The market’s sentiment is the trader’s point of view regarding a particular asset. While price movement occurs inside the market, traders develop this psychological feeling. Hence, differentiating a successful crypto trader from a novice is by observing how they drift around when the market encounters volatility.
Crypto trading is a very high-income generating venture if the right strategies are applied. Consequently, organizations have kept track of customers’ sentiments on social media platforms to upgrade their customers’ experiences.
The following section will see a sentiment-based crypto trading guide that includes exact buying and selling trading methods.
What is a sentiment-based crypto trading method?
Analyzing the market sentiment is the vital component that precisely measures the progress or failure of a cryptocurrency coin or token. The sentiment in the financial world acts as the opinion given on the situation of the market.
However, crypto market sentiment represents the common feelings or opinions and a viewpoint of traders to the asset. It delivers the crowd psychology of traders related to crypto-trading and the development of the cryptocurrency as reflected through social and trading metrics. When a crypto-trader takes a call relying upon the sentimental viewpoint or psychological feeling, it is sentiment-based crypto trading.
The feeling of the traders about a cryptocurrency may tangibly impact the market cycles and cryptocurrency price. When a significant portion of the traders moves upon the same idea or feeling, they share perhaps significant repercussions. In essence, sentiment-based crypto trading is a psychological consideration of factors impacting cryptocurrency price movement.
How to trade using the sentiment-based trading method?
Technical analysis targets anticipating future prices in a shorter period by considering a particular cryptocurrency’s historical trading volume and prices. Analysts are convinced that market structure follows unrecognizable trends and that those trends usually follow repetition, for instance, Elliot Wave patterns, Bollinger Bands, moving averages, etc.
On the other hand, analysts who prefer fundamental analysis endeavor to ascertain the inherent value of a cryptocurrency. The fundamental analyst’s approach targets to determine whether the asset is overrated or underrated. And determining this involves metrics studies such as project team, the technology application, and the case studies utilizing that technology and blockchain.
Bullish trade setup
Look for a buy entry when the price breaks over the dynamic level of 20 EMA with an impulsive bullish candle and the buy volume level is greater than the previous volume level.
Place your stop-loss order below the breakout candle with at least a 10-15 pips buffer.
Take the profit by calculating at least a 1:3 risk/reward ratio. Or else, you can ride the trend by targeting the next resistance level.
Bearish trade setup
Look for a sell entry when the price breaks below the dynamic level of 20 EMA with an impulsive bearish candle and the sell volume level is greater than the previous volume level.
Place your stop-loss order above the daily breakout candle with at least a 10-15 pips buffer.
Take the profit by calculating at least a 1:3 risk/reward ratio. Or else, you can ride the trend by targeting the next support level.
How to manage risks?
Perhaps executing a crypto trading money management method is the finest approach to attempt to give a wide berth to losing money in sentiment-based crypto trading. Although there is no perfect trading method, nor humans exist or even robot traders. But all of these have the same attribute; whether it is good or bad, also they have similar mistakes. These mistakes are the components that a successful trader always endeavors to avoid for bagging the winning trades.
There are various suggestions available that is crypto trading preach the 2% rule. In this method, a trader should jeopardize 2% of their account on each trade. It is the fixed percentage risk, which is the amount you are lenient with and afford. Therefore, the idea behind the method is a trader must jeopardize only a tiny percentage of the capital on any trade.
In case of a trader has a $50,000 balance in the trading account, then 2% of that balance stands for $1000 of risk per trade. However, it may seem a large amount to the trader with a balance of $5000 in his account. But applying the same rule of 2% risk, the amount stands for $100 of risk per trade.
How to make $500 per day with this strategy?
This trading strategy is very much possible to make $500 per day. The amount the trader may be able to generate per day largely relies on the strategies they apply, risk handling technique, and the amount of time and energy they are willing to invest.
However, it is not that easy. Making the strategy and refining it according to the trading needs so that the traders may have winning trades more and more. It is a significant move towards making a profit as a crypto trader.
In a nutshell, cryptocurrency traders pay heeds to sentiment-based trading as one of the best strategies to apply in the ever-volatile crypto space. It provides successful outcomes if they are appropriately applied.
While numerous traders utilize market sentiment analysis in the investment markets, it may be particularly beneficial in the cryptocurrency market. Due to the blockchain industry and crypto markets being comparatively small, public attitude and sentiment can result in volatile price movements.
Hopefully, it’ll make you better comprehend sentiment-based trading using the methods mentioned above, and you’ll be able to make profitable trading choices. Although, it is still suggested to scrutinize substantial research on the sentiment tools that may bring you the desired result.