Crypto Trading Strategies

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Cryptocurrency trading strategies do not need to be complex. All that is needed to execute them is a simplified way of identifying and trading setups that have potential. One such strategy which is very useful in trading on an intraday basis is the pivot point strategy.

Why is the pivot point strategy such a useful strategy for trading cryptocurrencies?

  1. Pivot points are usually respected by many market participants and so serve as useful points of intraday support and resistance.
  2. Cryptocurrencies have wide range of movements. Therefore, intraday trades can produce better returns than most other assets.
  3. Pivot points can be used to trade long or short.
  4. The strategy is easy to learn and can be used by beginners as well as experienced traders.

How to Trade the Pivot Point Strategy

To trade the pivot point strategy, you will need to download a pivot point calculator. There are two versions of this calculator that you will find online. One version uses dotted lines to retrace the pivot points on a daily basis. The disadvantage of this version is that it does not show what the previous pivot points for a week or a month were, and so traders cannot perform historical analysis or studies of past trades on pivots.

This disadvantage has been overcome by the 2nd version, which uses continuous solid lines to trace the pivot points. The pivot points automatically readjust themselves to the new day situation, while still displaying the original pivot lines for the previous days.

Tracing the Pivot Points

In order to use the pivot point calculator, you need to download one from the internet, attach it to the chart and ensure that it traces updated lines by switching from the H1 time frame to the D1 time frame, and back to the H1 timeframe.

  1. Download the pivot point calculator from the internet. Simply use a Google search for “pivot point calculator”, and you will see various versions. Download one version to your desktop.
  2. Head over to your MT4 platform, and click -> File ->Open Data Folder. In the data folder, select MQL4-> Indicators.
  3. Copy the pivot point calculator from your desktop to the indicators folder.
  4. Restart your MT4 trading terminal, then click Insert -> Indicators -> Custom – Auto pivot calculator, to add the indicator to the chart of choice.

Once you have added the pivot calculator, you are ready to trade.

Elements of the Trade

The key elements of the pivot point trading strategy are:

  1. Establishing the trading bias for the day.
  2. Establishing the behaviour of the candle at the pivot point: breakout or rejection?

Generally speaking, the market bias is determined by whether the 1st market candle for the day ends higher or lower than the previous day’s closing price.

In establishing the basis for trade direction, the trader must determine where the price is coming from, and whether the candle that touches the pivot point breaks out in the direction the price is coming from, or whether the pivot point will reject the price action at that area.

Long Trade

This is the setup for a long trade:

  1. The price is trending upwards, breaks above the pivot point above (i.e. closes above it), and retraces back to the pivot point that was just broken. Usually a broken pivot will change its function. In this case, the broken resistance will turn to a support in which a BUY order can be initiated.

Buy trade setup for Pivot points

Here is a BUY setup, where price action has bounced off the S1 pivot point. There are two possible Take Profit points. The first TP area is at the central pivot, and the 2nd s at the R1 area. The price also bounced off the central pivot after breaking this pivot, providing a re-entry opportunity which could be used to trade to the second Take Profit area (TP2).

Short Trade

Here is the setup for a short trade:

  1. Watch for a break of a pivot point (candle closes below the candle) and an upside retracement to the broken pivot point.
  2. The broken pivot will change function i.e. the support pivot point will now serve as a resistance.
  3. Go short at the pivot point, using the next pivot point below as a first profit target.

Pivot Point Short Trade Setup

Here, we can see the pinbar which marks the area where retracing price got rejected at the pivot point turned resistance. The sell order can then be taken at the central pivot (coloured green) and use the S1 (blue colour) pivot point as the first profit area.

This is a strategy that can be practiced on demo and quickly adapted for live trading.

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