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Lesson 8 of 8

Trading Strategies & Case Studies

Now it's time to put everything together. In this final lesson, you'll learn proven trading strategies, see real-world examples, and understand how to develop your own trading approach.

Trading Styles Overview

Your trading style determines how long you hold positions and how frequently you trade. Choose based on your personality, time availability, and risk tolerance.

Style Holding Period Time Required Stress Level
Scalping Seconds to minutes Full-time attention Very High
Day Trading Minutes to hours Several hours daily High
Swing Trading Days to weeks 1-2 hours daily Moderate
Position Trading Weeks to months Few hours weekly Low
💡 Beginner Recommendation

Swing trading is often best for beginners. It gives you time to analyze, doesn't require constant screen time, and avoids the stress of rapid decisions. Start here before considering faster styles.

Strategy 1: Trend Following

"The trend is your friend." This classic strategy involves identifying the direction of the market and trading in that direction.

Rules

  • Only go long when price is above the 200 EMA
  • Only go short when price is below the 200 EMA
  • Enter on pullbacks to the 20/50 EMA
  • Wait for confirmation (bullish candle pattern, MACD crossover)
  • Stop-loss below recent swing low (longs) or above swing high (shorts)

Example Setup

📊 Long Entry Example

1. BTC is above 200 EMA on daily chart (bullish trend)
2. Price pulls back to 50 EMA
3. RSI shows oversold (below 40) but not extreme
4. Bullish engulfing candle forms at 50 EMA
5. Entry: On close of engulfing candle
6. Stop: Below the engulfing candle low
7. Target: Previous resistance or 2-3x risk

Pros & Cons

  • Pros: High probability, lets profits run, clear rules
  • Cons: Misses reversals, whipsaws in ranging markets

Strategy 2: Support/Resistance Bounces

Trade reactions at key levels where price has historically reversed.

Rules

  • Identify strong support/resistance levels (multiple touches)
  • Wait for price to approach the level
  • Look for rejection signals (long wicks, reversal patterns)
  • Enter after confirmation candle
  • Stop-loss just beyond the level
  • Target: Next major level or 2:1 minimum

Example Setup

📊 Support Bounce Example

1. ETH has bounced from $1,800 three times in past month
2. Price drops toward $1,800 again
3. Long lower wick (hammer) forms at $1,800
4. Next candle is green and closes above hammer
5. Entry: $1,850 (above hammer high)
6. Stop: $1,780 (below support zone)
7. Target: $2,000 resistance (Risk $70, Reward $150 = 2:1)

Strategy 3: Breakout Trading

Trade when price breaks out of a consolidation pattern or through a key level with momentum.

Rules

  • Identify consolidation patterns (triangles, ranges, flags)
  • Wait for a decisive break (close above/below level)
  • Volume should increase on breakout
  • Enter on the breakout candle close OR on retest
  • Stop-loss inside the pattern
  • Target: Measured move (pattern height projected from breakout)
⚠️ False Breakouts

Many breakouts fail. To filter fakeouts:
• Wait for candle close beyond level, not just a wick
• Confirm with volume spike
• Consider entering on retest for better R:R
• Always use a stop-loss

Strategy 4: Mean Reversion

Based on the idea that price tends to return to its average after extreme moves. Works best in ranging markets.

Rules

  • Identify ranging/consolidating markets (NOT trending)
  • Use Bollinger Bands or RSI to identify extremes
  • Buy when price touches lower Bollinger Band + RSI below 30
  • Sell when price touches upper Bollinger Band + RSI above 70
  • Target the middle band (20 SMA) or opposite band
  • Stop beyond the extreme
⚠️ Warning

Mean reversion fails badly in trending markets where price can stay overbought/oversold for extended periods. Only use when there's clear evidence of a range, not a trend.

Strategy 5: Dollar Cost Averaging (DCA)

Not a trading strategy per se, but a proven investment approach. Invest fixed amounts at regular intervals regardless of price.

How It Works

  • Decide total amount to invest (e.g., $10,000)
  • Divide into equal portions (e.g., $500/month for 20 months)
  • Buy at the same time each period regardless of price
  • You automatically buy more when prices are low, less when high
  • Removes emotion and timing from the equation

DCA Variations

  • Value Averaging: Adjust purchase amounts based on portfolio performance
  • DCA on Dips: Regular buys + extra purchases during significant drops
  • Reverse DCA: Gradually selling during bull markets

Building Your Trading Plan

Every successful trader has a written plan. Here's a template:

1. Trading Identity

  • What is your trading style? (Swing, day trading, etc.)
  • What timeframes do you trade?
  • How much time can you dedicate daily/weekly?

2. Risk Parameters

  • Maximum risk per trade: ___% (recommended: 1-2%)
  • Maximum portfolio risk at once: ___%
  • Daily loss limit: ___% (stop trading if hit)
  • Weekly loss limit: ___%

3. Entry Criteria

  • What setups do you trade?
  • What indicators/tools do you use for confirmation?
  • What market conditions do you avoid?

4. Exit Criteria

  • How do you set stop-losses?
  • How do you set take-profit targets?
  • Do you scale out of positions?
  • When do you move stop to break-even?

5. Review Process

  • When do you review trades? (Daily/weekly)
  • What metrics do you track?
  • How do you identify areas for improvement?

Common Mistakes to Avoid

Over-trading
Taking too many trades, often from boredom or FOMO. Quality over quantity.
No Stop-Loss
"It will come back" mentality. One bad trade can wipe out months of gains.
Moving Stop-Loss Further
If your thesis is wrong, adding to the loss doesn't help. Honor your original plan.
Trading Without a Plan
Improvising leads to emotional decisions. Always know your entry, stop, and target.
Ignoring the Trend
Fighting the market direction. Trade with the trend, not against it.
Over-leveraging
Using too much leverage magnifies losses. Start with no leverage or very low.

Next Steps

Congratulations on completing the course! Here's what to do next:

  1. Paper Trade First: Practice with fake money until consistently profitable
  2. Start Small: When going live, use amounts you can afford to lose
  3. Keep Learning: Markets evolve; continuous education is essential
  4. Journal Everything: Track every trade, review weekly
  5. Be Patient: Consistent profitability takes months or years
  6. Manage Expectations: Professional traders aim for 15-30% annually
✓ You're Ready

You now have the knowledge foundation for cryptocurrency trading. Success comes from applying this knowledge consistently, managing risk, and continuously improving. Take the final exam to test your understanding!

🧠 Test Your Knowledge

1. Which trading style is recommended for beginners?

Scalping
Swing Trading
High-frequency trading
Margin scalping

2. In trend following, when do you enter long positions?

When price is below 200 EMA
At any time with high volume
When price is above 200 EMA and pulls back
Only during ranging markets

3. What should you do before trading with real money?

Paper trade until consistently profitable
Start with maximum leverage
Invest all savings immediately
Follow social media tips blindly

📋 Lesson Summary

  • Choose a trading style that fits your personality and time availability
  • Trend following: Trade in the direction of the major trend with pullback entries
  • Support/Resistance: Trade reactions at key levels with confirmation
  • Breakouts: Enter when price decisively breaks consolidation patterns with volume
  • Mean reversion: Trade extremes in ranging markets only
  • DCA: Systematic investing to remove emotion and timing from the equation
  • Create a written trading plan and follow it consistently
  • Paper trade first, start small, and never stop learning
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