Just wanted to alert people of a short term trade opportunity, or warn people from entering into the market on the bounce. Recently crpytocurrency markets have been in a serious downtrend. Many of the once high flying cryptos like ADA, XRP, and STR have fallen 50% from their tops at the beginning of the year. During the down trend there has been a clear pattern forming. There is a massive move lower followed by a sharp recovery up, but then it fades lower and has another massive move lower.
.png)
This repetition is almost like clockwork. Look at the circled areas (that I actually drew in yesterday following the spike higher) above to see the pattern. Each move lower is followed by a massive bar higher, and the pattern repeats. As soon as the volume drops off, the move higher always fails. I expect no different this time around. XRP, ADA, STR, as well as BTC and most cryptocurrencies made a big move lower about 5 hours ago and have been sharply recovering since.
.png)
As you can see by the arrow I drew in, the volume on this move up has been pitiful. There is no support to this rally, and I would expect the market to move lower.
A huge mistake many people make is trying to call the bottom in moves lower. The big V shape recovery entices people to buy in and think that the market has bottomed, but there is no reason to believe the pattern won't continue to repeat itself. Instead of buying into the spikes, I would recommend being patient and wait for a Volume spike to the upside. A bottom will not be set until we see a bullish candle with higher volume than the bearish candles that flush lower.
It is always better to wait for clear buy signals than to attempt to call a bottom and lose 20 points to the downside. I have been burned too many times calling tops and bottoms in the past, so learn from my mistakes and just be patient. Buy signs will show up soon enough, and we will be rallying once again. In the meantime, I am pretty confident in a short position for another leg lower here. Across the board there has been extremely weak volume, so I expect another leg lower.
.png)
.png)
.png)
Be careful making any trades in these kind of markets, unless you are looking for a long term investment! Thanks for reading! :)
Taking risk means earnings.
very true.. just depends on how much you are willing to risk. I personally would rather take a slightly smaller gain if the chance I would make money was significantly higher.
investments is all about risk/reward ratio :-) Calling bottoms can be justified by support, channel, fibonacci lines or by a - cross fingers - well calculated EW correction etc... The thing with crypto's is that the UP goes mostly extremely fast so you quickly miss on some serious gains. I do like to call the bottoms, somebody has to do it or we would never see a reversal :-)
that is very true! It is definitely a lot easier to call a bottom than a top, and those are some great tools to use! I just been burned too many times on a false bottom. Also if those indicators you stated breakdown there is a possibility for much more downside... just risky, but if you are willing to risk it and get it right, there are certainly huge rewards. Thanks for the comment!
Before every purchase I'm asking myself, can I afford to lose this money.
Now obviously no one wants to lose money, but some losses are more "affordable" than others.
Also, I think if I invested more than I could afford to lose and the market turned Bearish, I'd be a lot more stressed and would probably be rushing to sell off to stop loss.
As it stands I just ride the waves.
I'm convinced that over time, as word spreads and this all becomes more main stream, the added influx of investors will push many currencies up.
Better to HODL than sell at a loss to only have to buy back in at a more expensive price later.
Many wonderful points! :) I think a buy and hold will be very rewarding over time! Also I think it is a great rule to never invest more than you can lose, because at the end of the day this is all speculative anyway. I think people that don't know enough about the underlying cryptocurrencies/ don't have a long term time horizon need to be wary buying in now, because we could easily move much lower. For long term holders it is probably best to not even watch the price action haha
This post has received a 0.07 % upvote from @drotto thanks to: @nickh725.
Another fantastic post @nickh725, really great insight that helps newbie traders like me that don't have this knowledge gained from experience!
I'm so glad you liked it! :) Let me know if you have any other questions!