Is Kangaroo “hopping” the best strategy in the current Crypto market?
Alt coins, especially DeFi tokens seem to be enjoying their moment in the 🌞(sun). All of us who saw the 2017 bull run are familiar with the joke that when doge coin starts pumping, it’s truly Alts season. Doge started pumping when TikTokers around the world decided to promote it as a viable investment opportunity that can give returns hundreds of times the original investment. (Cough – Crypto Pump, cough). This was two months ago.
DOGE pumped to 40+ sats and is now back at 29 Sats in roughly two months. Ever since then almost all the coins and tokens have seen massive swings. Which begs us to ask the question, are we in the bull market or the bear market?
Well, there is a third state apparently – The Kangaroo Market.
What is a Kangaroo Market?
Before we get to that, let’s look at the existing animals – the bull and the bear.
The bull is used to describe a market that rises from the way it attacks its opponents. Bulls usually use their horns to thrust their enemies upwards.
During a bull market, there is a strong demand from buyers, and this pushes the market up.
On the other hand, a bear market occurs when the stock market falls a lot from its most recent high.
Bears swipe their paws down when attacking their prey, and that imagery has become symbolic of the huge downward movement during a crash.
Now, let’s move to the kangaroo that’s trying to steal the thunder from the bull and the bear.
A kangaroo market may be one which hops up and down over a period of time, without any strong uptrend or downtrend.
So how does one trade in such a market?
Trading Strategy to Adopt in Roo Market
These are some of the parameters that seem to work at the moment while deciding what to trade on the crypto market.
1)Token economics –
There are various debates regarding this aspect of Investment decision making. Fixed Vs Deflationary Vs Inflationary. In general Fixed Supply Tokens Tend to get price appreciation in the short run, but there are many other parameters as well. Fundamentally good tokens like ETH and ATOM, although inflationary in nature, have had periods of great price runs.
2) Upgrade and Network Hype –
Anytime one researches a new coin, we would generally see a white paper and a milestone document which gives the roadmap for expected development targets and their dates. If there are positive signals regarding some of those milestones being achieved, there is generally a sense of euphoria and that causes prices to temporarily sky rocket.
When using technical tools to evaluate buying decision, the current strategy seems to be working well for me at the moment.
3) RSI –
Coins which are oversold in a shorter time frame like daily but are in the middle of a strong weekly or monthly trend. In order to determine the recent strength, we use the RSI which means relative strength index.
RSI is an indicator that measures the magnitude of recent price changes to evaluate overbought or oversold conditions in the price of an asset. The RSI is displayed as an oscillator (a line graph that moves between two extremes) and can have a reading from 0 to 100. The indicator was originally developed by J. Welles Wilder Jr. and introduced in his seminal 1978 book, “New Concepts in Technical Trading Systems.”
An RSI of 50 is considered average conditions or the mid-point. An RSI below 40 generally means the asset is in oversold territory conversely an RSI of 70 and above generally indicates overbought conditions. The RSI periods can be set on whatever chart you use.
The idea is to enter a trade where the RSI is low on the daily time frame (We can set the time frames to daily, weekly, monthly etc. on trading view or another charting tool on most exchanges), but at the same time the RSI strong on the weekly time frame.
For example, if a chart has an RSI of 30 on the 6 day moving average and for some reason has taken a beating this week but shows an RSI of 70 in the 6-week time frame. This would indicate that the long term trend is intact but has had a short term sell.
Once momentum builds up and prices start to rise again you will notice that R.S.I will also start rising in the same defined time frame. Once you hit your target and begin to notice that the RSI is reaching overbought levels, one can take an exit and book their profit.
The same can be useful if the RSI is high on the lower time frame but low on the larger time frame, which indicates that the asset has picked up some recent interest but does not show a clear long term trend.
4) Moving Averages –
Coins which have gone parabolic is a short time frame generally show a pattern of support on some particular moving average on the way up. These moving averages differ from asset to asset, but let’s take an example of an earlier parabolic THORCHAIN rally.
As you can see the chart had 3 moving averages. 7 Day in the black, 30 days in the yellow and 90 days in the light green.
Prior to the rally the 3 moving averages were very close to each other. Once this rally began you could see a clear pattern that the price would always find support at the 7 day moving average during its run up.
Later as the 30 day moving average also started catching up to the 7 day moving average, we could see that the 30 day became the new area of support and the rally lost a little bit of pace.
During an uptrend identifying and understanding these levels becomes very critical in order to determine when to enter and exit a trade.
There are many other indicators but this is a simple strategy that has given me results. I apply this strategy and move on to the next coin with coin. In the current alt’s season, this kangaroo hopping trading strategy seems be giving results.
You can also follow our weekly analysis on crypto market. What do you think about the Kangaroo Strategy? Let us know in the comments below.
Note: The article is written with inputs from guest author Ivaangelic. and Seedly blog.
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