BitShares crypto trading strategy

August 13, 2019

Major crypto trading styles

In crypto trading, one size doesn’t fit all. Each trader has a unique way of managing the process of trading cryptocurrencies. Similarly, each coin should be approached in a unique way. In general, there are a few major trading styles out there - scalping, day trading, swing trading, position trading. Some of these are long-term and some are short-term crypto trading strategies.

Traders use scalping to earn profit on positions opened and closed within minutes; Day trading on the other hand is open for a couple of hours, - the maximum being 24h; Swing trading trades are usually held for a few days for the purpose of taking advantage of the volatile market, while position trading is seen as a more long-term approach.

Best BitShares trading strategy

In this blog post, we look at the best crypto trading strategy to trade the BitShares’ native token BTS paired with USD stablecoin bitUSD. The major trading pair, BTS/bitUSD, is available on Sparkdex, which offers a superior trading engine that suits all major crypto trading strategies. 

There are many trading strategies out there that are based on candlestick patterns. In general, these strategies can be mixed with a variety of  styles, however, swing trading is considered to be the best match for BTS/bitUSD. 

Swing trading: find the opportunity

As a first step, traders should be looking for a clear trend direction in the price chart below. In this example, we see a clear downtrend as the BTS price action breaks below the previous horizontal support to create new short-term lows. 

BTS/bitUSD (Source: Sparkdex)

Once we have identified the prevailing trend direction, we need to look for signs of reversal. As this is mostly considered to be a swing trading strategy, we aim to capitalise quickly on a potential reversal in the trend direction, which should be a reaction to a failed breakout. As seen the next BTS/bitUSD price chart, the important horizontal support has been identified and we now closely monitor the reaction of the price action if/when we get there. 

BTS/bitUSD (Source: Sparkdex)

We see here that the price breaks the horizontal support, (the blue horizontal line), but immediately rotates back higher to close just above the support. At this point in time, we focus on the next candle. If, as seen in the case here, the following candle is long and green (bullish), a long trade is advised to be initiated to capitalise on the potential trend reversal, as that would be a failed break of the acting support. 

Playing the BTS/bitUSD crypto trading strategy

The next pricing chart below shows how to play this trade. The trade is initiated after the first green candle closes at the very top. The stop loss is set below the low recorded by the reversal candle. The resistance can be adjusted based on your risk risk/reward ratio. Our advice is to go with the 2:1 risk/reward, which is a ratio where a lot professional crypto traders start to get interested because it allows them to double their money.

BTS/bitUSD price chart
BTS/bitUSD (Source: Sparkdex)

In this particular example, we raise our target as we aim for the price to re-test the previous support, which now acts as a resistance. So, as we risk 20 pips to make 50, our R:R is set at 2.5:1. 

A great advantage of this strategy is that it offers clear exit to a trade. The stop loss should always be placed below the previous low, or above the previous high if the prevailing trend is bullish. Despite the fact that the BTS price action had returned lower to re-test the acting support, it failed to touch our stop loss (invalidation zone). It ultimately rotated back higher and booked us 60 pips. 

Overall, the failed breakouts occur when a crypto asset makes a breakout move to new highs or lows, but quickly stalls out. The coin then triggers stop-losses that are located below lows, or above highs, and then rips away in the opposite direction. Hence, a false-break is often a very strong clue that the price might be changing direction. As the trend direction change is not certain, we use the following candle as “confirmation”.

This crypto trading strategy allows you to trade decentralised on Sparkdex effectively as it combines both the momentum and chart patterns to provide you with the best cryptocurrency strategy. See our DEX Masterclass to learn more about how to trade decentralised.


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