Some of us made it to the moon. However, we’re all back on Earth now.
In the crypto and traditional markets, the new bulls are not like the last bulls.
The last bull run included all kinds of cryptos, large and small. People bought at the top.
Lots of these people are now just sellers waiting to exit at higher prices at multiple levels or anytime there’s a pop or pump. All of this creates multiple ceilings of resistance.
One of the best things to do is learn from history and use that knowledge in the future.
The great debate in the crypto space is whether you should hold or whether you should trade.
To be quite frankly developing you own methodology from the basics is the best approach, so you won’t rely solely on the market conditions but on your own projection and psychological strength. In order to do that you must educate yourself on the basics of technical analysis, price action, market structure, volume profile and fundamentals.
It is well known that the vast majority of traders are usually never successful, even during a bull run. This is not because trading is a losing game, but it is simply because most people who decide to take on day trading or swing trading are not mentally prepared to be successful, and make crucial mistakes along the way. Here are just a few tips that can make or break your trading experience, should you choose to pursue that journey.
- Don’t rely on other traders ideas. No matter how good of a trader you follow, you will never be able to fully replicate their moves fast enough, and you will never know if they are posting their losses as well as their wins, or what else is going on behind the scenes. If you do not understand the charts that you are following enough to form your own opinion, you should not day trade or swing trade, period.
- Be clear on the fact that technical analysis is just a guide and is by no means foolproof. It helps to paint a picture of what could happen, not what will happen. Setups fail all the time and it is how you handle these failed setups that will help you minimize your losses.
- Always ensure you are using proper risk management. Set proper stop losses, which are pre-determined sell orders that execute when the price drops below a certain level. Make sure that these stop losses are not too tight and not too loose. There isn’t an exact science on what your stop loss percentage should be, it always depends on the asset being traded, the time frame, and other aspects of the scenario. With proper risk management, you can still be profitable even if your win ratio is low (the ratio of your winning trades to your losing trades), For example, you can lose 10 trades in a row at a loss of $10 each, but win a single trade with a gain of $1000 and secure big profits if you manage your risk accordingly. Risk 1-5% per trade is the norm.
- Probably the most important thing about being a day trader or a swing trader in a bull run or bear market is to be patient. Whatever you do, do not overtrade. This is crucial to your long term success and is the number one mistake most new traders make. Nothing will dwindle your resources down faster than jumping from one trade to the next in rapid succession. Along with this, ensure that you stick to your strategies. If you have a stop loss in place, don’t lift that stop loss when the price approaches it. You may lose 1% to 5% on that trade, but it is better than watching helplessly as the price drops 25% or more on you. Other opportunities will come up and you will have many chances to make that small loss back.
Always remember to use your head, not your emotions. Don’t fall in love with coins, as things can change overnight. Even in a bull run, projects can fail and you have to be prepared for that inevitability, no matter how fundamentally strong your investments seem to be.
Most importantly, you must experience loss before you can truly experience wins. If you haven’t experienced a bear market or taken tough losses, you will not be fully equipped to handle a bull run.
When it comes to TA here are the basic principles to take in consideration
There must be a solid understanding of support and resistance levels, which are where prices hold up or fall through certain areas on a chart. If you are able to identify and work within these zones, you will be much better at determining when to enter and when to exit trades.
Market structure consists of three different types of trends.
Each subsequent trend and even the trendless sideways movement have specific characteristics.
For understanding market structure and ultimately what a break in market structure means and looks like first we have to understand what the specific signs of each trend are.
An uptrend consists of higher lows (HL) and higher highs (HH).
A downtrend characteristics are lower lows (LL) and lower highs (LH).
The sideways market:
A consolidating market does neither of the above mentioned until supply and demand are out of balance and price breaks out. Note, a breakout can occur either to the upside or to the downside depending on where price is in correlation to the overall market situation.
Things you can ask yourself when looking at a chart:
-What is the preceding trend ?
-Where is price ? Is it at support or resistance ?
-What is the overall higher timeframe trend ?
It’s very important to be aware of:
Consolidations can take place at bottoms and at tops. They are not a specific sign of a bottom formation!
There are two types of swings:
- The swing high (SWH)
- The swing low (SWL)
A complete Market Cycle within price action goes as follow:
Where is bitcoin now?
We are currently on the Early accumulation
- Beginning transition from bearish trends to more neutral. Volatility slowly dying off.
Bitcoin recently had the lowest volatility two weeks in a row. Between $30-$50 daily moves.
It should still be monitored for short opportunities.
What to look for During accumulation;
- Bearish forces become more neutral as buyers methodically accumulate. But still no signs of strong upwards momentum develop.
- Higher lows will usually develop but is unable to penetrate a longer term resistance level to create a higher.
Recommended action is to buy by pieces in an attempt to scale in. as there could be a possibility of lower price action.
Bitcoin will establish a pattern of higher highs and higher lows. It will start showing considerable upside momentum and should be monitored closely on short term timeframes for low risk opportunities.
Pullbacks above the rising moving averages become deeper considered to be the sweet spot for opportunities. Gains can come quickly.
Within this period the whole market will move up together in an uptrend.
The next factor to take in consideration is Volume. The most important indicator.
Volume is a measure of how much of a given asset has been traded in a given period of time, or how many times the asset has been bought or sold over a particular span. It is a very powerful tool but is often overlooked because it is such a simple indicator.
Volume information can be found just about anywhere, but few traders or investors know how to use this information to increase their profits and minimize risk.
When analyzing volume, there are guidelines we can use to determine the strength or weakness of a move. As traders, we are more inclined to join strong moves and take no part in moves that show weakness or we may even watch for an entry in the opposite direction of a weak move. These guidelines do not hold true in all situations, but they are a good general aid in trading decisions.
A rising market should see rising volume. Buyers require increasing numbers and increasing enthusiasm in order to keep pushing prices higher. Increasing price and decreasing volume show lack of interest, and this is a warning of a potential reversal. This can be hard to wrap your mind around, but the simple fact is that a price drop (or rise) on little volume is not a strong signal. A price drop (or rise) on large volume is a stronger signal that something in that has fundamentally changed.
Combining market structure with some technical patterns, price action, and volume is the key to staying alive in this market.
Now that you have all the info required to make a decision is your job to see what works for you in accordance to the timeframe, risk factors and risk tolerance.
Make sure you have the stomach for cryptocurrency trading, as it is definitely not for the faint of heart. If you can handle the volatility, you will do well in this space. The best lessons come from failure and mistakes, but most of all from experience, Plan the trade and trade the plan. Document your process. Learn from your mistakes.
Be patient and if you do crypto trading is definitely an experience that will stay with you for a lifetime.