Bitcoin recently suffered a bear market. The sudden down move surprised many investors.

But there was no reason for them to be taken aback. A popular technical indicator warned of the sell-off before it happened.

Stochastics can help you profit from bitcoin. This popular momentum indicator is widely followed by individual investors and professional money managers.

As you can see at the bottom of the chart, this indicator uses two lines to show the direction of the trend. Signals are given when the lines cross.

Stochastics Trade Signal for Bitcoin

The formula for calculating stochastics sets a lower limit of zero. The upper bound of the indicator is 100.

Values below 20 are relatively rare, as are readings above 80. The horizontal gray lines show the 20 and 80 levels.

Trade signals tend to be more reliable when they occur in these extreme areas.

In this chart, the stochastics indicator provides a buy signal when the magenta line crosses above the blue line. When the blue line falls below the magenta line, the indicator gives a sell signal.

The most recent sell signal came before bitcoin sold off by more than 20%. The timeliness of this signal isn’t rare.

Stochastics Beats the Buy-and-Hold Approach

Several studies have shown that simple technical strategies like this one can beat buy-and-hold returns in crypto markets.

One major reason for outperformance is the fact that technical strategies generally avoid some of the large price declines that occur in downtrends.

Bargain hunters might think declines are buying opportunities. But they might find more success with simple technical rules. A moving average or a simple stochastics indicator could be a better way to trade the market.

Of course, there are many cryptocurrencies. A trader could apply this strategy to several of them. There are many variants such as delaying action to limit short-term trades, or using weekly charts.

Traders might consider cryptos to be a part of their portfolio, just like stocks.

Your Gateway to Crypto Fortunes

If you’d like to learn more about the best crypto opportunities out there now, check out my colleague Ian King’s special report titled Cryptocurrency’s Next Wave — 3 Trades to Multiply Your Money 12 Times in the Next 12 Months.

Each week in his Next Wave Crypto Fortunes service, Ian shares his top research and crypto recommendations.

His subscribers recently made gains of 335% and 1,061%. And they even sold half of their position in one crypto for a 3,981% gain in just three months.

To learn how Ian can help you profit in the crypto markets, click here.



Michael Carr

Editor, One Trade