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How to Trade Ethereum the Next Bitcoin
Ethereum is considered to be the next bitcoin, and in this article, we’re going to show you how to trade Ethereum. If you’re reading this article probably you’re already familiarized or interested in trading cryptocurrencies.
It’s never too late trading Ethereum for massive profits because ETH remains one of the most undervalued cryptocurrency. Many people are asking if it’s too late to invest in Ethereum and whether or not we’ve missed the bus.
In the crazy old days, we saw Ethereum price reaching an all-time high of $1420. But, our team at TGS believes that the current bear cryptocurrency market is giving us another great buying opportunity.
The most important question we have to ask ourselves is if Ethereum has reached its peak potential in both the technology itself and the overall market cap?
If you believe Ethereum has reached its absolute peak then for sure investing in Ethereum can be too late. However, if you still believe there is room for growth, like our team at Trading Strategy Guides, then you should consider investing in Ethereum.
The most important thing when trading Ethereum or any other cryptocurrency is to make sure you stay in the game.
What is Ethereum?
Ethereum is an open-source, public, blockchain-based distributed computing platform featuring smart contract functionality. In other words, ethereum is a digital currency, and it’s a way of transferring value from one person to another person.
Ethereum is a different type of blockchain the same like Bitcoin has its own blockchain. The Ethereum blockchain has its own currency which is called Ether. The difference between Ethereum and Bitcoin is the proof of stake and the fact that Ethereum has real people behind it.
The most significant difference is the use of smart contracts which has allowed other intelligent people to implement different cryptocurrencies based on the Ethereum blockchain.
The amount of transaction that Ethereum blockchain can process, or the average block time is around 12 – 15 seconds which is faster than Bitcoin.
How to Trade Ethereum
Buying Ethereum can be extremely simple, but it can also be a little bit daunting for the non-technical people. The process of buying Ethereum can be done quickly through an exchange where Ether is listed.
The easiest way to buy Ethereum is to use a cryptocurrency exchange called Coinbase. You can get an account set up in minutes. You can check it out here to get yourself signed up.
Another great way to buy and sell Cryptocurrency is called Binance. Binance are known for their strong team, proven products, superior technology, and industry resources. They have a solid relationship with industry leaders and are capable or 1,400,000 orders per second which by far makes them the fastest exchange in the market today. You can sign up with them here. It only takes a minute.
You can buy Ethereum directly with fiat money from the major cryptocurrency exchanges.
However, you have also the option to buy Ether with Bitcoin or other major cryptocurrencies like Litecoin or Ripple.
All you have to do is to register a free account with any of the crypto exchanges, deposit fiat and buy Ethereum through the platform.
Note: Before to start trading Ethereum you should keep in mind that the crypto market is extremely risky and extremely volatile and we believe a lot of the market is just driven purely by speculation.
Ethereum Trading Strategies
In this section, we’ll be looking at some ethereum trading strategies to help us make profitable trading decisions. All we need for this trading strategy is two technical indicators:
- The MACD – This is a momentum indicator that can help us spot a trend.
- The MFI or the Money Flow Index an overlooked but critical technical indicator that measures the money flow into or out of a cryptocurrency.
The MACD is one of the most common indicators used by traders around the world in a variety of different markets to spot trades before they happen. Our team at TSG has written extensively about how to properly use the MACD indicator in our top awarded strategy MACD Trend Following Strategy.
The MFI indicator is based on price action and it incorporates Volume in its calculation, which is quite similar to other oscillators. In other words, we can use the MFI indicator to measure buying and selling pressure.
We can use the MFI indicator to trigger entries and to take profits.
The easiest way to interpret the MFI indicator is that a reading above the 50 level represents an inflow of money into the cryptocurrency, while a reading below the 50 level represents an outflow of funds from the cryptocurrency.
The other critical MFI thresholds are 20 and 80. An MFI reading of 20 is considered bullish and oversold while a reading above the 80 level is considered bearish and overbought.
The MFI measures the market sentiment giving you signs of whether the cryptocurrency is oversold or overbought and to what degree.
Using the MFI indicator is probably the most useful measurement of sentiment available to traders
Let’s now take one step forward and see how you can make money applying Ethereum trading strategies.
Step #1: Wait until the Money Flow Index drop below the 20 level
The first rule is that you always want to wait for the Money Flow Index to be in oversold territory. In other words, we need to have an MFI reading below the 20 level.
An extreme MFI reading below 20 suggests that there is very heavy money outflow from Ethereum. As history has repeatedly shown, this information can be used as a contrarian indicator.
The MFI indicator is not a standalone indicator. There are plenty of good cryptocurrencies that have high MFI reading, and most bad ones have low MFI reading.
So, in order to use the MFI indicator, we need to check it against other technical indicators which are the reason why we also use the MACD indicator.
Step #2: Wait for MACD histogram to break above the zero level
The second rule is to wait for the MACD histogram to turn positive. This is a confirmation that the bullish momentum is starting to build up. Now, we have two rules in place, but these are still not enough to trigger an entry.
Indicator-based strategies are very unpredictable which is the reason why we’ve added another confirmation signal before to enter and buy Ethereum.
Now, we’re going to lay down a straightforward entry technique for Ethereum trading system.
Step #3: After MACD turned positive, Buy after MFI also breaks above the 50 level.
As an extra measure of caution, we also like to wait for the MFI indicator to break above the 50 level before to buy Ethereum.
A reading above the 50 level represents an inflow of money into Ethereum which is the moment when smart money is stepping into the market. We want to trade alongside smart money to really make a profit trading the cryptocurrency market.
The next important thing we need to establish is where to place our protective stop loss.
Step #4: After Place Protective Stop Loss below the Previous Swing low
In order to minimize our potential loss we want to place our protective stop loss very close to the market price but at the same time at a price where it should really invalidate our trade signal.
For the Ethereum strategy, the ideal place to hide the stop loss is just below previous swing low. You can always add a buffer to protect yourself in case of a false breakout.
The next logical thing we need to establish for the Ethereum system is where to take profits.
Step #5: Take Profits when the MFI enters Overbought territory or above the 80 level
When it comes to our Ethereum take profit trading strategy we want to cash some profits at the first sign that the market is about to turn against us. Otherwise, we risk given back some of our hard earned gains.
The first indication that the market is about to turn is when the Money Flow Index enters into overbought territory. In other words, when the MFI breaks above 80 levels, we take profits.
Note** the above was an example of a BUY trade using Ethereum trading strategies. Use the same rules for a SELL trade – but in reverse. In the figure below, you can see an actual SELL trade example.
Ethereum has fundamental advantages that hopefully will help Ethereum price suppress Bitcoin in the coming years. Trading Ethereum should only be done with money you can afford to lose because the whole cryptocurrency market it’s mostly based off of speculation.
Nobody really knows what the potential is and what the future holds but this doesn’t discourage us to adopt a positive mindset and hope for a bright cryptocurrency future.
Thank you for reading!
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