tether cryptocurrency trading strategy

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This tether trading strategy gives you a way to catch a falling knife while taking very little risk. The bottom rotation trading technique taught in this step-by-step tether trading guide is more suitable for day trading.

Our team at Trading Strategy Guides has worked hard to put together the most comprehensive PDF guide to different cryptocurrency strategies. Previously we have covered OMNI Cryptocurrency Strategy, which is another cryptocurrency built on the Bitcoin blockchain that acts as a bank account with zero fees.

This trading technique we have developed allows you to take less risk and catch a very strong intraday reversal. If we can develop this skill of catching a falling knife, you're going to be able to better control our risk and maximize the upside.

If you’re tech-savvy, you can also use an algorithm or program to capture this trade setup. However, before catching falling knives, there’re two things you’ll need to learn to do:

  1. Discipline – follow the rules.
  2. Repetition – doing the same thing over and over again.

If you learn these two things, you’ll be able to catch a falling knife!

Moving forward, we’re going to explain what cryptocurrency Tether (USDT) is, and last but not least, we’ll share the key trading rules to bottom rotation trading with which you’ll be able to use to catch falling knives.

What is Cryptocurrency Tether (USDT)?

Tether is a cryptocurrency that is pegged to the US Dollar. The idea behind Tether is to create a stable currency relative to the US Dollar, which is subject to inflation. It's needed in the cryptocurrency community and extremely useful for crypto exchanges that don’t want to deal with fiat money like Binance and Poloniex.

Tether's price is on par with the USD’s price. Since Tether has almost a 1:1 ratio with USD, this means that the price of Tether will always have a 1:1 ratio with Bitcoin's price.

tether cryptocurrency trading strategy

At the moment of writing this step-by-step cryptocurrency guide, Tether is a top 10 cryptocurrency, having a total market cap of more than $2.4 billion. Also, see the best cryptocurrencies to invest in for 2019.

Now, before we’ll outline a method on how to buy cryptocurrency Tether, we always recommend taking a piece of paper and a pen and note down the rules of this Tether cryptocurrency trading strategy.

In this demonstration, we’re going to look at the buy side.

Tether Cryptocurrency Trading Strategy

To catch a falling knife is Wall Street slang for buying an instrument that has seen a steep decrease in their price. The goal of this strategy is to pick the bottom before the reversal happens. Catching a falling knife work only if you have a systematic trading strategy to approach to the market. Otherwise, you’ll find yourself catching a falling knife with the bare hands, and that can be painful. Read more about reversal trading here.

You have to avoid taking trades based on intuition, especially when trying to catch a reversal. In this case, you need to be precise as possible and we’re going to teach you a very simple day trading strategy

These are our trade criteria to bottom rotation trading:

Step #1: Wait until Tether Cryptocurrency price moves in a horizontal consolidation

After a strong bearish trend, wait until the market starts to develop a horizontal consolidation. This is where the price moves back and forth without any clear direction. We need to see a perfect horizontal consolidation as part of the bottom rotation setup.

The consolidation is the first price structure that needs to be satisfied in order to catch the falling knife.

Today’s example is a 15-minute Tether chart:

tether cryptocurrency price

During these times of consolidation when the cryptocurrency price moves back and forth, the institutional money accumulates their positions.

However, before the trend reversal to happen, the smart money will deploy one more trick to fool the retail traders. See below:

Step #2: Wait for a fast breakout (clear-out of stop losses) of the support level

Right before the reversal happens, you’ll notice a false breakout below the consolidation support level. Stop hunting happens in all markets, and this trade setup clearly emphasizes this aspect.

Two things happen when we break away from this consolidation. Both are adding confluence to the bullish case scenario:

  1. The stop losses of those who got long off of support will get triggered.
  2. New traders will short the market because of the downside breakout.

tether trading strategy

Next, the price structure needs to abide by the following rule:

Step #3: The breakout needs to be faded at the same speed as the Tether Cryptocurrency Price Drop.

The key characteristic of this reversal setup is that we need to see a quick rally after the initial support false breakout. The false breakout followed by the quick recovery should develop a “V” shape type bottom.

tether trading strategy

Next, we’re going to outline what key condition needs to be satisfied when trading Tether coin and how to buy cryptocurrency Tether.

See below:

Step #4: Buy at the first close above the broken support level. You can have a second entry once we break above the top of consolidation.

You can buy Tether once the cryptocurrency price closes back above the broken support level. You can initiate a first small position, and buy when we close back above the previous support level.

It’s always nice to buy cryptocurrencies at the bottom and see it shoot up.

Managing your trades depends on your trading style and risk tolerance. We always recommend your first initial position to allocate a low amount of your trading capital. You have to keep in mind that the reversal is completed only after we have a break in market structure and subsequently a breakout of the top of the range.

tether cryptocurrency price

Once we see a break to the upside of that sideways action, the reversal has been confirmed, and you can consider this to be a swing trade. Generally in this situation, you can close the initial trade so we can have a risk-free trade.

day trading crypto tether

This brings us to the next important step we need to establish for our day trading cryptocurrency strategy, which is where to place your protective stop loss.

See below:

Step #5: Place Protective Stop Loss below the “V” bottom and the Second SL below the Consolidation Bottom

The ideal place to hide your protective stop loss is a few pips below the “V” shape bottom. For the second entry, use a protective stop loss below the consolidation support level.

Because the first trade is closed once the consolidation top is broken, we basically ensure an almost risk-free trade on the second position. We’re going to use the profits made on the first trade to ride the trend reversal.

crypto profit taking strategy

Last but not least, we need to define where we take profits when trading Tether coin.

See below:

Step #6: Take Profit equals two times the consolidation price range.

We use a simple dynamic take profit strategy.

We simply measure the consolidation price range, multiply it by two, and project that number to the upside to determine out take profit. The easiest way to visualize your take profit level is to simply draw a box around your consolidation and copy paste that box two times to the upside.

track cryptocurrency

**Note: The above was an example of a BUY trade using the Tether 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.

how to trade tether

Conclusion – Tether Trading Strategy

Tether trading is a simple cryptocurrency strategy that can dramatically increase the size of your winning trades. To ensure consistency, use the same trading routine every day and manage your risk carefully. Don’t forget that trying to catch a falling knife can be dangerous. This is why we always preach the importance of following trade rules.

If you’re interested to learn more about different types of trading techniques, please click on the trading blog, where you’ll find in-depth trading strategies and how to take advantage of them.

Thank you for reading!

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With over 50+ years of combined trading experience, Trading Strategy Guides offers trading guides and resources to educate traders in all walks of life and motivations. We specialize in teaching traders of all skill levels how to trade stocks, options, forex, cryptocurrencies, commodities, and more. We provide content for over 100,000+ active followers and over 2,500+ members. Our mission is to address the lack of good information for market traders and to simplify trading education by giving readers a detailed plan with step-by-step rules to follow.