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The price of Bitcoin has been stuck between $ 35,000 and $ 40,000 for what seems like months now, and that’s because it is approaching several candles on the high period chart.
May’s record sell-off rocked the market with buyers and sellers confused about where bitcoin is next. The violence and the 50% drop was enough to make sentiment bearish and raise concerns that a bear market was already there, while others saw it as an opportunity to buy the downside.
The two opposing forces have left the bulls and bears in a stalemate, and bitcoin’s price action is slowly moving sideways as a result. With very little intraday price movement or action, and certainly not enough for an interesting swing trade, what does a trader need to do to keep profits flowing?
Fortunately, there are several trading strategies to use when the markets move sideways, and there is less room for return on your investment.
Use technical indicators to tell when a trend is dead
First of all, it is important to understand when there is a glaring lack of trend. When this happens, it is often not worth trying to make big swing trades, and even some types of day trading strategies become less effective. What continues to work is scalp trading.
To find out if a trend is paused, there are certain clues to look for. On the one hand, volatility will decrease, as will the volume of transactions. Price action will be limited to a narrow range and this will become clearer over time.
Technical indicators such as Bollinger Bands will start to tighten or tighten, and the Ichimoku baseline will flatten during these phases. Price action also tends to hang on to moving averages during this time frame and can lead to several confusing crossovers.
To eliminate noise, consider using the Average Directional Index to directly visualize the strength of a trend. A reading below 20 suggests that there is no trend and that lateral consolidation could follow for some time.
Finally, a doji candle shows indecision which can also portray a lack of trend on the highest timeframes. For example, a doji on a monthly candle represents a full month of side price action.
Scalp trading is the savior of sideways trading ranges
Moving on to scalping, the trading strategy we outlined above is among the most effective during tight trading ranges and sideways price actions. The term has nothing to do with Cowboys and Indians stories of financing, but rather refers to very short-term transactions with the intention of entering and exiting quickly with profits.
Due to the short time frame, profits are often lower than from intraday trades or longer term swing trades, but with sufficient frequency, capital can continue to grow during side price action. But this strategy also requires short and longing to resistance and support for the duration of the trading range, which is explained in more detail below.
Short bitcoin trading involves expecting the price of BTC to drop and this is how professional traders profit from cryptocurrencies like bitcoin during tight trading ranges when large ROI moves don’t. are not as common. By shorting when the price of bitcoin is at resistance and going long when the crypto asset is at support, traders can effectively extract profits even in the narrowest ranges, especially when trading on margin.
A long trade is the opposite, the trader expects the price to rise. By alternating between the two types of position, traders can quickly rack up the return on investment, even when the markets are sideways. An overlooked advantage of sideways markets is less overall risk. Stop losses are less likely to be triggered if placed above or below the range, and this makes a breakout of the range much clearer.
If a stop-loss is reached, it can also be used as a signal to trade in the opposite direction to the original order, as the breakout could lead to a sustained trend that finally sets in. Rather than wincing in pain the next time you see a tight trading range forming, instead don’t stress, strategize long and short scalp positions with PrimeXBT.
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