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Crypto analyst Nicholas Merten is unveiling strategies that investors can use to maximize profits and compound gains when trading altcoins.

In a new video, Merten tells his 377,000 YouTube subscribers that one way to pick the fastest horse is to analyze whether your coins are outperforming their competitors.

He suggests using ratios where one cryptocurrency is compared to another asset.

“Most people on the surface are going to do one thing. They’re going to look at ADA (Cardano) to USD. So they’re going to look at the price of Cardano in dollar terms… Another step that people take as well that gets you a bit deeper perspective is comparing it to Bitcoin. So doing to trading pair of ADA to BTC… These are what’s known as ratios.” 

In the case of Cardano, the analyst is tracking the performance of ADA against ETH (Ethereum).

“So what we’re doing here is we’re taking the ADA/BTC pair in order to get as much price action that we can work with here. We’re taking ADA/BTC, so ADA’s performance against Bitcoin and dividing it by Ethereum’s performance against Bitcoin (ADABTC/ETHBTC). This builds basically a custom ratio where the BTC and the BTC, they cancel each other out. And now we’re able to get a long-term set of price history of how ADA has performed against Ethereum.”

Merten explains that a declining ADABTC/ETHBTC chart means that Ethereum is outpacing Cardano. Meanwhile, a rising ADABTC/ETHBTC chart indicates that ADA is outperforming Ethereum.

Using ratios, Merten says investors should focus on support and resistance levels to determine whether to enter a trade, take profits or stay off the market.

“These can be you know descending lines of resistance, ascending lines of support. It can be generally these kind of flat lines of resistance and support. We’re basically looking when it generally tends to be that, for example, in this case, that Cardano might be at a discount to Ethereum. Or it might be overextended against Ethereum historically speaking. It doesn’t mean that it can’t break these levels up or down but was just generally going off of what we’ve seen throughout history. That tends to be a good point to buy in or take profits or maybe swap into the alternative currency.”

When using ratios to trade altcoins, Merten suggests that investors should take profits to avoid giving back gains when markets pull back.

“You can take partial profits along the way. So how this generally works is sometimes you know, for example, you don’t want to just wait for one key even level because you might not hit it. A lot of people are like, ‘Oh you just use limit orders and you’ll be disciplined and you’ll be able to take profits.’ Problem is if your limit orders don’t get hit, then you’re going to be wealthy on paper and then the market pulls back and you never actually realize any of those profits. Again, I would say to take what’s known as partial shares or partial amounts of profit at different varying levels or ascending levels of the ratio in this case.”

Source: dailyhodl.com

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