Trading idea: how to get profit from small market movements

Maria Stankevich, Chief Business Development Director at EXMO.com, explained how to open long and short positions using only one indicator.

The current market is increasingly looking like chaos - September became the sixth month since cryptocurrencies plunged into the abyss of fear, according to the Fear and Greed index. Now is the most extended period in history since the introduction of the index.

Chaos is happening not only in the cryptocurrency market - the scenario of the continued aggressive policy of the Fed led to massive sales not only in the cryptocurrency market but also in the traditional markets. At such moments, it is challenging to remain calm and earn without succumbing to emotions.

Many professional traders note that one of the main problems for beginners is trying to follow a million different indicators and constantly changing the strategy. In a market like today, this can lead to a portfolio loss. Therefore, we will consider a simple strategy - the ability to catch small movements and open long and short positions depending on the position of the moving averages.

There are different types of moving averages: the main ones are simple (Simple Moving Average - SMA) and exponential (Exponential Moving Average - EMA). All of them are lagging indicators and have one purpose - to determine the current trend of financial assets by smoothing fluctuations and noise. In fact, these are averaging the price of an asset over a certain period. You can set the period yourself; any exchange or TradingView allows you to do this.

By assessing the direction, traders can make these trends work in their favour and increase the number of profitable trades. Today we will consider only a simple moving average.

Select the chart in the Indicators section - Moving Average. We will consider two timeframes - 21 days and 50 days. After you have built them, you should have the following picture:

Daily timeframe:

http://joxi.ru/Vm6evXEs3gv4yr

And the 4-hour timeframe:

http://joxi.ru/n2Y7n1MSkLebxr

The key rule is that if line 50 is above line 21, we are looking for a setup for short positions. If vice versa, then for long ones. As soon as the lines intersect, we expect a trend change.

Let's look at the situation over the last few days:

http://joxi.ru/L21evaqsw70RW2

On September 13, the lines crossed and the 50 line was above 21. If we had gone short at $21.9k, we could have caught a 10% down move.

In this case, I would recommend the following setup:

Short $21,900
Risk: 5% (we never risk more than 5% of the portfolio)
1st goal: $21,000
2nd goal: $19,000
Stop loss: $22,500; after reaching the first target, we fix 50% of the profit and move the stop loss to $21,900.

We must remember that moving averages are a trend indicator that gives good signals to open and close positions only when there is a strong trend. When the market is in a long sideways direction, these signals are false and result in losing trades.

It is not financial advice or an action guide. Remember that cryptocurrency is highly volatile and can lead to financial losses.