This bitcoin strategy has been profitable since 2014

Bitcoin-focused investors have a lot in common. When the bull cycle is over, they claim to buy when the market corrects. But if there is an adjustment they are still not sure about whether to attend and so they may have missed the opportunity.

The current market structure presents the same dilemma. It is not yet clear whether Bitcoin will return to its earlier ATH values. While the asset has been gradually recovering over the past few weeks, it hasn’t been convincing enough.

For medium term investors there may be an opportunity to remove market noise and get exposure based on a proven strategy. (Note: the strategy does not work during Black Swan events).

Trade with the trend, not against it

Looking at the medium-term investors from the previous period, traders don’t have to wait 5-10 years to make profits. Trend trading takes 6 months to 2 years and can be very profitable if you catch the main trend.

Long-term Bitcoin Trend | Source: Ecoinometry

Data from Ecoinometry illustrated the strategy above, which allows a long position when the asset closes its daily candle above the 200-day moving average (DMA). While not a new strategy, it can be an important strategy to describe the current situation. At the time of writing, the BTC price is trading just under $ 38,000.

Bitcoin price is hovering below the 200 DMA | Source: trade view

According to the 1-day chart, BTC is currently hovering below the DMA of 200. Bitcoin must close above it to confirm a sustained bullish flip between $ 41,500 and $ 43,500. If BTC is above the 200 DMA and the daily candle closes above this moving average, this is a strong trend reversal indicator. Therefore, investors should still be patient as they set up their buy orders.

One particular factor that supports a trend reversal is Bitcoin’s fear and greed index.

Fear and Greed Index | Source: alternativ.me

For the first time in a year, Bitcoin hit extreme levels of fear last week. However, there have been a lot of corrections in the last few days and psychology is currently in a state of “fear”. Historically, this sentiment has created massive buying opportunities for BTC traders and could be one of the things that may point to a trend reversal in the future.

Has this strategy been tested?

The answer is yes. Because, unlike other factors that can include a specific cryptocurrency index, the momentum trend strategy also works with assets from the traditional market. Notable examples are Apple Stocks (AAPL) and gold.

AAPL / USD | Source: Trade view

As observed, the AAPL continues to hold above the 200 DMA, indicating its bullish bias. The same has happened since the beginning of 2018, as shown in the graph. Hence, momentum trading can be vital for both cryptocurrencies and traditional technology stocks or commodities.

You can see the BTC price here.

Disclaimer: This article is for informational purposes only, not investment advice. Investors should research carefully before making a decision. We are not responsible for your investment decisions.

Minh Anh

According to AMBCrypto

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