How to profit from small market movements. Investing Idea

How to open long and short positions using only one indicator

How to profit from small market movements. Investing Idea

The current market is looking more and more like chaos – September was the sixth month since cryptocurrencies plunged into the abyss of fear, as measured by the Fear and Greed Index. This is the longest period of time since the index’s inception.

Chaos is not just happening in the cryptocurrency market – the Fed’s continued aggressive policy scenario has led to massive sell-offs not only in the cryptocurrency market, but also in traditional markets. At times like these, it’s especially hard not only to stay calm but also to make money without giving in 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 strategy. In a market like today – it can lead to 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.

Moving averages may be of different types: simple (Simple Moving Average – SMA), exponential (Exponential Moving Average – EMA), their derivatives. 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 – it is the averaging of the asset price for a certain period. The period can be set independently, any exchange or TradingView allows you to do that.

By evaluating the direction, traders can make these trends work in their favor and increase the number of profitable deals. We will only look at the simple moving average today.

sеlect on the chart under Indicators – Moving Average. We will be looking at two timeframes – 21 days and 50 days. Once you’ve plotted them, you should have the following picture:


The key rule is that if line 50 is above line 21, we are looking for a set-up for short positions. If the opposite is true, then we are looking for longs. As soon as the lines cross – we expect a change in the trend.


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

In that case, I would recommend the following set-up:

Short $21.9k.

Risk: 5% (we never risk more than 5% of our portfolio)

1st target: $21k.

2nd target: $19K.

Stop Loss: $22.5k. After we reach our first target we take a 50% profit and move our Stop Loss to $21.9k.

It should be remembered that moving averages are a trend indicator, which gives good signals for opening and closing positions only if the trend is strong. When the market is in a long sideways trend, these signals are false and lead to losing trades.

Latest news:

The White House unveiled a concept for regulating cryptocurrencies in the U.S.

Ethereum network undergoes global updаte that shuts down mining

“Merge” Ethereum and the Beam hardfork. Main events of September