We introduced the concept of Kinetic VQ (KVQ) to our TradeSmith members a couple years ago. KVQ is a strategy for finding powerful new investment trends that can work in any market — bullish, bearish, or sideways. You can read more about KVQ here.
In brief, we find the concept of kinetic energy in physics. It’s the force required to accelerate an object from a state of rest up to a given velocity. Think of a professional baseball pitcher who throws 95 mph fastballs. Kinetic energy is the amount of energy the pitcher needs to generate with his body in order to get that baseball up to 95 mph when it leaves his hand.
Kinetic VQ stocks are like a baseball that’s about to leave the hand of the pitcher. They’ve got extra built-up energy behind them. We detect that extra energy by comparing the current VQ on the stock to its long-term average VQ. When the current VQ is significantly higher than the long-term average VQ, it’s like extra kinetic energy behind the stock that can propel the stock on to its next big move.
Of course, we want that move to be in the right direction! Just as it’s critical that the pitcher release the ball at exactly the right moment, it’s also critical that we get the timing right before we buy into a stock with KVQ. That’s where the TradeStops Stock State Indicator (SSI) comes into play; we wait for the SSI to change from Red to Green.
The KVQ strategy works like this:
- Look for stocks that have a higher current Volatility Quotient (VQ) than their long-term Average VQ and
- Have recently changed from the SSI Red Zone to the SSI Green Zone
We’ve had tremendous success with this strategy in stocks, so of course we’re also on the lookout for opportunities to apply it to cryptocurrencies as well.
We’re looking for cryptos that are in the Crypto State Indicator (CSI) Green Zone or Yellow Zone and have a sideways or upward trend with a VQ of less than 80%, a KVQ of more than 20%, and trading in USD.
The chart below shows how ERC/USD recently broke above its trendline and triggered a new CSI entry signal. You can also see how the current VQ (blue line at the bottom of the chart) is quite a bit above the long-term average VQ (red line at the bottom of the chart.
We’ve seen some good follow through to the upside in ERC/USD already, but if our KVQ strategy works as well for cryptos as it has for stocks, we should see more upside follow through in the weeks to come.
Meanwhile, the ongoing bear market has pushed the current VQ for a number of cryptos considerably higher than their average VQ. Including EuropeCoin, there are currently 36 cryptos that we follow with a current VQ that is more than 20% higher than their long-term average VQ.
One of those is Bitcoin (BTC/USD), with a current VQ of almost 31%. That’s more than 40% higher than its historical VQ of 21.7%.
When BTC finally triggers a CSI Entry signal and moves into the CSI Green Zone, we’d expect to see the Kinetic VQ help power BTC higher.
Just like a pitcher releasing the ball at the right time, though, we’ll be waiting until these cryptos change from Red to Green. You can set alerts in Crypto by TradeSmith on these cryptos so that you’ll know when they change from Red to Green.