CoinSmart is not affiliated with any investment advisor, broker, or third party and will never ask you for access to your account. Read more here
Share on twitter
Share on facebook
Share on linkedin

Technical Analysis Series Part 1: Top 3 Simplest Crypto Trading Strategies

NOTE: At the end of the article, we have a GetSmart Quiz for you. If you correctly answer all the questions, you will receive (1) entry to win $4,000 CAD of Bitcoin! Draw will be on Sept. 30th 2021.

The cryptocurrency market can be a hard one to gauge, especially if you are a newbie trader. You must have seen all these fancy price charts and crypto trading strategies that barely make any sense. What’s with all the lines! What’s with all the curves? What is RSI?

crypto trading strategies

Whether old-school traders want to admit it or not, technical analysis can be very daunting. So, today what we are going to do is to simplify the process for you. We will show you three cool techniques that you can use to gain a better understanding of the market.

Before we begin, let’s give you a small tour of the interface.

CoinSmart Advanced Trading Interface

When you log into your account, you will see this on the header. Select “Advanced Trade.”

crypto trading strategies

 

Now, you will see the price chart, order book, and the different technical analysis tools that are available to you.

 

You can choose the crypto you want to look into on the top right corner and the base fiat currency (CAD, USD, or EUR). In our examples, we will be looking at BTC/CAD.

crypto trading strategies

 

Alright, let’s get started.

Top 3 Simplest Crypto Trading Strategies #1: Overpriced and Underpriced

The first thing that you need to look at before investing in the market is whether the asset is overpriced or underpriced. Ideally, you should want to enter the market when the asset is underpriced and sell when it is overpriced. There are two ways that you can judge this behavior.

Firstly, we have the relative strength index.

The relative strength index (RSI) is a technical indicator that analyzes the strength or weakness of an asset, based on the closing prices of the recent and historical trading performance.

  • If RSI > 70: The asset is overpriced and will likely drop soon.
  • If RSI < 30: The asset is underpriced and will rise again.

Let’s take an example.

crypto trading strategies

As you can see, the relative strength index was hovering above 70, indicating that the market was overpriced. This resulted in a massive sell-off, with BTC crashing from $72,000 CAD to $59,800 CAD. So keeping an eye out on the RSI is a very handy tactic.

The second tool that you can check out is the Bollinger Band.

crypto trading strategies

Created by John Bollinger, the Bollinger Band allows you to check market volatility and asset strength. There are two things you need to know about these bands:

  • Squeezing bands mean decreasing price volatility, and expanding bands mean increasing volatility.
  • When the price candlesticks drop below the Band, it indicates that the asset is underpriced. When the price rises above the Band, the asset is overpriced.

Top 3 Simplest Crypto Trading Strategies #2: Golden & Death Crosses

Now we come to the cross strategy. In technical analysis, a “simple moving average” or SMA is the mean average of an asset over a defined period of time. So, a 20-day SMA is the mean average of an asset over the last 20 days.

You just need to select 2 “Moving Averages” from the list of indicators and choose two time-frames – 50 and 200.

crypto trading strategies

Also, make sure that you have put your time frame as “1-day.”

crypto trading strategies

Alright, now that we have done our homework, let’s look into the indicator itself:

  • Golden cross: The 50-day SMA crosses over the 200-day SMA. This is a bullish signal.
  • Death cross: The 200-day SMA crosses over the 50-day SMA. This is a bearish signal.

Now, let’s see how this works in an actual chart.

crypto trading strategies

As you can see, the 200-day SMA (blue) has crossed over the 50-day SMA (yellow) to form the death cross. Following this, Bitcoin dropped from $40,730 to $37,600 over the next four days.

Top 3 Simplest Crypto Trading Strategies #3: Dollar Cost Averaging

Finally, we have one of the least complicated and well-tested strategies out there – Dollar Cost Averaging (DCA). The idea is that instead of putting all your money at one go, you:

  • Break down that amount into smaller batches.
  • Choose a specific time and day, and only buy at those times.

Keep in mind that this is a long-term strategy. By buying smaller portions of an asset at the same time over a long period, you will overcome market volatility.

Let’s take an example.

Alice wants to invest $5,000 CAD in BTC. However, she read up on DCA and decided to break up this investment into 5 $1,000 CAD batches. She then decides that one first of every month, she will make her investment. By doing this, Alice will mitigate significant fluctuations in one go.

Conclusion

So, there you have it. Investing in crypto is simple and doesn’t require an Einstein-level IQ. It just needs self-discipline, a bit of understanding, and some patience. So, be on the lookout for some patterns and integrate a consistent investment policy. That’s all that you will need to invest in crypto, regardless of the market conditions.

Alright, it’s quiz time!

Before you take the quiz, make sure that:

  • You have a verified CoinSmart account (to get your reward if you successfully answer all the questions).
  • You use the same email in the quiz that you use to register your CoinSmart account.

Alright, it's quiz time!

Before you take the quiz, make sure that:

  • You have a verified CoinSmart account (to get your reward if you successfully answer all the questions).
  • You use the same email in the quiz that you use to register your CoinSmart account.

Top 3 Simplest Crypto Trading Strategies Quiz: Answer All The Questions And Earn An Entry To Win $4,000 CAD of Bitcoin

Enter your name
Enter your email
If RSI > 70, then:
Which of the following is a golden cross?
I have $100 and I want to use Dollar Cost Averaging. So, I should: