On Monday I published the first part of this series about using technical analysis when trading cryptocurrencies. Click Here to read part 1.

In the first part, I discussed chart patterns and the RSI indicator on the hourly chart. 

Now In this chapter, I will be looking at the MACD and Stochastic indicators. 

Stochastic Indicator

Also, I will be looking at Litecoin today on the smaller time frames as on the daily chart and above the trend is too strong to analyse with both indicators (depending on how you use them).

Again I will be taking a sample set of 20 trades and present the results. 

Once again I will be using a one to three risk to reward ratio and will be using the previous wave low as the stop loss. 

Example: 

The way we will be looking for signals is in the overbought and oversold areas and looking for a stochastic moving average crossover.

Litecoin

Results

Out of 20 trades, 14 lost and 6 won.

Again with the 1 to 3 risk to reward ratio and a risk limit of USD 200 to USD 600 reward, this means a total of -USD 800.

The problem seems to be the amount of time the indicator can stay in the overbought and oversold zone.

The indicator can continuously crossover while being in extreme areas.

MACD indicator

So with the MACD we will be looking at the histogram and the moving average crossover.

The histogram has to be in the direction of the trade and the cross over has to be in the direction of the histogram. 

Example:

MACD analysis

This strategy produced very different results with 11 losers and 9 winners.

Winners made USD 600 per trade, while losers lost USD 200 per trade.

Which means a profit of USD 900.

This momentum-based strategy proved very successful but the signals were lagging in nature. 

The interesting thing about this market on this timeframe was that the MACD indicator seemed to catch the velocity of the moves

The filter only worked if the crossover happened in the same direction of the histogram. ie. if the histogram was below zero the crossover has to be below zero.

Thats all for now I hope you have found the research interesting. In part 3 we will be looking at other indicators and chart types.

 

 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.

Cryptos feed

Latest Crypto News & Analysis

Editors’ Picks

Crypto Today: Calm between the storm? Schiff says look out below, Dash, Monero stand out

Bitcoin in mid-range, BTC/USD is trading just below $7,400 after experiencing rises and falls of hundreds of dollars within days. Peter Schiff, a life-long crypto skeptic, said that pumpers and dumper have lost the plot, and added: "Look out below".

More Cryptocurrencies News

Ethereum Price Analysis: ETH/USD bumps into $148.00, waits for new drivers

ETH/USD has recovered to $148.00 on Thursday; however, the upside momentum has faded away during early Asian hours. The second largest coin with the current market capitalization of $16.2 billion has settled in a tight range limited by $148.00 on the upside.

More Ethereum News

Monero Price Analysis: XMR/USD rises from the ashes

Monero is arguably the biggest single-digit gainer on the first Friday of December. The crypto has increased in value by 2% on the day after opening the trading session at $55.01. 

More Monero News

Bitcoin Cash price analysis: BCH/USD market momentum turns from bearish to bullish

BCH/USD is on course of charting its second straight bullish day. Currently, the price has gone up slightly to $211.75 and is floating below the 20-day Simple Moving Average (SMA 20), SMA 50 and SMA 200 curves. 

More Bitcoin Cash News

BEST CRYPTO BROKERS/EXCHANGES

Bitcoin Weekly Forecast: It's all about whales again

On the cryptocurrency market, regulators, governments and central bankers and other big names like that are inferior to whales when it comes to generating trends and price movements.

Read the weekly forecast

BTC

ETH

XRP