BTCUSDT 4H DOUBLE DEATH CROSS LONG TRADE STRATEGYThe double death cross strategy employs one more moving average that will help you anticipate when the death cross signal will occur. The third moving average is the 100-day MA, which is a medium-term MA situated between the other two moving averages.
Step #1: Wait for the 50-day EMA to cross below the 100-day EMA. The two moving averages also need to converge with the price action. You can read more about day trading price action here.
If we get the crossover of the 50-day MA (blue line) and 100-day MA (orange line) at the same time the price is testing those moving averages like it’s doing on the GBP/USD chart below, that’s the best-case situation for trade because we can define the risk.
The rule you need to keep in mind is that when the MAs converge with the price you have to get ready for the ride because it is going to get BUMPY!
Step #2: Multiple entry strategy: Sell1 when we close below 50-day MA and 100-day MA. Sell2 when we break and close below 200-day MA.
Using multiple entries to improve your average entry price can be the best way to approach the death cross signal. Scaling into a position is our preferred trading method when looking to capture a large price move in a currency pair.
The fact that the price was near the death cross signal, it created tension in the market that eventually will lead to a sharp move to the downside.
We pull the trigger on the first half of the trade once we close below the 50-day and 100-day moving averages.
If at the moment when the death cross developed we’re already trading slightly below the two moving averages, sell at the market the moment we close below.
The second half of our position is entered once we break and close below the 200-day moving average.
**Note: It’s important to remember that the success of the death cross signal relays on this simple trade secret that price and the two moving averages need to converge.
Keep it 'simple stupid' is not just a simple aphorism, but it’s an old truth that can make the difference between losing and making money trading.
Step #3: Hide your protective Stop Loss above 50-day MA and 100-day MA
The most important thing we need to define when trading is our risk. If you want to be a profitable trader you really need a limited risk. This is the type of death cross trades that we want to pull the trigger on.
If the price were to move back above those moving averages, we can safely assume this is yet another false trade signal. In this trade case scenario, we’re risking a little and our reward is potentially much bigger.
So, the best place to hide your protective stop loss is above the 50-day MA and 100-day MA.
Step #4: Choose your own Take Profit strategy or use this Two-step process for the take profit strategy: Mark on your chart the high of the candle when the 50-day MA crossed below 200-day EMA. Take profit when this high is broken.
Our take profit strategy might seem a little bit complex, but once we break down the steps you need to follow, it will make more sense why we’ve chosen this approach.
The first thing you have to do is to remember what we said at the beginning of the article which is that when the price doesn’t converge with the two MAs this is a death cross false signal.
In the example below, we can observe this type of price action.
Now all you have to do is to mark the high of the candle when the death cross happened and take profit as soon as the high gets broken.
**Note: The above was an example of a SELL trade using the death cross strategy. Use the same rules for a BUY trade – but in reverse, in which case we have the golden cross trading strategy.
Conclusion - Death Cross Stocks
Following the death cross trade signal can be a very efficient approach to identify bearish sentiment in the market. If you want to switch from short-term trading and try capturing larger trends the double death cross trading strategy can help you achieve your goals.
You must know that the death cross definition is universally applicable to any other asset classes. We can have a death cross crypto or a death cross gold the same way we can have a death cross S&P 500. Capturing and detecting bearish trends can be a hard task because downtrends are typically different than bullish trends. However, the double death cross strategy gives you a systematic way to tackle bearish trends.
