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.
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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.

 

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

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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’ll use for investing — one we’ve 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’ll 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’s 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 “stop loss”  = 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’ve 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  – don’t rush to scale in, but if you’ve 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— practice scaling and prove you can do it successfully–you’ll be doing it for years so no need to go huge $$ on this trade.

We hope you find this information helpful– 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 – 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.

NOW FREE ALL May June Cryptocurrency Trading Posts

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Cryptopatterns mission is education for cryptocurrency traders.

We’ve been traders in a wide variety of markets for over a decade, studied multiple effective trading systems taught by experienced traders,  and  followed, traded and posted/tweeted about trading the crypto market for over a year to prove the consistently accuracy and usefulness of our pattern, indicator and market analysis before starting our subscriber newsletter in April 2017.  For example, there’s this recent tweet:

giftwrapped trade 7 3

But don’t have to take our word for it — you can review our twitter feed @cryptopatterns, and we offer a number of free posts since starting our newsletter in April 2017 that you can review to see what the “real world” of trading using our SAFE HIGH PROBABILITY tools is all about.

You can now review ALL our May and June 2017 posts for free — click on MAY or June 2017 Archives using the drop down on the right —  the password where required  is 

Maycrypto for May posts

and

Cryptju for June posts

 

If you’d like to review April 2017 for free write us at cryptopatterns@gmail.com

A good place to start checking out our free posts focused on keeping traders SAFE is this post where we projected a low for BTC Bitcoin around $1700 (and the entire market crash which happened a few days alter) while the price was still near 2400

BTC XRP Updates 5 26 17 9:10 AM Est

Click on the Basics-Educational and FREE posts categories for more

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Subscribers to cryptopatterns newsletter receive:

  • Daily Early Updates
  • Real Time Market Updates
  • Real time analysis of all large high volume cryptos that trade in USD or USDT – these analyses show patterns, indicators and potential targets.
  • Trader education including unique red flags, market indicators and trader psychology to manage the high stress nature of trading most don’t anticipate (until it’s too late)
  • Real time analysis of higher risk lower volume cryptos when risk/return justifies
  • Daily Market Wrap summaries including trade ideas, updated charts and specifics of what to watch for in curent market for short term, intermediate term and long term.

All of this is included for a low monthly (or even lower annual) fee.   Cancel any time – no questions asked and no further obligation.

We are committed to helping traders (especially our subscribers) stay safe and stay in the trading game profitably for years and hope you find our information –free or subscriber — helpful.

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.