Bitcoin Cash Trading Strategy – Pump and Dump Setup
There are growing speculations that Bitcoin cash will replace bitcoin which is the reason why we present the pump and dump bitcoin cash trading strategy. If BCH will overtake bitcoin classic and become the number one cryptocurrency in terms of market cap, then it’s wise to trade BCH.
Our team at Trading Strategy Guides is working hard to put together the most comprehensive guide to different cryptocurrency strategies. Previously, we have covered a scalping strategy for trading Litecoin so make sure you check that out as well if you’re into making quick trades.
Also, read The Trend Following Trading Strategy.
To cut things short and save you a lot of time we’re honest to admit that we don’t know if bitcoin cash will replace bitcoin.
However, we can still share a few thoughts with you about what the most likely kind of outcome is, but this is not as important as having a profitable cryptocurrency strategy.
Whether or not bitcoin cash is the real bitcoin, we’re going to give you a brief introduction and some information that we think will help you decide if it’s worth to trade bitcoin cash. Here is another strategy called trading volume strategy.
What is Bitcoin Cash?
Bitcoin cash is a digital currency or a cryptocurrency that resulted in a fork of Bitcoin classic. The BCH come into existence on August 1st, 2017. The exciting part about bitcoin cash is how it comes to life.
Bitcoin cash was started by something called a hard fork of the Bitcoin. The way a hard fork works is simple. Bitcoin itself is governed by a set of rules, and everybody using the bitcoin protocol agrees to those rules. This is called consensus.
Now if you did not agree with the rules governing bitcoin, you could break with consensus and cause a hard fork. This means that you’ll be creating your own coin, which is what happened with bitcoin cash.
At the time of writing this article, bitcoin cash is the 4th most valuable cryptocurrency after, Bitcoin, Ethereum and Ripple. The current bitcoin cash market cap is above $16 billion while the total circulating supply is around 17 million. Moving forward, we’re going to highlight a very easy bitcoin cash trading strategy that will help you boost your account balance.
Before outlining the cryptocurrency strategy rules let’s look at one institutional indicator that you can use too
The only indicators you need are the following:
Volume Weighted Moving Average (VWMA): The VWMA is a simple technical indicator used for volume analysis. The VWMA is the average price of a coin weighted by volume. The VWMA gives the best performance when used intraday.
The VWMA is one of the most underused technical indicators that only professional traders use.
The VWMA can be located on most trading platforms and once applied to the chart; it should look like in the figure below:
The VWMA is useful to help identify suitable points at which to buy or sell and to measure the success of your past bitcoin cash trades.
Traders can compare the current Bitcoin cash price to the VWMA to try to determine the general trend and intraday prices:
- If bitcoin cash price is below VWMA, the trend is bearish.
- If bitcoin cash price is above VWMA, the trend is bullish.
Now let’s see how you can efficiently trade with the Bitcoin cash trading strategy and how to make consistent profits by day trading the cryptocurrency market.
Bitcoin Cash Trading Strategy – Cryptocurrency Strategy
This cryptocurrency strategy will help you have a broad measure of trading efficiency for a large number of trades. We’re the number one platform in the world at developing trading strategies with a proven edge. If you want to learn trade cryptocurrencies like a pro just follow this simple step by step tutorial.
The VWMA is a powerful breakout tool which is why we’re going to use it for range trade breakouts.
Now, before we go any further, we always recommend taking a piece of paper and a pen and take notes over the rules of the cryptocurrency breakout strategy. In this article, we’re going to look at the 'buy' side.
Step #1: Wait for a strong breakout and a close above the VWMA
To determine whether Bitcoin cash breakout above the VWMA is genuine, we can use different tools, but the most accurate one is to use the price action. In order to get a good read on the breakout strength, we want to see strong bullish bars that break above the VWMA with conviction.
When the Bitcoin cash price trades above the VWMA we know this is a bullish signal.
As a second condition to validate the breakout, we look for a close above the VWMA. The higher the closing price, the better.
This brings us to the next step.
Step #2: Look for a retest of the VWMA and a reaction higher from it. Preferably, we want to see a pin bar or bars with long wicks.
After we have detected the breakout, we wait for a retest of the broken VWMA. More than this we also want to see at the first retest a reaction higher.
This higher reaction should develop a pin bar pattern or a candlestick bar with long wicks.
The long candlestick wicks represent institutional buying in this case.
If the breakout was genuine and real institutional buying was behind this move, then we want the bulls to defend this price levels and keep Bitcoin cash price trading above the VWMA.
The next step will highlight the Bitcoin cash entry strategy.
Step #3: Buy at the opening of the next candlestick after the pin bar
It’s important to follow all the steps and only enter the market once you have enough evidence that the institutional money is on your side.
When you have multiple confirmations for your trade signal, you increase your chances of success.
So, buy Bitcoin cash at the opening of the next candle after the pin bar.
The next important thing we need to establish for our breakout strategy is where to place our protective stop loss.
Step #4: Hide your protective stop loss below the breakout candle
The lowest price of the breakout candle is an important technical level because that’s the moment smart money stepped into the market. If this level gives up then we know for sure the bulls are very weak and it’s best to let this trade go.
Our stop loss strategy is to place our protective stop loss below the breakout candle.
Last but not least, we also need to define a take profit level for our bitcoin cash strategy which brings us to the last step.
Step #5: Take Profit when we break and close below the VWMA
When Bitcoin cash price trades below the VWMA this is a bearish signal. If you bought Bitcoin cash and all of a sudden we trade below the VWMA, then it’s best to take profits and close the trade.
You’ll notice that many times Bitcoin cash will produce false breakouts below the VWMA. This means that you’ll get out of your trade too early. To counteract this drawback, you can take partial profits and then trail your SL below the VWMA.
**Note: the above was an example of a BUY trade using the cryptocurrency trading strategy. Use the same rules for a SELL trade – but in reverse. In the figure below, you can see an actual SELL trade example.
Best Places to Buy and Sell Cryptocurrency?
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If you want to take advantage of the bitcoin cash true potential, you can start trading the bitcoin cash trading strategy. The low numbers of coins available in circulation make bitcoin cash a true candidate not just to make a few trades here and there but to HODL for the long term. Here are the trading conditions you want to avoid in the forex market.
The bitcoin cash coin has seen a growing adoption since its creation which guarantees that in the long run BCH will survive and be part of our everyday payment transactions.
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