Some of the biggest dangers in trading are the things you don’t think of or don’t know through experience. That’s where cryptopatterns can help.
Here are three keys we strongly believe in to be a successful long-term trader that have made (or saved) big money many times over the years.
KEY #1 DAILY CLOSING PRICE IS WHAT MATTERS MOST FOR TRADE STRATEGY.
We get it. The crypto market never closes — in real life– but it most certainly does close on charts. Every 5 minutes, hour and day another candle or bar is formed on your price charts. That’s the close we’re talking about. On Poloniex which is a high volume exchange–that close for the daily chart is 8 PM Eastern Standard Time (U.S.) — watch how interesting things tend to happen around that time — it’s no coincidence.
You saw a huge example of “Close is what matters” just yesterday. What this means is we give most credibility to closing price on daily chart vs volatile moves that happen during the day.
Key support broke for ETH and BTC last night (they fell to recent lows) as well as other altcoins (ZEC for example) BUT the drop was
- with low volume
- not “in sync” BTC would drop then bounce, the ETH would drop and recover – big moves down in markets don’t work like that
- right after close (8 PM EST) so it didn’t effect “final” price on daily chart and if anything is slightly bullish as many daily charts are showing potential “reversal candles” so far today with generally higher volume than yesterday.
KEY #2 MARKET LIQUIDITY = Is there enough volume to make a real market?
Your technical analysis or news you think matters presents a huge trade opportunity in BTCD — you’re sure this is the next 250% + return and you want in.
So you buy 5 BTC worth –you actually see the price go up as you trade! Of course it drops back down in a hurry. Why? You’ve just invested 5% of the entire day’s trading volume and are now at the whims of whales and bots who can easily drop the price 50% and get you to bail out before taking BTCD up the 250% — in 6 months.
A good general rule for traders is to look for a history of strong consistent trading volume. This makes any technical analysis much more reliable. In addition, staying away from low volume crypto or at least adjusting position size when you realize you don’t want to be at the mercy of a few other traders is key to long term success.
KEY #3 TRADING STRATEGY FOR HIGH VOLATILITY PERIODS – What will you do if you can’t trade? THIS WILL HAPPEN TO YOU – ARE YOU READY?
These are from two of the biggest exchanges:
Outages and trades not executed happen all the time, especially during high volatility periods (as we said, all the time in the world of crypto). Do you have a contingency plan of what you’ll do if you have a huge position in ETH, see it start crashing, want to get out but can’t?
Remember when XRP had it’s huge run? We saw multiple traders lose everything while trying to do the right thing and cover their short positions–but the platform was jammed and they simply couldn’t get their order executed. It can (and likely will) happen to you.
So what’s the solution? Admittedly there’s only so much you can do – same goes for hacking — it’s a risk you have to assume to be in the game. BUT–you can do a couple of things that make sense given the challenges of the new crypto market:
- Minimize margin trades. There’s plenty of money to be made on straight buys of cryptocurrency. If your serious about long-term trading, maybe you don’t need 1000% return on your entire investment account each month?
- Cut back on position sizes If your serious about long-term trading, maybe you don’t need 1000% return on your entire investment account each month?
- Use hard stop losses — not always a great solution as last week’s Coinbase/GDAX fiasco shows, but if you insist on playing big then play big responsibly.
We have more unique keys for traders including subscribing to our cryptopatterns newsletter. We’re constantly monitoring the crypto markets to give you insights on how to trade safely and profitably for the long haul.
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! All information presented (c) 2017 JBP cons, inc. All rights reserved.