The Euler method is a mathematical approach to solving differential equations in the real world, but its presence is vital in the cryptocurrency market. The financial market has a close connection to mathematics, where it is logical to find a price direction of a trading asset using a formula.
The Euler method is an algebraic solution to differential equations to find the price direction in financial markets. In the following section, we will see the nuts and bolts of the Euler method, including the trading approach with Euler indicators in buy and sell markets.
What is the Euler method?
It is a first-order method used to solve local errors proportionately to the step size. It is a helpful technique to solve differential equations and provide solution curves.
The Euler method works as an essential tool in physics, chemistry, and economics. Therefore, several trading indicators were built to anticipate the future price of financial trading instruments. Overall, the Euler method applies to finding the object of a falling object, reaction over time, the flow, and many more.
How to trade using the Euler method in trading strategy?
Several trading indicators are built from the Euler method concept, and most of them apply to the cryptocurrency market. However, traders need to know ways to generate a trading signal using Euler and other indicators.
Let’s see some critical Euler indicators used for the crypto market.
Euler method: volume profile
It defines the high and low volume area that helps traders find the most reliable place to take a trade. If a bullish trading idea comes with a higher volume, it will become more reliable than a buying setup with a low volume.
Euler method: MathLab
This indicator works like a traditional pivot point where supports, resistances, and neutral points are visible. Moreover, it uses Bollinger Bands and moving averages to understand the price movement better. However, it is better to use this tool to find the monthly S/R areas so that investors can have the long-term price direction.
Euler method: crypto cap
This indicator shows the money circulation from BTC to fiat, BTC to altcoin, and altcoins to fiat using the RSI algorithm. Any divergence with the histogram and price indicates a reliable reversal trading opportunity.
A short-term trading strategy
In this section, we will see the application of the trading mentioned above tools in the intraday chart. This approach is to find the short-term trading opportunity in the crypto market.
Bullish trade scenario
Before taking a buy trade, follow these steps:
- The higher time frame price action from H4 or H1 should move higher from any significant support level.
- Move to the 5 minutes chart, where the price should correct lower towards the intraday support level.
- The dynamic VWAP is below the price.
- A divergence between the price and Euler method crypto cap appeared.
- Open a buy trade on the next candle that shows bullish rejection from the divergence.
- The SL is below the near-term swing low, and the first take profit is based on a 1:2 risk vs reward ratio.
Bearish trade scenario
Before taking a sell trade, follow these steps in crypto CFDs:
- The higher time frame price action from H4 or H1 should trend lower from any significant resistance level.
- Move to the 5 minutes chart where the price should correct higher to the intraday resistance level.
- The dynamic VWAP is above the price.
- A divergence between the price and Euler method crypto cap appeared.
- The sell trade is valid after the bearish rejection candle closes.
- The stop loss is above the swing high, and the take profit is based on RR.
A long-term trading strategy
The long-term method offers an investment opportunity from which a vast gain is possible. This method applies to long-term traders and HODLers who want to join the bullish or bearish rally in the daily chart.
Bullish trade scenario
The buy trade is valid once these conditions are present in the chart:
- In the daily chart, the price trades above the EM Mathlab support areas and dynamic 20 EMA.
- The price shows a substantial volume in the EM volume profile while moving up from the dynamic 20 EMA.
- EM cryptocap histogram remains above the neutral level.
- Open the buy trade after a candle closes above the dynamic 20 EMA with these conditions.
- The ideal stop loss is below the near-term swing low, and take profit is based on price action.
Bearish trade scenario
The sell trade is valid once these conditions are present in the chart:
- In the daily chart, the price trades below the EM Mathlab resistances areas and dynamic 20 EMA.
- In the EM volume profile, the price shows a strong volume.
- EM cryptocap histogram remains below the neutral level.
- Open the sell trade after a candle closes below the dynamic 20 EMA with these conditions.
- The ideal stop loss is above the near-term swing low, and take profit is based on price action.
Long-term sell trade example
Pros & cons
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Final thoughts
The Euler method has emerged better to understand cryptos in both short-term and long-term approaches. Several indicators from the concept help traders find the most accurate and affordable way to join crypto trading. However, the outcome of this approach depends on how traders implement all methods under a sound risk management system.
