If you trade crypto, and especially looking for scalps/ day trade position, try this method. I made more money that I could imagine using this:
CRYPTO DAY TRADING TUTORIAL: FOLLOW THE TREND (BEARISH Version)
Yesterday I wrote about the bullish version of the follow the trend method, this time let's talk about the bearish version!
This method takes advantage of the follow the trend principle.
My principle:
1. What's falling will keep falling until reversal signs appear.
2. In crypto, the system is "once the momentum fades off, the asset will be abandoned dumping the price for a long period of time". So something that rose hundreds of percent a few days ago could start dropping today and be down 80% by tomorrow (try looking at the LAB few weeks ago, for example).
That's why we take advantage when something's just finished rising, then it looks like it's about to drop, we join in on the slide down.
Step 1: Market Screening.
Go to Coinmarketcap, or to your favorite exchange. Sort by 24H% or top losers. Make sure we get the ones with big losses. You can do this by clicking on the 24H% or %Gains depending on the exchange, until it sorts from the lowest (see image 1). Examples in the image include AIO, UAI, KAITO, etc.
Step 2: Confirm the bias is bearish.
Open TradingView (or the exchange you're using, on its chart). Go to the 1‑day or 4‑hour timeframe first. Make sure:
- The chart is bearish (red) and
- Breakdown from key levels and/or 21 EMA. For the bearish version, big candles are still "okay" to trade. As long as you can handle the loss or patiently wait for a small pullback to find an optimal entry (see example in image 2, marked by arrows).
You can check several charts for this. Just mark the ones that meet the criteria, then move to step 3.
Step 3: Entry Trigger.
For now, we're specifically looking for short positions.
There are many ways, I'll cover them another time. But this time, let's use the 21 EMA on the 15‑minute or 1‑hour timeframe as resistance/support for entry.
We're looking for/waiting for a 15‑minute or 1‑hour candle to form a pattern with these conditions:
- Solid red body that's large with little or no lower wick, breaking through the 21 EMA on the 15‑minute timeframe
- Not a drop that's too big
- Even better if it previously broke out above the EMA, then failed by dropping to form a bearish candle.
Check out arrows at image 3 and more example at image 4.
Step 4: Stop Loss, Take Profit, and Risk Management.
Place stop loss above the part of the candle that came out of the 21 EMA.
Take profit: Can aim for 2R first. But from my experience, crypto drops usually happen super fast. Can reach 4R or even 5R. But don't get greedy. 2R is enough in my opinion. The rest can be trailed.
Since this is day trading, and you can open many charts and enter several assets at once, just risk 0.5%‑1% per entry. And maximum total exposure to risk is 5%. Example: trade with 1% risk and hold 3 trade positions, then you're exposed to 3%.
Okay, go ahead and backtest it first. Or just front‑test it for a week.
Some limitations of this method:
- Sometimes we don't know if the crypto has truly crashed, or if it's just a correction. If it's just a correction on a larger timeframe, it could rise again even faster.
- Usually the current top losers have super volatile moves. Even 5x leverage can lead to liquidation. Make sure to calculate the risk properly.
