“Set it and forget it”: a less nerve-wracking crypto strategy than HODLing

Reddit user predot shared a strategy for investing in cryptocurrencies that he says is more profitable and less nerve-wracking than HODLing or DCAing (dollar-cost averaging). Let’s take a more detailed look at this strategy. 

What’s the strategy, and why is it better than HODLing? 

The main principle of investing is to buy when it is low and well high. The HODLing strategy does not understand where it is “high” and “low” because it is based on the fear that if one suddenly sells cryptocurrency, it will go to the Moon. The author suggests learning to understand where these highs and lows are by using simple technical analysis to calculate changes in the trend direction. He says this will help you buy when the trend starts to heat up and sell when it starts to cool down. 

Before writing the post, predot tested his strategy on BTC, ETH, and XRM. However, his method applies to all digital assets. Thus, the knowledge you gain will help you know when to buy or sell any cryptocurrency, derivative, or stock.

Here’s what else is known about testing the strategy: 

• Each test started with $500 on March 1st of, 2022.
• The price purchased or sold for each was the middle between the open and close price for that day. That can help to average out the price fluctuations.

You can see the results of buying and HODLing vs. applying MACD strategy (moving average convergence divergence) below: 

XMR:

• HODL: $457.60 ($2.40 loss);
• MACD: $996.80, or 218% better than HODLing. This was eight trades over the seven months.

ETH:

• HODL: $307.20 ($192.80 loss);
• MACD: $1,012.80, or 330% better than HODLing. This was ten trades over the seven months.

BTC:

• HODL: numbers being updated;
• MACD: numbers being updated.

And, when using this strategy, there is no need to follow the market’s movement, afraid that you’ll miss something. 

How to implement MACD strategy? 

It is worth mentioning that using this strategy, you will not catch the peak and the bottom exactly, but you’ll have a good enough idea that you’ll be able to get in around those prices and still make healthy profits. 

The author also advises you to study MACD trading, MACD divergence, and so on before testing this strategy yourself. Remember that this strategy is not financial advice but is attached only as a consideration. Do your research. 

You’ll need an account on a charting platform to do your analysis. Navigate to TradingView and create an account. After you’ve made your account, search for crypto using the Search field at the top of the screen. For example, enter BTCUSD and select Bitcoin / U.S. Dollar. Now that you have the BTCUSD chart on your screen, we’re going to change how it looks: 

• Look along the top of the screen for the Indicators label. To the left of that label is a drop-down arrow labeled Bar’s Style. Click that and select Candles. Candles or candlesticks tell us much more information than a simple price-line graph.
• Farther to the left, you will see some time frames, e.g., 15m for 15 minutes, four hours, etc. We want to choose D for one day.

Change the BTC/USD chart style to candlesticks and the time frame to 1 day. Then you need to add the MACD indicator and adjust it. To do this: 

• Click Indicators along the top of the screen
• Type in MACD and select Moving Average Convergence Divergence from the list
• You should now have a second chart on your screen. It will contain two line graphs and another graph that seems to go above and below an invisible ‘0’ line. The MACD line graph indicates the 12 periods (days, in our case) exponential moving average (EMA) of the price. If you changed the time frame to 1H, the period would be hours. The MACD graph would then be the EMA of 12 hours. The signal line indicates the 26-period EMA line.

Then, to make the MACD chart easier to read, do the following: 

• To the upper-left of the MACD chart, you should see some text: MACD 12 26 close 9 EMA EMA. Place your mouse over top of that text and click the Settings cog.
• In the MACD Settings window, click Style. Ensure that Histogram, MACD, Signal, and Zero Line are all checked
• To the right of Histogram > Color 0, select the graph button. Select Columns
• To the right of MACD > Color 0, select the line button. Select Line. Do the same for the Signal line right below. After that, click OK.

Compare the two-line graphs with the price chart above, and you’ll see some similarities. When the green MACD line turns down under the red (signal) line, you can see that price is about to head downwards. 

When the green MACD line turns upwards to move above the red signal line, that indicates that the price is about to move upwards. When we look at the price chart, we have no idea which direction the price will move. But with the MACD chart, we’re given an indication of which direction the chart will trend. And this is very important. 

As for the histogram that rises and falls above and below the invisible “0” line, this graph indicates the space between the MACD line and the signal line, i.e., the difference between the 12- and 26-EMA MACD and signal lines. The taller the histogram graph indicates the strength of the movement of the MACD and signal bars. 

What to do with the information and how to make money from it? 

The answer is as follows, according to the author, when the green MACD line is moving upwards and is just about to cross up and over the signal line is your indication to buy. When the green MACD line is moving downwards and is just about to cross under the signal line is your indication to sell. 

Here are the charts which predot generated, marking off the buy and sell points according to the MACD chart. He also tracked each buy or sell in a spreadsheet: 

• ETH chart;
• ETH profit tracking;
• XMR chart;
• XMR profit tracking.

According to the author, the goal of the method is to make an investor set the right parameters and forget about the process, without constantly checking the behavior of prices. If you like this method, write about it in the comments. If not, what is its flaw and what strategy do you use?