“Trading cryptocurrencies might sometimes appear more difficult than it truly is.” This is a statement only experts traders will agree with. I am guessing you are already thinking about one expert trader you know. The truth remains, you too can become very good at crypto trading if you pay attention to the little details on the charts.
In this short tutorial, we will explore how to simply set up the SWING TRADING short-term scalping strategy which can afford you some level of success as you begin your crypto trading journey.
Before we commence, a little disclaimer: This material can only serve as a guide and cannot be considered as financial advice. Crypto trading remains very risky and you make use of the information contained within at your own risk.
Okay so let’s dive right into it.
We will be exploring 3 simple indicators to help us make the best decision on when to enter the market and in what direction to trade (buy or sell).
Crypto Trading: 3 Simple Indicators for Scalp Trading on 1 hour and 5 minutes Time Frames
- MOVING AVERAGE WEIGHTED (WMA)
- SMOOTHED MOVING AVERAGE (SMMA)
MOVING AVERAGE WEIGHTED (WMA)
The WMA can help determine trend direction. It could be an indication to buy when prices dip near or just below the WMA. It could also be an indication to sell when prices rally towards or just above the WMA.
Moving averages can also indicate support and resistance areas. A rising WMA tends to support the price action, while a falling WMA tends to provide resistance to price action.
This strategy reinforces the idea of buying when the price is near the rising WMA or selling when the price is near the falling WMA.
SMOOTHED MOVING AVERAGE (SMMA)
A Smoothed Moving Average is another type of Moving Average. In a Simple Moving Average, the price data have equal weight in the computation of the average. Also, in a Simple Moving Average, the oldest price data are removed from the Moving Average as a new price is added to the computation. The Smoothed Moving Average uses a longer period to determine the average, assigning a weight to the price data as the average is calculated.
To explain what the Stochastic indicator is about, here’s what the founder of Stochastic has to say…
“Stochastics measures the momentum of price.
If you visualize a rocket going up in the air – before it can turn down, it must slow down.
Momentum always changes direction before price.” – George Lane
Select your Stochastic, set the following as:
How to Use Time Frames in Crypto Trading
1 HR TIME FRAME: Used for finding and noting the trend direction. In this short term scalping, we will use the 1 Hr time frame to determine which direction our price is going (if upwards, then we are going to look for setup ups that follow the upward trend and vice versa).
5 MINUTES TIME FRAME: This is the time frame to place your trade with.
After determining the direction of the trend, return to your 5 minutes charts and watch out for the actions from the INDICATORS.
Crypto Trading: Placing Your Trades
For the WMA AND SMMA,
One the 5 min time frame, check to see when the WMA (blue) & SMMA (orange) lines cross each other than enter the trade in the direction of the trend.
Note that when the orange line is above the blue line, it is a bullish trend (enter a 5min buy) and vice versa.
FOR THE STOCHASTIC,
When the two lines cross outside of the purple area above the 75 it is an overbought condition and you can enter 5 minutes SELL order.
Also, When the two lines cross outside of the purple area below the 25 points it is an oversold condition and you can enter 5 minutes BUY order.
Best Case Scenario
The best time to enter your scalp trade is when all of the above conditions are met. This can occasionally be tricky sometimes so be sure that the lines have fully crossed each other before you take your trades.
Finally, trading success most times requires your understanding of the market, chart interpretation, as well as the simple use of indicators such as the ones above.