Stellar Lumens (XLM) is a cryptocurrency with great potential. To trade it successfully, there's a swing strategy with DBLHC that you might need to try. Why so and how to do it?
Cryptocurrency is becoming increasingly popular worldwide, and one of the digital currencies that is gaining more recognition is Stellar Lumens (XLM). As one of the top altcoins, XLM's potentials are quite attractive for traders and investors.
However, as with all types of investments, crypto trading also involves significant risks. Therefore, it is important for traders to have an effective trading strategy to optimize their profits and manage risks. In this approach, we would learn to trade Stellar Lumens (XLM) in a swing strategy with Double Bar Low Higher Close (DBLHC) that consist of the following steps:
- Find a bullish trend of a swing low.
- Wait for a valid DBLHC.
- Open buy at the opening of the next candle.
- Set a Stop Loss.
- Take profit on a breakout.
But before describing each step thoroughly, let's get more details on Stellar Lumens and its potential as a cryptocurrency.
Why is Stellar Lumens (XLM) Considered Special?
Stellar Lumens (XLM) is a cryptocurrency on the Stellar blockchain, a decentralized payment network that allows its users to send money with small to no fees and fast transactions.
Stellar has been around for a long time since Jed McCaleb and Joyce Kim started the Stellar Foundation in 2014. Initially, it was just a fork of the Ripple protocol. The creator of Stellar was also one of the founders of Ripple. When Stellar separated itself from Ripple, the developer changed Ripple's basic code in the blockchain.
Here are some factors that make Stellar Lumens highly regarded among investors:
- The blockchain only takes 3 to 5 seconds to confirm transactions.
- Stellar is able to process thousands of transactions at the same time.
- Stellar is considered the future of banking because it has great potential in the financial industry.
- The crypto coin, XLM, has become very popular among investors as a long-term investment.
- The uniqueness of XLM lies in its ability to quickly complete cross-border transactions with very low fees.
- The number of users switching to Stellar to send money keeps increasing in recent years.
- The use of Lumens is integrated into global P2P lending platforms and services such as Bitbond.
- Although the price of Stellar Lumens is below $1, the coin is included in the top 25 cryptocurrencies with the largest market cap.
DBLHC Trading Strategy for Stellar Lumens (XLM)
Each individual has a different trading approach. Some traders are impatient to HODL, so swing trading can be a good strategy to choose. With swing trading, you can hold a trading position for at least one day to three weeks.
To start swing trading with Stellar XLM, there are several price patterns that need to be considered. One pattern that can be used is the Double Bar Low Higher Close (DBLHC), which is better known as the double bar chart pattern.
This pattern is easily recognizable because it consists of two bars with the lowest price levels that are parallel or almost the same, and the second candle must close higher than the first candle. Usually, the candle wick will be very small while the body is more dominant.
Without further ado, here are some steps that you need to follow when trading Stellar Lumens with DBLHC:
Step 1: Find a Bullish Trend or Wait for the Market to Form a Swing Low
The first step in this Stellar Lumens trading strategy is to find a bullish trend or wait for a swing low to appear in the market. To profit from Stellar Lumens' swing trading, pay attention closely to DBLHC. You can find this pattern at the end of a bearish trend as a bullish reversal pattern.
However, DBLHC can also appear as a trend continuation pattern. The pattern's reliability will increase if it is used on a previously established trend. That way, DBLHC can also provide the same results even if the market is in the process of developing a swing low.
The appearance of the DBLHC pattern immediately after the swing low indicates confirmation that institutional money is buying at low prices. This can also be seen on the Stellar XLM chart that develops a swing low.
Step 2: Wait for a Valid DBLHC Pattern to Form
In general, the first and second candle of the DBLHC pattern should be different. However, in certain cases, the first candle can also be as bullish as the second candle. As long as the lowest price is parallel and the closing price of the second candle is closed higher, the DBLHC pattern is still considered valid. To enter the market, remember that both conditions of the DBLHC pattern must be met.
Step 3: Buy at the Opening of the Next Candle
The third step in the Stellar Lumens swing trading strategy is to enter a buy position at the opening of the candle after DBLHC. It is important to remember that the second candle must close much higher than the first candle and have two parallel lows. To not miss the moment, you can place a buy limit order above the highest price of DBLHC's second candle.
Step 4: Place a Stop Loss Below the DBLHC Pattern
For the stop loss, you can place it below the low of the DBLHC pattern. Stop loss is an automatic order to close a trading position when the price reverses to an undesirable level.
Step 5: Take Profit When the Price Breaks the Trendline
To determine the take profit level, you can draw a trendline from the swing point to the lowest price of the DBLHC pattern. Once you have a view of the upward trendline, you just have to wait for the price to break below the trendline.
After the price breaks and closes below the upward trendline, you can immediately take a profit. This breakout strategy will help maximize your profit while the bullish momentum is still strong.
It should be noted that the above strategy is just an example for buy positions. As for sell positions, you can apply the same rules but just reverse them. The example for entry sell positions is provided below.
To conclude, XLM is one of the favorite and prominent cryptocurrencies compared to other coins. It has great potential with some serious partnerships serving a number of large transactions. Trading Stellar Lumens with DBLHC provides a good approach to swing strategy. It combines momentum and chart patterns, giving you the best opportunity to take profits in the cryptocurrency market.