Crab Strategy in FUTURES: Market Movement in Range (Confirmations).
The Crab Strategy is based on the idea of taking advantage of market movements that seem erratic or sideways, similar to how a crab moves; and it is focused on scalping trading, as it basically consists of applying a quick entry and exit technique that seeks to maximize profits and minimize losses to take advantage of short-term price movements.
To apply this strategy in futures, it is essential:
1. Understand the Futures Market
-Familiarize yourself with the dynamics of knowing how Futures contracts work on Binance (See tutorials). This includes understanding leverage, liquidation, and fees.
2. Technical Analysis
-Identification of Support and Resistance: Draw key levels on the chart where the price has struggled to break through (resistances) or where it has bounced (supports).
-Candlestick Patterns: Learn to recognize candlestick patterns that may indicate a trend change. I recommend paying close attention to the following:
In the graph of FIGURE 6, there is a lateral movement that can lead to the Crab Strategy, as the price moves in a zigzag in a vertical range; which would allow entry into the market both downward and upward, as appropriate, according to the exploitable vertical movement range. Of course, the wider the vertical price movement margin in a bullish or bearish market, the more significant the profits will be.
FIGURE 6, first case, shows us how the market comes from a bullish trend, enters a range, makes a confirmation of two bullish-bearish touches at resistance and support, and then begins to define a new bearish trend, perfectly exploitable. The bearish candle that inaugurates that new trend is like the crab's claw; and that new market direction is what we would take advantage of with a take profit that we can establish after confirmation.
In the second case, we see how the price comes from a bearish trend, makes a confirmation of two bearish-bullish touches at support and resistance, and then defines a new bullish trend, perfectly exploitable. The bullish candle that inaugurates that new trend is like a crab's claw; and that new market direction is what we would take advantage of with a take profit that we can establish after confirmation of the two touches.
It is very important to keep in mind the phrase: The market coming to me; which tells us that if the market does not come to the price I have stipulated, then I do not trade. In any case, I always advise to first trade on a DEMO account to practice our strategy and adjust its effectiveness.
3. Indicator Setup
It is very important to use technical indicators that help us establish entry and exit moments, such as:
-Exponential Moving Averages (EMA): I recommend the 8, 21, and 50.
-Relative Strength Index (RSI): It is very useful for identifying overbought or oversold conditions. For Scalping: A fast RSI with periods of 5 to 7 is ideal for 1 or 5-minute charts. For Momentum Trading: Use a slightly longer RSI period, between 9 and 12, on 5 to 15-minute charts. For Range Trading: A slower RSI, in the range of 14 to 25, helps define trading ranges.
-Bollinger Bands: It is very important for measuring volatility and potential reversal points.
4. Final considerations of the Crab Strategy:
The strategy is designed for Short Movements: Remember that the idea is to enter and exit the market quickly, similar to how a crab moves sideways. Look for scalping opportunities where you can take advantage of small price fluctuations.
Entries: Look to enter short or long positions when the price approaches a support or resistance level, especially if there is confirmation of a trend change (for example, an RSI signal or a candlestick pattern).
Quick Exits: Set small profit targets and use Stop-loss to protect your investments. The key is to exit quickly once you have reached your target.
5. Risk Management
-Define the size of your positions and make sure not to risk more than 1-2% of your capital on a trade.
-Use Stop-loss orders to limit losses in case the market moves against your position.
6. Practice and Adjustment
-Remember that before trading with real money, consider practicing with a demo account to familiarize yourself with the strategy and adjust your parameters as needed.
- Stay updated on market news that may affect prices, as unexpected events can cause volatility.
7. Review and Continuous Improvement
- Keep a record of your trades to analyze what worked and what didn’t. This will help you adjust your strategy over time.
Remember that scalping can be risky and requires discipline and speed. Always trade cautiously and ensure you have a solid plan before entering the market.
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