
fundamental analysis:)
Fundamental analysis helps you decide if a coin is worth buying or not. It helps you understand the workings of the company that is behind the coin.
If it has the potential or not. The truth is that the crypto market right now is so, clustered that only five to six percent of projects are worth investing in.
Others are just mere scams so, fundamental analysis is very necessary to perform fundamental analysis.
After performing fundamental analysis on a particular coin you decide that it does have the potential to multiply many folds.
Technical Analysis :)
So, what do you do next do you buy it at the current market price or do you have a certain strategy to enter. This is where technical analysis comes into the picture. You cannot enter blindly at any time that is not a good way of investing especially in crypto The crypto markets are a lot volatile than any other asset class. Therefore even if you find the next bitcoin. It can easily go down 40 to 50 percent from your entry price. Hence it is very important to have a good strategy to enter the markets
What's Strategy ?
So, what is the stratege that we will use is a simple crossover strategy in this strategy. We will use four exponential moving averages and combine them to find the correct entry price for the coin.
Moving averages are simple indicators that show the average price of an asset over a particular period of time.
The objective of using a moving average is to identify the trend of the market. Some traders use two or more moving averages and use their crossover as a signal to buy and sell.
For instance, here we have a 20 EMA period and a 50 EMA period when the 20 EMA period crosses above the 50 period EMA. it signals a buying opportunity.
And when the 20 ema crosses below the 50 period EMA.
It's signals a selling opportunity. Our strategy is also a crossover strategy at this point. I want to make one thing clear, the strategy that, i am about to share is not created by me. I don't know the exact person who created this strategy, but i want to make sure that we give credit where it's due. With that being said let's get into the strategy, so in our strategy we are going to be using four EMAs to filter out buying signals.
The 4 period EMA, 8 period EMA 13 period ema 21 period ema and a 55 period ema.
Now for this particular strategy, i have created a custom indicator that shows the moving averages and buy and sell signal the links to the indicator will be in the below section. Once you plot the custom indicator the chart will look like this if, you don't want to use the indicator. You can manually plot these four moving averages.
4 ema charter
The Dark blue line here is the 8 period ema the green line is the 13 period ema the yellow line is the 21 period ema and the red line here is the 55 period ema. Since we are using this strategy for investing, we will only look at buying opportunities. We will not discuss selling opportunities. Now for this strategy, we will be using the daily time frame. Since, we are interested in investing only. we don't need to look at smaller time frames. we will focus on daily time frame.
There are simply two rules for buying a certain coin.
Number one 21 period ema crosses above 55 period ema.
Rule number two at the time of the crossover the eight period ema should be above the 13 period ema. Let's look at an example to see the strategy in action.
Here is the bitcoin chart on the daily time frame, this buy signal is the most recent buying opportunity.
As you can see on this candle the 21 period ema crosses above the 55 period ema and at the time of the crossover the eight period ema was above the 13 period ema.
Hence, The indicator gave a buy signal this buy signal was generated when the price was around eleven thousand three hundred back in october 2020.
We bought bitcoin at that price, we would be standing at a profit of 187.96 percent.
Right now on ethereum we had a buying opportunity back in april 2020 when the price of ethereum was around 217$. We bought ethereum back then we would have generated 827% percent returns at current value the same thing happened in Cardano case.
The buying signal occurred in mid-november last year 2020 in back. When the price was around 0.105$, that buying position would have given us roughly 10x returns that is a thousand percent returns so that is how you enter into the crypto market.
Again, i would suggest you use fundamental analysis first to know the project behind the coin you want to invest if you are 100% sure of the potential of the project.
Then and only then you should use this strategy to buy and even if you follow this strategy you need to be ready for at least a twenty percent drop in your value. Crypto markets are a lot more volatile than the traditional markets.
Hence, The risk appetite of the investor should be adjusted accordingly.
Disclaimer ! This is not financial advise.
Please always do your own research.
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