Many of you probably aren't familiar with a trading strategy called basket trading. I got first introduced to it from my Forex trading days and immediately saw its value. I apply that to Crypto trading to minimize my losses and keep my trades stable and less volatile. It also allows me to harvest profits as targets are reached.

Here are the facts about the market. Market comes across looking random because many cannot quantify the factors that contribute to price movement, and therefore it appears random. We can take that assumption as a fact. Due to various timing factors, the market appears random within a certain time range. We can use this randomness to our benefit. This means if we trade a basket of cryptos that exhibit various timing and trend attributes, then we end up with a single "currency" or asset that tends to move in more of a sinusoidal pattern with a bias towards a direction. Price tends to cross the 0% gain line, often giving us many opportunities to adjust that basket. These adjustments involve taking out profit and breaking even from other coins. If the basket trend is bullish or bearish , that's all you need to make a profit from the basket.

You can use the amazing TradingView feature of combing cryptos quickly to create your basket. More about the feature is here:

Here is a quick tutorial on how to perform this exercise of creating a basket. The more coins you have, the smoother the movement will be, and more often, it will reach the 0% gain level. The advantage here is that this acts as a "stop-loss" without taking a loss, and you can harvest profits with TP limit orders.

  • Determine the series of coins that you think are bullish or bearish . Stick to only one direction. Let's say for this example; you went with bullish .
  • Determine the volatility of each coin: meaning, the general % movement of the price that is expected typically.
  • Use that volatility to determine the % of the investment that should go towards each coin.
  • Now, create the chart formula based on that percentage, and you got yourself what the basket of currencies looks like.

Here is an example:
  • BTCUSD->2%, ETHUSD->5%, JASMYUSD->15%, AVAXUSD->9% (not real values)
  • If I have $1000, I will invest most into BETC and least into JASMYUSD to make my overall basket constant in volatility . This yields about BTCUSDx4, ETHUSDx1.8, JASMYUSDx0.1, AVAXUSDx0.7. If you put $100 in each coin, multiply it by the multiplier, $400 on BTCUSD , $180 on ETH, etc. You can play however you like. You can maximize for higher risk as well.
  • Now on the TradeView chart, enter the formula for the coin to see the single basket currency made up of your combination: BTCUSD*4+ETHUSD*1.8+JASMYUSD*0.1+AVAXUSD*0.7

I also add each coin, so I see how the coin itself moves relative to the others. You can apply indicators and whatever you like to it and trade it just likes how you would trade anything. All the math that applies to a single chart applies to this basket. I'm yet to see a platform that lets us easily trade complex strategies like this, so I'm making my own for trading purposes. If you know of one, please let me know in the comments so that I can try it out.

If you have any questions, please ask, and I will try my best to answer. If you found this interesting or helpful, please like it! Thank you!

Please keep in mind that this is not a guaranteed way to make profits. There are still risks like the entire crypto market going against you. This happens when there are fundamental changes that affect the market. Please trade at your own risk and play it safe.
Comment: Here is an example of what the basket looks like for me since its creation. My JASMYN trade is going against me but the API3 is helping and this allows me to take profit on API3 once JASMYN has reached the bottom and let JASMYN go up or I can buy more JASMYN with the profits from API3. Usually not a good idea to bet on the same coin again, especially when it has gone against you. I would put money towards a different coin that's making a breakthrough.

Also note the thick blue line, which is the basket currency price. See how often it crossed the zero axis. If my basket's bullish direction is realized, then this "zero" line will start to go up slowly.

The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.