Divergences say BUY ETH NOW. Should you?

NOTE: ETH went up $8 since we began writing this post – that means divergences were right, right? ūüôā

Should you buy ETH right now? ¬†How do YOU decide? ¬†Price? Potential for the technology? Those are useful, but can they tell you go BUY NOW? ¬†We’ll show you another way to decide called divergence, and, to us, it says BUY ETH NOW.

cryptopatterns offers an educational newsletter. ¬†If that education can produce profitable trades all the better. ¬†So, we’re going to introduce divergences using a real potential trade for ETH. ¬†You can then decide if you agree or disagree with our assessment, add it to your own research and trading strategy (you have one, right?), and hopefully, make the best possible trading decision if you are interested in trading ETH.

START WITH THE DEFINITION

The point where two things split off from each other is called a divergence.

So if we’re going to trade ETH using divergences we want to find a pattern, indicator or SOMETHING that is not consistent or has “split off” from the way things normally look when we review an ETH chart.

MULTIPLE TYPES OF DIVERGENCES – FINDING “WHAT DOESN’T FIT”

cryptopatterns studies dozens of indicators to “build our case” for buying or selling a cryptocurrency. ¬†When you’ve studied thousands of charts over 10 years, it becomes easier to pick up when one or more pieces of the puzzle just doesn’t fit. ¬†Here are a few examples for our potential ETH Trade:

VOLUME DIVERGENCE

Volume divergence is when there is a split off between price and volume. ¬†Here’s the details on the current ETH chart:

eth vol divergence 8 13

So, does volume divergence say to BUY ETH NOW?  No, if anything, this volume divergence is a red flag to SELL ETH because

Price went UP

Volume went DOWN = BEARISH Volume Divergence

We want to see demand (volume) ¬†increase with price — something like this:

NEO vol 8 13

The bottom line is volume is generally not useful to tell you to BUY NOW — it’s a better tool for “confirmation” which is a different topic for a different post. ¬†We’re trying to decide if we should buy ETH now, so let’s look for other divergences.

PATTERN DIVERGENCE

This is when something happens that you don’t normally see in a proven price pattern — here’s an example from LTC that just happened yesterday:

LTC div 8 13

In this example, pattern divergence does not tell us to BUY LTC now, instead it was a red flag to sell LTC (which we shared with subs) and reassess. ¬†So pattern divergence has great use and could be a buy or sell signal, but if we review ETH’s chart above, we don’t see any pattern divergence, so we have to look for other clues.

INDICATOR DIVERGENCE

If you’re new to trading, you’re likely overwhelmed by the endless options to draw lines, channels, and do statistical analysis on charts using dozens of indicators offered by the exchange you trade on — don’t worry, we are too. ¬†Here’s a quick example from Bittrex Exchange:

bittrex indicators 8 13

You don’t have to understand every indicator to use one or more effectively. However, it is worth your time to learn a few of them and understand how to use them in your trading decisions. ¬†We’ll show you one for ETH we’ve used successfully called the MACD (read all about it and how it works HERE)¬†

ETH divergence 8 13

This set up where price is HIGHER and indicators are LOWER is called BULLISH DIVERGENCE.  Why bullish?

In order to correct this divergence one of two things has to happen:

  1. Price has to go HIGHER to pull the indicator higher  OR
  2. Price has to drop A LOT  (like to $214 range!)

Either of these moves will get price and indicator back “in sync” — which if you study charts you will see they are in sync most of the time.

TIME TO BUY ETH NOW? ¬†CAN’T TRADE ON DIVERGENCES ALONE!!!!

What is ETH’s indicator divergence telling us? ¬†It’s saying there’s a bullish edge in probabilities because that indicator is really low and there’s a better chance of it moving up than down right now–and what makes the MACD go up?

INCREASE IN PRICE = BUY ETH NOW!

WARNING: ¬†BEFORE YOU TRADE ANYTHING PLEASE UNDERSTAND: NOTHING WORKS EVERY TIME, AND WE ARE IN A VERY VOLATILE AND UNCERTAIN PHASE IN TODAY’S TRADING ENVIRONMENT.

As you can see above, divergences guarantee nothing — ETH could tank and wipe out the bullish divergence — and then there’s the setttings of the MACD which you can manipulate, then there’s the time frame, divergences often read differently on the 30 minute vs the 1 hour vs 2 hour vs 4 hour vs Daily charts. ¬†There’s a lot to learn about divergences, but they are an incredibly useful tool as a PART of an overall trading strategy.

That’s where so many other patterns, indicators and targets can be used as CONFIRMATION of divergence to make better trading decisions. ¬†And that’s EXACTLY what we do every day for our subscribers at

cryptopatterns newsletter

We use every type of divergence imaginable, watch all the patterns and indicators, and share our research so traders can see our take on the probabilities as well as LEARN HOW TO DO THEIR OWN — this offers a great edge in probabilities for trading and investing in their short term, intermediate term and long term cryptocurrency trades.

SOOOO — SHOULD YOU BUY ETH NOW?

Only you can decide, and even if divergences make it a screaming buy, the bigger question is WHAT IS YOUR TRADING STRATEGY? ¬†How long do you plan to hold? What’s your price target? What’s your exit strategy? ¬†Check our education category for more free posts on many of these subjects, and watch for more to come.

This site is for informational and entertainment purposes only and not in any way intended to be investment or trading advice.  You are 100% responsible for your financial decisions at all times.  It is highly recommended you DO NOT  make any investment or trading decisions depending upon what you read on this blog/newsletter!

Ignoring reality of Bitcoin Cash at Poloniex, GDAX / Coinbase may crash crypto market

bitcoin cash logo

TRUST.  The entire crypto market relies on it.  It will never reach its potential if trading exchanges cannot be trusted beyond doubt.

And yet, several major exchanges have decided to take a questionable approach of simply saying “we won’t recognize Bitcoin Cash”. (great chart here) In the world of cryptocurrency, that approach is not recognizing reality. ¬†The largest and by far most important cryptocurrency just executed a hard fork, and there’s simply no way to ignore it.

It would mean a lot to investors if they were notified by major exchanges such as Coinbase, GDAX and Poloniex ¬†specific details on how they plan on delivering Bitcoin Cash to holders of Bitcoin as of the fork. The current approach is not only questionable, it’s dangerous for market stability in general. ¬†Here are several reasons why:

  1. Markets hate uncertainty. The hard fork created enough FUD, there’s no possible benefit to exchanges so many traders rely on to add more (especially while others don’t).

2. There is already a major trust problem for exchanges.

GDAX has had multiple glitches, reports of Poloniex insolvency are circulating, and those are “good” exchanges compared to nightmares like BTC-e and many others. ¬†The biggest exchanges simply must build 100% confidence from investors or it will be increasingly hard to keep investors in the game and bring new and important institutional investors into the market no matter how much profit is possible or how low fees are.

 

3. Full access and disclosure of details of BTC and Bitcoin Cash are needed to make appropriate investment decisions.  

There’s already a clear value relationship between BTC and BCH on Kraken where BTC is dropping as BTC rises and vice verse. ¬†How can traders on any exchange (including Kraken) intelligently trade the most heavily traded crypto in the entire market without full access to all elements effecting BTC’s price?

BOTTOM LINE

This isn’t some fly by night crypto we’re talking about — this is BITCOIN — if exchanges create FUD by hodling back coins that belong to BTC owners — the frustration can easily spread to a complete mistrust of the crypto market (as if trading and investing isn’t hard enough in stable situations). ¬†Instead of recommending exchanges to business associates and friends, traders will continue to wonder how they’ll get screwed next.

The crypto market is simply too new and unstable to allow chaos at the top of the food chain.  ALL major exchanges need to step up do everything possible to ensure investors get full value for their BTC and have access to all price, chart and indicator information for Bitcoin and Bitcoin Cash in order to have maximum confidence in their investments, their research and to make informed investment decisions.

If some of the biggest exchanges keep ignoring this reality by waiting weeks or months to notify customers they have finally decided to award customers their Bitcoin Cash, this will create significant mistrust in those exchanges, no matter how honest their intentions.

More importantly, while these delays seem only related to certain exchanges regarding Bitcoin Cash, we think failing to resolve this matter quickly is important enough that it could spiral into a much bigger deal for all cryptocurrency investors no matter where you trade.

 

Disclosure:  Author has a VERY small position in BTC and Bitcoin Cash

This site is for educational and entertainment purposes only and not in any way intended to be investment or trading advice.  You are 100% responsible for your financial decisions at all times.  It is highly recommended you DO NOT  make any investment or trading decisions depending upon what you read on this blog/newsletter!  All information presented (c) 2017 JBP cons, inc.  All rights reserved.

We called the May BTC cryptocurrency crash but didn’t advise short it. Should you short now?

short margin call

Most won’t lose this much, but traders can (and do) lose more than they invest shorting the crypto market. ¬†Some lose everything they own….

The patterns are clear that trading in the current crypto market is dangerous, which can lead to huge upside or market crashes.  Our pattern analysis called the 50% crash in BTC  in May as you can see in this post:

BTC XRP Updates 5 26 17 9:10 AM Est

Is there more serious downside coming?  If so, does it make sense to short the crypto market?

To answer the first question — we’ll share that we don’t see the same patterns as the BTC market May crash but we are on “ETH Watch”. ¬†We will be¬†keeping subs updated daily on market conditions and hopefully be in front of big moves which patterns often are.

This post is focused on the second question, which is actually more important in the big picture than what the market is going to do today, this week or this month:

Should you consider shorting cryptocurrencies if you see big downside?

Good question — this post shares our reasons why we don’t see shorting as part of safe, high probability trading for most traders.

1) We’re working under the premise we’re in a LT Bull Market
Since cryptopatterns entire focus is SAFE high probability trading, shorting in a LT bull mkt reduces the probabilities for anything but ST and possibly IT shorts, and even then there can be significant surprises to the upside — for example BTC after it crashed from 2700 to 1500 shot up to nearly 3000–and even just a few days ago shooting up $700 when many gurus were screaming to short it.

trader suicied

2) Unlimited risk
Since many of our subscribers are new to trading ¬†we think the highest probability for staying with trading is staying safe and avoiding trades where you can lose more than you invest.¬† This is why we don’t encourage margin trading on the long side either, though we know experienced traders can certainly benefit from both shorting and margin trading.

shorting confusing

3) Shorting on most crypto exchanges is difficult and confusing.
We’ve been trading for over a decade and still can’t figure out some of the costs and procedures to short on most exchanges. ¬†and this relates to

4) What are you shorting against?

If you can only short one crypto against another it’s possible you can be very right and make no money (have had this experience personally). ¬†For example if you short ETH against BTC and both move down, you were right to short ETH but still made no money because the BTC you borrowed to short is now worth less as well.¬† If you can short against USDT or the USD or whatever your fiat currency is, then shorting can make sense.

So to summarize — we are not against shorting, but it doesn’t fit safe trading in the current crypto market because it’s more difficult to execute, takes more discipline (which many traders don’t have), is far more risky than only trading long (in a LT bull market and without margin trading), and is not evolved on many exchanges to be easy to make money and assure liquidity too (we watched multiple traders ¬†blow out large accounts when they couldn’t get their trades to execute on Poloniex so they could cover during XRP’s massive run up for example).

Finally, and perhaps most importantly:

There is plenty of money to be made on the long side with safe trading — and much higher prob of consistently doing it for years to come. ¬†Most traders don’t stay in the game for months much less years, and shorting the market is a big reason why.
cryptopatterns header

There may come a day when shorting makes more sense as platforms and shorting against fiat currencies becomes easier. ¬†Down the road, it’s also likely there will be a time when there is a clear edge to shorting the market consistently, and we believe our patterns and indicators will let us know.
Subscribe to cryptopatterns newsletter and we’ll show you how to find an edge to trade safely for the long-term in any market.
All content on blog/newsletter (c) 2017 jbp cons.  all rights reserved.

 

Should you “Buy and Hodl” BTC ETH Cryptocurrencies? 3 Keys to Decide

We’re curious how “buy and hodl” investors are feeling today? ¬†Probably just like stock investors in early 2009 during the financial crisis. ¬†They’re likely finally starting to wonder, “I’m still way up on my BTC or ETH, should I sell and just be done with it?”

3 notes:

  1. That’s not buying and hodling
  2. That’s EXACTLY what they want you to think.
  3. Maybe they should just sell and take their profits — ANYTHING CAN HAPPEN

Of course every situation is different so we can’t recommend what you should do right now, however, we can review an alternative to strictly buy and hodl investing that’s worth considering, especially in a market as volatile as cryptocurrency.

3 SIMPLE KEYS TO LONG-TERM INVESTING WITH LESS STRESS

KEY 1 Define Your Trading Funds

What if you were watching the crypto market drop 50% over the last few weeks with 50% of your investment funds in cash? ¬†It’s fairly easy to accomplish this if you set up clear definitions for your funds — we like the following:

  • VST = Very short term
  • ST = Short term
  • IT = Intermediate term
  • LT = Long-term (essentially buy and hodl)

This approach allows you to have funds available for short term opportunities when they arise. ¬†More importantly, if you don’t want to be an active trader, you can leave the VST ST and IT funds in cash so you’ve got a hedge against huge downturns like the current crypto correction.

Here’s a handy table we shared in a recent subscriber educational post

trading guidelines 6 20

You can learn much more about defining your trades in our educational post:

How (and why) to define your BTC cryptocurrency trades VST ST IT or LT to make money

KEY 2 DEVELOP A SCALING STRATEGY FOR INVESTING

Here’s a scaling strategy we shared in a recent post (link below) and have been reviewing for weeks with our newsletter subscribers

  • Block 1 ¬†10%
  • Block 2 10%
  • Block 3 ¬†20%
  • Block 4 ¬†20%
  • Block 5 FINAL BLOCK 40%

‚ÄúBLOCK 6‚ÄĚ RESERVE Some traders keep a reserve fund usually = 25% -50% additional for a 100+% investment if patterns and indicators justify the additional funds.

A scaling strategy can be applied to VST ST IT and LT funds to minimize risk. ¬†Popular “safe” investment approaches such as “dollar cost averaging” is a form of scaling.

We think the following descriptions of these blocks (from the post) describe where we are today:

Block 4¬†¬† Use Daily and even weekly charts once price gets this low. ¬†Here‚Äôs where you also need to take a hard look at what ‚Äúwave‚ÄĚ your investment is likely in. ¬†As we get closer to fully invested we want to be convinced that our story for the investment is still valid.

Block 5¬†¬†Same as Block 4 ‚ÄĒ careful consideration should be given to REDUCING your investment before adding block 5 or 6 ‚ÄĒ why will this investment go up from here? ¬†You need a better answer than ‚Äúit just has to‚ÄĚ or ‚ÄúI want to make back what I‚Äôm down‚ÄĚ

Where are you in your investing strategy today? ¬†Fully invested and watching losses mount? ¬† ¬†Don’t feel badly if you’ve gone too fast — whales and bots are experts in convincing you the bus is leaving without you….until it isn’t.

You can learn all about scaling strategies in this cryptopatterns newsletter post

Step by step how to ‚ÄúScale‚ÄĚ into cryptocurrency trades for long-term¬†success

 

KEY 3 10-20% RETURN / YEAR ON INVESTMENT FUNDS IS EXCEPTIONAL

We were screaming this while BTC was near $3000, and we’ll keep screaming it if BTC falls back below $1000 (could that happen? ANYTHING IS POSSIBLE).

Just like the attitude that many traders chase 100% returns when they seem to be happening on a daily basis, buy and hodl investors tend to get way too comfortable that a hot market will stay hot forever, or “always come back”.

The stock market has skewed our thinking because we’re in an extended rally. ¬†If you bought in 2000 you barely broke even in 2010–a 10 year period before another uptrend started. ¬†Or for a current example. Natural Gas is a useful commodity, right? ¬†Seems like a good long-term bet to “always trend up” ¬†Take a look at this long term 10 YEAR Natural Gas Chart 2007-current:

natgas 10 year 7 16

This doesn’t mean you shouldn’t buy and hodl. ¬†What it does mean is to set realistic expectations for your investments. ¬†Look around. ¬†What else can you invest in right now that you can earn 10-20% on your money per year? ¬†Most safe investments are lucky to pay 2-3% per year!

So there are 3 keys to consider. ¬†We’ll add one more. We think KEY 4 could be to subscribe to cryptopatterns newsletter, so you can stay aware of probabilities for big moves in the crypto market. ¬†We teach subscribers SAFE trading / investing strategies at all times and are proud of the fact we’ve been encouraging subscribers to use a scaling strategy for their investing funds for weeks.¬†

With those 3-4 keys in mind, NOW is a great time to reset your thinking, and decide just how much sense buy and hodl truly makes for you.

Once you’ve got realistic goals and the above keys in mind, you can make needed adjustments to your cryptocurrency investment portfolio to plan to earn a strong return like 10-20% overall per year that will put you in the top 10% (more like top 1%) of all traders and investors.

This site is for educational and entertainment purposes only and not in any way intended to be investment or trading advice.  You are 100% responsible for your financial decisions at all times.  It is highly recommended you DO NOT  make any investment or trading decisions depending upon what you read on this blog/newsletter!  All information presented (c) 2017 JBP cons, inc.  All rights reserved.

Step by step how to “Scale” into cryptocurrency trades for long-term success

eth scale in blog 7 9

Everyone from the most successful trading gurus to your Mom has told you:

“Don’t trade cryptocurrency (or anything else) without using a stop loss”.

90 percent traders quit 5 years blog

It’s a good bet the biggest problem in trading is the use of stop losses to control risk. ¬†Doubt many quit who are consistently making money….

We could simply pile on and say “You GOTTA use stops or don’t trade!” but how does that help?

We’d rather show those who struggle with using stop losses (it’s not just you–far from it) some alternatives they can use to trade SAFELY and, with practice, PROFITABLY for years

The concept is called “Scaling In” and it involves buying small “blocks” of your investment as price goes lower so you build a position slowly while improving your average investment price.

WARNING: ¬†Scaling in is not foolproof (neither are stop losses) and also takes practice, but it could be a better fit for your current trading mindset for those who feel they must “stay in the trade” while still managing risk.

HOW TO SCALE INTO TRADES

There are multiple methods but below is one step by step example and then you’ll find additional ideas in a link to another post that can help you build the skill needed to successfully scale in.

We need to add that sometimes a trade or investment set up ¬†makes more sense to enter all at once and use a stop loss. ¬†Traders can use “scaling in” to practice safe trading until the build a system for setting stops they can use confidently and effectively.

cryptopatterns can help.  Our newsletter teaches our subscribers scaling in (and out), effective use of stop losses (we share possible specific stops or scale in strategies with our reasoning on many of our posts).

Whatever you do, spend time learning to define and manage your risk. ¬†You want as many tools as possible for safe trading if you want a real shot of getting out of the “90+% who lose, quit trading, or both”

SCALING IN STRATEGY – STEP BY STEP

  1. Determine the percentages you‚Äôll use for investing ‚ÄĒ one we‚Äôve seen used effectively is
  • Block 1 ¬†10%
  • Block 2 10%
  • Block 3 ¬†20%
  • Block 4 ¬†20%
  • Block 5 FINAL BLOCK 40%

“BLOCK 6” RESERVE Some traders keep a reserve fund usually = 25% -50% additional for a 100+% investment if patterns and indicators justify the additional funds.

you can adjust these figures and with practice will determine the scaling in strategy that give you the most confidence.

2. Determine the price points you‚Äôll use to enter the trade —

Your goal in this step is to have a legit reason to enter each block — you should review market conditions before adding as well –things change all the time.

Block 1 . You want “in” so start with a small investment on a dip on the 15 or 30 minute chart (bottom of indicator such as “bollinger bands”) — here’s the ETH example again

eth scale in blog 7 9

Block 2 ¬†This might be a target from a longer time frame chart — like the daily chart

Block 3  Again might be from the daily chart but add the use of bollinger bands or other indicators on the daily chart to increase the chance of getting in safely

Block 4 ¬† Use Daily and even weekly charts once price gets this low. ¬†Here’s where you also need to take a hard look at what “wave” your investment is likely in. ¬†As we get closer to fully invested we want to be convinced that our story for the investment is still valid.

Block 5 ¬†Same as Block 4 — careful consideration should be given to REDUCING your investment before adding block 5 or 6 — why will this investment go up from here? ¬†You need a better answer than “it just has to” or “I want to make back what I’m down”

Block 6 ¬†All above tools plus every other tool you use says BUY. ¬†We’re talking the strongest case possible — don’t kid yourself. ¬†Add when ALL indicators are at absolute bottom of indicator where there‚Äôs very low probability of anything lower except a spike that typically reverses quickly (you might want to wait for such a spike if price gets this far as it could be great buying opportunity). ¬†Block 6 adds should be VERY VERY RARE

Scale in ‚Äústop loss‚ÄĚ ¬†= Some price well below you ever thought you’d see — you honestly determine you’re better off salvaging the money you’ve invested vs waiting and hoping it will come back. ¬†Might want to check cryptopatterns newsletter before selling –this might be where we’re looking to buy! This should almost never happen which is why you want to practice with SMALL investments or on paper before risking too much scaling in.

If you‚Äôve scaled in properly price usually starts going up around blocks 2-4 so you have a lot of funds not invested. ¬†Do not rush to add those funds. ¬†You’ll be profitable on your trade which is more than most can say. ¬†Plus over time, you can learn to add when you have the momentum of the trend behind you.

Obviously, you need to adjust the above information to your personal preferences and risk tolerance.

SHOULD YOU USE “SCALING”?

Right now is a VERY risky time to trade cryptos¬†¬†‚Äď don‚Äôt rush to scale in, but if you‚Äôve built a case and a plan and are confident and comfortable (minimal stress) you can handle the risk, then TRADE YOUR PLAN. ¬†Our final suggestion is to take whatever position size you are considering and

CUT IT IN HALF or even less‚ÄĒ practice scaling and prove you can do it successfully‚Äďyou‚Äôll be doing it for years so no need to go huge $$ on this trade.

We hope you find this information helpful‚Äď STAY SAFE (=STAY SMALL for now) and STAY IN THE GAME.

For more strategies to use “scaling” see our prior post:

5 Steps for successful cryptocurrency trades ‚Äď Scaling IN and OUT

This site is for educational and entertainment purposes only and not in any way intended to be investment or trading advice.  You are 100% responsible for your financial decisions at all times.  It is highly recommended you DO NOT  make any investment or trading decisions depending upon what you read on this blog/newsletter!  All information presented (c) 2017 JBP cons, inc.  All rights reserved.