The crypto squeeze trading strategy is among the most efficient trading techniques that expert crypto investors depend on making trade decisions. Following a specific trading strategy is essential to determining the most efficient position. So it makes sense that professional crypto investors should follow particular trading plans to obtain constant profits from the marketplace.
However, it is mandatory to have a clear understanding of any trading technique alongside successful implementation in live trading. This article will briefly discuss the crypto squeeze trading strategy and how to use the concept successfully in live trading.
What is the crypto squeeze trading strategy?
Cryptocurrencies have become attractive investment assets as the marketplace is worth trillions of dollars. We already know that crypto assets are volatile, so it makes sense that it is a common scenario for rapid price surges or spikes to occur here.
Like many other financial assets, the volume drops before any significant breakout, representing indecisions or confusion among market participants. This scenario typically occurs in financial assets like currency pairs before any important fundamental news is released.
The crypto squeeze trading strategy involves catching these volatile price movements’ low phases to increase profitability. Determining these squeeze conditions enable catching the most potent swing trades.
How to trade using the crypto squeeze trading strategy?
When you seek to use the crypto squeeze trading strategy for successful trading, it requires determining the squeeze phases. Expert crypto investors frequently use momentum indicators to identify these conditions and mark entry/exit positions of trades.
Many technical indicators are capable of helping crypto investors successfully execute squeeze trading strategies, including Bollinger Bands, squeeze momentum, Keltner channels, RSI, MACD, etc. You can use these technical indicators to obtain the market context and make trade decisions.
Short-term trading strategy
In this trading method, we seek to implement the crypto squeeze trading strategy using two popular trading indicators:
- Bollinger Bands
- Squeeze momentum
The BB indicator is popular among financial traders to determine volatility and breakouts. The bands get closer declaring low volatility, and when these bands get wider indicate breakouts.
On the other hand, the crypto squeeze momentum indicator shows readings on an independent window using histogram bars. When the bars are smaller, it defines low volatile phases, and the long bars declare significant volatility.
We combine both these indicators to determine short-term trading positions. This trading strategy suits many time frame charts. We recommend using it on a 15-min or an hourly chart to get the best results.
Bullish trade scenario
When seeking opening buy positions observe these conditions in the 15 minutes chart:
- The bands of the BB indicator get wider on the upper side.
- The price remains on the upper channel of the BB indicator.
- Geen histogram bars appear above the central line of the squeeze momentum indicator window.
Entry
When you detect these scenarios, it declares a potential breakout above, and the price may enter a bullish trend. Open a buy position.
Stop loss
Place an initial stop loss below the current swing low.
Take profit
Close the buy order when these conditions are present:
- The price reaches below the middle band of the BB indicator.
- Red histogram bars appear below the central line of the squeeze momentum indicator window.
Bearish trade scenario
When seeking opening sell positions, observe these in the M15 time frame:
- The bands of the BB indicator get wider on the lower side.
- The price remains on the lower channel of the BB indicator.
- Red histogram bars appear below the central line of the squeeze momentum indicator window.
Entry
When you detect these scenarios, it declares a potential breakout below, and the price may enter a bearish trend. Open a sell position.
Stop loss
Place an initial stop loss above the current swing high.
Take profit
Close the sell order when:
- The price reaches above the middle band of the BB indicator.
- Green histogram bars appear below the central line of the squeeze momentum indicator window.
Long-term trading strategy
We use the Keltner channel indicator alongside the BB indicator to generate long-term trading ideas in this trading method. Both indicators have three bands, so we change the color of the Keltner channel indicator bands to red to easily differentiate them from the BB bands as BB bands are blue. We seek trading positions through crossovers between these bands of different indicators. We recommend applying this method on an H4 or daily chart to get the best long-term trades.
Bullish trade scenario
Observe when these conditions are present in the daily chart:
- The dynamic lower line of the Keltner channel indicator crosses above the lower band of the BB indicator.
- The middle band of the Keltner channel indicator surpasses the middle band of the BB indicator on the upside.
Entry
When your chart matches these conditions above, it declares a potential bullish price movement. Enter a buy trade.
Stop loss
Place an initial stop loss below the current bullish momentum.
Take profit
Close the buy trade when:
- The upper band of the Keltner channel indicator drops below the upper band of the BB indicator.
- The middle band of the Keltner channel indicator drops below the middle band of the BB indicator.
Bearish trade scenario
Observe when:
- The dynamic upper line of the Keltner channel indicator declines below the upper band of the BB indicator.
- The middle band of the Keltner channel indicator surpasses the middle band of the BB indicator on the downside.
Entry
When your chart matches these conditions above, it declares a potential bearish price movement. Enter a sell trade.
Stop loss
Place an initial stop loss above the current bearish momentum.
Take profit
Close the sell trade when:
- The upper band of the Keltner channel indicator cross above the upper band of the BB indicator.
- The middle band of the Keltner channel indicator surges above the middle band of the BB indicator.
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Final thought
Finally, we can conclude by saying that the crypto squeeze trading strategy is one of the most efficient trading strategies to help you execute constantly profitable trades. However, we suggest you follow some specific trade and money management rules as cryptocurrencies are volatile assets.
