NEW Crypto Trading Strategy! (The Brick)
I’ve made a new strategy that is useful for cryptocurrencies and any other market. It helps identify long and short setups.
As a trader and educator, I am constantly reviewing and teaching various topics that pertain to specific indicators, specific markets and specific strategies. Most strategies that are available out there for free are total crap. They are. And the ones that you have to pay for are also crap. I know when I was struggling to become a profitable trader, I went through a number of headaches and heartaches before I attained profitability. One of those struggles was trading someone else’s system and/or using a trading system because I was desperate to make money. This strategy is not crap – it works. While it would be easy to say ‘I made this strategy’, which I did, it doesn’t mean its entirely original. First, the series of indicators used are well known. Second, the application of a volatility indicator and momentum indicator to help develop a filter for a trade entry is also no original. Anyway, let’s get to it.
The BRC (Brick) Strategy
The BRC strategy is a combination of three indicators: one volatility indicator and two momentum indicators. B stands for Bollinger Bands (volatility indicator), R stands for Relative Strength Index (momentum) and C stands for Composite Index (momentum). The method for the BRC Strategy is as follows:
- Price must be at or near an important support or resistance level.
- Price must be trading at the extreme of the Bollinger Bands – either trading against the upper band or lower band.
- The RSI and Composite Index must have similar structure (look nearly the same) and have similar peaks or troughs.
- Entry is triggered when the Composite Index crosses above/below either of the averages.
Buy/Long Trade Example
On Litecoin’s 4-hour chart above, I have annotated each level to correspond to the rules listed above. I want to break down this trade a little further and go into a little more detail on each point.
- The arrow for #1 is pointing to the light blue horizontal line. That line represents the 4/8th minor harmonic level – a strong area of support.
- The arrow for #2 shows that the candlesticks are trading against he lower band of the Bollinger Bands – notice also that the candle the arrow is pointing at bounced off the lower band.
- The #3 arrows show both the RSI and the Composite Index look share the same structure. They look very much the same. Notice also that the troughs in the RSI create a lower low while the troughs in the Composite Index create a higher low – this is Regular Bullish Divergence.
- The entry to buy/long for Litecoin (LTC) is when the Composite Index (red average) crosses above either of the moving averages (green or yellow). That would have put our entry at the open of the next candle at $66.28.
Short Trade Example
- The arrow for #1 points to the 2/8th Major Harmonic pivot – one of the strongest reversal pivots on Ethereum’s chart.
- The arrow for #2 shows price is trading up against the upper bands of the Bollinger Bands.
- The #3 arrows show the similar structure in both the RSI and the Composite Index.
- Finally, #4 shows the cross under of the Composite Index and the moving averages.
You may also see that as the trade progressed, an Ideal Ichimoku Breakout trade was formed when price and the Lagging Span both dropped below the Cloud. Both the BRC Strategy short and the Ichimoku short that lasted from 218.12 to 99.07.
There are a couple more points to the BRC Strategy that I think are important.
First, I only use the strategy on a 4-hour chart. The reasons for this is because anything lower than a 4-hour chart produces to many false-positives. Anything longer (like the Daily chart) still works, but the trading opportunities are very few. The 4-hour seems to be the sweet spot – but you find something different! Second, it’s not required but I would heavily suggest you add another filter and that is to look for divergences between the RSI and the Composite Index. I did type that right: look for divergences between the RSI and the Composite Index – you would view the RSI in place of the price chart. Good luck and let me know how it goes!