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Cryptocurrency trading is now more profitable than running a hedge fund. Traders are making a killing from buying and selling cryptocurrencies, ICOs and blockchain assets.

Imagine if you had put $100 into Litecoin in December 2016. Today, 7 months later, you would have $2,400. A whopping 2300% return!

Traders are making super enormous profits by buying low and selling high

As simple as this strategy sounds on paper, it is harder to pull off in real time. You need to look at a price chart and determine whether it is a right time to buy or not.

The last thing you want is to buy at the top and watch prices tumble down to a low. 

The most profitable traders know

  • How to time an ideal entry price when the market about to move up
  • How to stay put, control emotions and wait
  • When to sell and book profits.

If you are looking to make profits, make use of these 5 certified cryptocurrency trading tools to help you time your entries, know when to hold and most crucially when to sell and take profit.

5 Certified tools for making money trading cryptocurrencies

  • Candlesticks
  • Moving averages lines
  • Price support and resistance levels
  • Trading patterns
  • Elliott Wave Analysis

1) Candlesticks

Candlesticks are a technique of representing prices of cryptocurrencies on charts. They are an improvement on simple line charts because they carry more information about market activity than line charts. A large segment of cryptocurrency traders uses candlestick charts.

Candlesticks include four prices in one diagram. You can quickly tell the highest and lowest bid price and the opening and closing price of the day by looking at one candlestick. Candlesticks are pretty accurate at capturing market sentiment during trading sessions.

Technical Chartists determine when to enter or exit a trade by reading candlestick patterns. They are consistent across all time zones from the shortest 1 minute chart to yearly charts. There is no reason why you too cannot interpret patterns to arrive at a trading decision.

Some examples of patterns include:

  • Bullish candlestick patterns

A hammer is an example of a candlestick that forms after a long downtrend. It signals fading momentum of the prior trend and a take over by buyers. You will spot it at the bottom of a trend before price reverses to an uptrend.

This pattern resembles a nail hammered flat into a board. The long wick and small head indicate a strong rejection of bears' efforts to sell. Instead, bulls take over and buy, forcing the price to close above previous prices.

 The hammer is a high confidence buy signal.

  • Bearish candlestick patterns

A bearish engulfing is a sample pattern that forms at the top of a bull trend. When you see it on a chart, expect a possible change in market direction. The pattern appears as a short white candlestick overshadowed by a longer black candlestick.

You will notice this pattern after an uptrend momentum is exhausted. Bears come in at the top and sell cryptocurrencies forcing prices to drop and kickstart a change in direction.

Your strategy at this point should be to reduce part of your position. Wait for a third candlestick the following period to confirm a full reversal and exit.

2) Moving averages lines

Moving average lines are part of a group of charting tools known as indicators. They come in two forms: exponential and simple moving average lines.

Moving averages aggregate past prices and average them out over a period. The formula for both simple and exponential moving averages varies. A 20-day moving average line, for example, sums up the closing prices of a digital asset divided by 20 days that make up the period. This cuts out the noise of day to day price movements and gives you get a clearer picture of price direction.

The most typical time frames for cryptocurrency charts are the 7, 21, 30, 50, 100 and 200-day moving average lines. You can tweak the days to fit your model.

  • Trading signals from moving average lines: Bullish and bearish cross

Both long term and short term moving average lines combine well for strategic buy entry and close exit signals.

A bearish and bullish cross are two commonly used signals for exit and entering a position respectively.

In a bearish cross, the shorter term moving average say 21, cuts below the longer term moving average say 50. This cross signals an expected bear trend and an exit for you.

In a bullish cross, a short term moving average line such as 7 cuts above a long term moving average line like 50. This cross translates to entry price signal for you.

As you read your charts, add exponential and simple moving average indicators to refine your buy and sell strategy.

3) Price Support and resistance levels

Resistance levels act against an upward momentum of price. Price is forced to halt, drag sideways or break down. A change of trend and direction follows at this level.  Similarly, support levels push against price but in a downward momentum. Price bounces off a support level or may drag sideways. Eventually, price resumes the uptrend using support as a launch pad.

Resistance and support levels are psychological and persist over years, months, weeks or days. Because all traders see these price levels and expect the same price behavior, it reinforces the significance of these levels. The crowd acts collectively to reduce or add to their trading position.

Sell some of your position at resistance levels, add to your position at support levels.

Support levels are great signals for adding to your trading position. At strong resistance levels, you want to sell some of your cryptocurrency holdings. Wait for price to turn direction, find a support zone and buy back in.

4) Trading patterns

You can trade profitably by identifying patterns and trading on the expected price direction. Cryptocurrency charts often form patterns that give a big picture outlook of where price is likely to head in the future. Chart patterns reoccur in both bear and bull markets. Once you spot a familiar pattern, you can quickly tell which price direction to expect.

Some of the most common patterns in cryptocurrency charts include:

  • Head and shoulder pattern

The head and shoulders pattern is a reversal pattern and signals the end of a trend. It resembles a head, flanked by a right and left shoulder. The head and shoulders rest on the neckline. If you are keen, you will see how this pattern forms on different time zones.

When spotted at the top in an uptrend, it is known as a Head and shoulders pattern. Its alternative is the inverse head and shoulders pattern that appears at bottom reversals.

Sell on the break of the right shoulder in a downtrend, buy the break of the neckline in an uptrend

The sell or buy signal is clear when the right shoulder is about to complete and break the neckline. Price breaks the neckline strongly and continues on the opposite trend.

You want to sell at the neckline when you see this pattern at the top and buy at the neckline when you spot it at the bottom.

  • Bull and bearish flags or pennants

Flag and pennant patterns are continuation patterns. When flags appear, the momentum of the prior trend is still in force. You will spot this pattern in both uptrends and downtrends.

The formation of flags and pennants resembles a flag on the end of a pole. Both pennants and flags are a temporary pause in the trend.

Control your emotions during bullish and bearish pennant flags continuation

In uptrends, bullish flags and pennants signal higher prices in future. You should add to your long position or buy more. In downtrends, do not worry about the bearish flag and pennant. Wait for the pattern to complete and trend to continue. Consider adding to your short position.

  • Ascending and descending triangles

Triangles appear in both uptrends and downtrends. They signal a continuation of the prior trend and form when the market is exhausted right before picking up momentum for continuation.

 Control your emotions and consider adding to your prior trading position during triangle formations

Ascending triangles are a pause in an uptrend. Prices coil up and consolidate into a triangle structure just below a resistance level. Conversely, descending triangles are a pause in a downtrend. Once the triangle patterns complete, a breakout follows in the direction of the prior trend.

You should be patient during triangle formations. These structures take time to consolidate before breaking out. Triangle patterns are a signal to keep holding or add to your prior position.

5) Elliott Wave Analysis

Elliott Wave theory has proven successful in identifying the bottom of bear markets and forecasted expected tops in bull markets. 

Elliott wave divides market moves into two basic trends: impulsive waves and corrections. At any one time, prices are either trending upwards or downwards with intermittent corrections.

Trends are impulsive waves and subdivide into 5 waves while corrective waves subdivide into 3 waves and move in the opposite direction. The motive wave is labeled as 1 - 2 - 3 - 4 - 5, followed by an a - b - c correction. Wave 1, 3 and 5 are impulsive waves, while 2 and 4 are corrective waves. 

Pick up any price chart and take a look at the candlestick price lines on any time frame. You will be amazed at how this structure repeats itself on both higher and lower degrees.

How do I profit from Elliott waves?

The most profitable trades are positions held during motive waves. You should hold through impulsive waves 1, 3 and 5, and be patient during corrective waves 2 and 4.

Corrections often fool new traders. Fickle traders usually sell during corrections, mistaking them for a change in trend. Don't be one of them.

Elliott wave analysis helps you to identify when a market is trending, when it is in a corrective state and when the trend has changed. Buy at the beginning of the motive wave and ride the trend. Be patient and calm and hold during corrective waves. Sell the end of the motive wave when a change in trend and direction is confirmed.

Final Thoughts

With these techniques in hand, you are ready to start analyzing charts and trading for profits! There are more techniques in the cryptocurrency industry, but these should get you to a good start.

Once you combine these techniques on a single chart, you can arrive at the best decision on whether to sell, buy or hold. A lot of other traders also use these techniques. So go out, join other traders and exchange ideas.