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NOTE: Stellar moved up as this post was completed — it offers another trading strategy for you to learn and consider (original “how to scale in” in post below)– please study both–you’ll likely use them often for ST IT and LT trade entries.
NOTE: Stellar is now getting close to it’s head and shoulders pattern target shared this morning so it offers a good opportunity to start discussing a “scale in” strategy.
STEP 2 BUILD A SCALE IN STRATEGY — EXAMPLE STELLAR $STR
(Step 1 was in market wrap discussing what ETH told us today — see categories for post)
NOTE: you COULD use STR prices to scale in for other crypto — but with market prices not in sync — (BTC LTC and DASH still way above key support) best to do your research on each crypto individually — we’ll try to cover more as patterns evolve.
- 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%
Some traders keep a reserve fund usually = 25% -50% additional for a 100+% investment if patterns and indicators justify the additional funds.
IMPORTANT: Unless you are truly prepared to lose every penny invested, you’ll still want to set a “something else is going on” stop loss for the rare event that the crypto you’re trading in is never going to recover your investment – you have to be willing to be wrong or keep the investment so small it’s basically an option/lotto ticket that you’ll never sell.
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 – here’s the STR chart from earlier- a sample scaling plan is below it
Block 1 .01750 well below crash low but above head and shoulders target in case target not met
Block 2 .0150 head and shoulders target
Block 3 .012 as long as indicators still show bullish divergence or wait until below .010
Block 4 .0085 assuming they take out key .01 support
Block 5 .0065 again have to check indicators and market and be sure this price point still makes sense (never just “buy blind”
Block 6 .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)
Scale in “stop loss” = price closes below first high volume green candle for 2 days = approx .0045 in the case of STR.
If you’ve scaled in properly price usually starts going up around blocks 2-4 so you have a lot of funds not invested as STR starts to move up. Do not rush to add those funds. They can be added when bullish wave patterns have been confirmed.
Obviously, you need to adjust the above information to your personal preferences and risk tolerance. We indicated earlier today that this is a VERY risky time to trade and current prices are proving that true – 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 — 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.
Also please remember the successful long term trading guideline that no IT investment should represent more than 50% of your investment funds — there will always be another “amazing” trade opportunity — we don’t need to “load up” to be successful trading–in fact loading up increases your chances of failure.