Ethereum Momentum Continuation is a trend-following strategy based on the RSI indicator and two moving averages.
This is a short-term momentum swing trading strategy that trades on 1-hour bars with the longer term trend. It takes around two trades per week.
RSI is a price-following oscillator that ranges from 0-100. Basically, RSI is a momentum indicator which compares the relative size of an asset's recent gains to its recent losses and thereby seeks to determine if the asset is either overbought or oversold. An asset is commonly deemed to be overbought once the RSI goes above 0.70, whereas it is deemed oversold once it's below 0.30.
Ethereum tends to trend rather than mean revert and instead of speculating in price reversals, this system bets that the trend will persist rather than reverse.
A trend-following filter is used – for a long signal, we need the previous bar to close above both 50 and 200 period moving average and also that the 50 is above the 200. We do not want to buy low prices and therefore the RSI needs to be above 70. We do not utilize a fixed profit target, but use a simple time-based exit which makes this system antifragile. We have set a fixed stop loss of 40 points*.
* Note that if your broker quotes ETHUSD in 1 decimal, the stop-loss in pips must then be 400 and if it quotes two decimals, then it needs to be 4000.