Learn Bitcoin Stochastic Strategy
This learn bitcoin tutorial will talk about how to come up with a bitcoin strategy that is based on the stochastic indicator. This stochastic strategy will be used by cryptocurrency traders to trade trending markets. This bitcoin strategy is simple to trade with & simple to follow. Using the stochastic indicators traders can use this indicator to come up with a strategy that will be used to identify bitcoin trends.
Bitcoin Trend
The various methods used to figure out and identify market trends.
·An upward trend is when the btcusd market is moving in an upward general direction and the bitcoin price keeps making higher highs & higher lows.
·A downwards trend is when the btcusd market is moving in a downwards general direction and the bitcoin price keeps making lower lows and lower highs.
This is the first thing to look for when determining the bitcoin crypto currency trend, a trader can then use another method to confirm the cryptocurrency trend. For example a trader may use a bitcoin trend line & if the bitcoin trend line direction is up the bitcoin trend is then upward but if the bitcoin trend line direction is down then the bitcoin trend is downwards.
A trader can also use the 200 day moving average to determine the cryptocurrency trend. If the bitcoin price is above the 200 day moving average then the bitcoin trend is considered as an upward bullish trend. If the bitcoin price is below the 200 day moving average then the bitcoin trend is considered as a downward bearish trend.
Stochastic Strategy
After determining the bitcoin trend the trader will then use the stochastic indicator to ascertain where to open a buy or a sell bitcoin trade. For this strategy a bitcoin trader will use the overbought & oversold levels to determine when to open trades. Oversold level is the 20 mark on the stochastic & the over-bought level is the 80 mark on the stochastic oscillator trading indicator.
Upward Bitcoin Crypto Currency Trend - in an upward bitcoin trend the trader will wait for stochastic technical indicator to pull back and move downwards up to the oversold levels. This will mean that there is a short term market retracement and a btc/usd trader will wait for the best opportunity to buy after this pull-back. Once the stochastic oscillator gets to the over-sold level it will not stay there for long because the bitcoin trend is upwards and this will only be a temporary bitcoin price pullback.
A trader will open a buy bitcoin trade once the stochastic oscillator leaves the oversold level & starts heading upwards.
Downward Bitcoin Crypto Trend - in a downward bitcoin trend the trader will wait for stochastic technical indicator to retrace upwards and move upward up to the over-bought levels. This will mean that there is a short term market retracement & a bitcoin trader will wait for the best opportunity to sell after this upwards retracement. Once the stochastic oscillator gets to the overbought level it will not stay there for long because the bitcoin trend is downwards and this will only be a temporary bitcoin price retracement.
A trader will open a sell bitcoin trade once the stochastic oscillator leaves the overbought level & starts moving downward.
A trader can use this strategy to find the best place where to open a trade after a bitcoin price retracement. This will increase the chances of the trader becoming more profitable because the trades will be opened at the best point - that is after a bitcoin price retracement. This will increase the risk reward ratio of the trades as the chances of the trades retracing further after these points are minimized because the bitcoin price is already oversold in an upward trending market or over-bought in a downward trending market.
A trader should then set their stop loss orders a few pips below where they opened a buy bitcoin trade or a few pips above where they opened a sell bitcoin trade. Trader will then determine where to take profits based on a favorable risk reward ratio, or they can set the take profit at a specified number of pips based on the rules of their bitcoin plan.
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