PUMPERS PICKS: Tip of the WeekI'm still getting several PMs about buying into / selling a coin and things to look for before executing a trade etc. There are also those that are unsure about how to execute Correction Plays - i.e profiting when a Coins price decline and then bounces upwards producing abundant profit. So I put something together just to walk you guys through the analysis that I conduct prior to placing a trade. This will illustrate how to “do the opposite” of what everyone else is doing. It will show you guys just how simple trading is when you aren’t using 104 useless chart indicators. This is a basic strategy that anyone can employ to generate continuous and excessive profit from crypto.
RULE ONERed is young. Green is old. You may not have a clue about what I’m talking about when I say this, but this is how I classify price moves when I look at the charts.
Consider life insurance, which deals with the life expectancy of people instead of price moves.
If you’re writing life insurance policies it’s going to make a world of difference if the applicant is 20 years old or 70 years old.
The 20 year old has a lot of time left to live, whereas the 70 year old is already close to the end of the road. This makes the 20 year old a better bet than the 70 year old, as you can get several years of payment from him – whilst the 70 year old could possibly die before the end of the month leaving you with a hefty bill to pay.
Similarly, in a market that is in a stage of old age (during the latter stages of a rally), it is particularly important to be attuned to the symptoms of a potential end to the current trend.
To use the life insurance analogy, most people who are involved in Crypto don’t know the difference between a 20 year old and a 70 year old.
If a coins value has been dumped down to laughable levels due to profit taking – then the only thing left to occur is for the price to soar back to the top. That is the cycle.
If you only buy into a coin when you see that a coin is rallying and is at its 24hr high, then you must now understand why you have been losing out. You have been buying coins that are in a stage of old age. These coins have already soared upwards and provided so many traders with gains that the only thing left to occur is for these traders to cash out and claim their winnings.
As the price plunges downwards, we see the dumping action accelerate as the unskilled traders begin to panic sell. Then prices begin to consolidate around a specific range, as there is no one left to dump out. Then the cycle starts all over again.
Seeing a string of green candle sticks may be comforting to the novice trader, but if you want to develop and transform into a person that actually pulls continuous profit from crypto – then you ned to realise that one of your greatest buy indicators is a sea of red candlesticks.
When I see that a popular coin is at an extreme low with nothing but red candle sticks on the chart, I recognise that as the beginning stages of a rally.
RULE TWONow the charts are useful for revealing what stage a particular price move is in. But your most important tool in assessing where prices are heading is the order book (specifically the sell side).
Often, I hear new traders talking about “buy support” and it really is a negative indicator of how limited their knowledge is about how this market actually moves.
Personally, I could care less if there is a “safe” level of buy support or zero orders on the buy side, because if I asses the sell orders and can see that a market can be moved easily (due to low sell resistance) then the buy side is entirely irrelevant in that scenario.
In fact if, during a rally, you begin to see buy orders stacking up then that is an indicator of a pending dip because all that does is provide a guaranteed (and profitable) exit for those who got in hours before the rally and who are already up 50 – 100%.
Your attention should always be on the sell side.
You always want to be aware of how high or low the sell resistance is.
As you can see the resistance in this particular coin is non-existent. More explicitly, it will only take 2.1BTC to move this coins price from 8908K to 12264K which is a 37% move.
It is really as simple as that.
The order book is literally your window into the future. It shows all the price levels a coin contains – and what needs to happen for a coin to move up or down in value.
After assessing these factors. It is your job to gauge the probability of a move taking place
RULE THREEI know that there are some traders who understand the importance of assessing the 24 hr high / low of the day but, in general, so many people think that it’s okay simply to ignore this indicator (But they will almost certainly have some RSI or Fibonacci tool cluttering their charts, rest assured)
The 24hr high / low is a tool that breaks down all the key information that a chart can provide – into two simple figures.
Now, remember what I said earlier about stages. It is very important to assess the 24hr High and Low for any coin that you are trading. This indicator shows if a market has moved and how far it has moved.
If there is an excessive gap between the high and low – and the current trading price is at or close to the high, then you need to look at the spread.
If the spread is tight (0.5% - 2%) then that indicates that buy support is high – and people are battling to get into this coin. Which could be a good thing – depending on what stage into a price move the coin is in.
If the coin is already up 200%+, at its 24hr high and there is a tight spread, then you can expect there to be some dumping action at any given moment because – as I mentioned earlier, those that got in to that coin hours before and who are already up 50 – 100% now have a guaranteed means of exiting with profit due to the excessively high buy support.
However if the coin is down -80%, close to its 24 hr low (or low for the week – look at the charts) and there is a large spread between the bid and ask – there is no incentive for anyone to dump out because no one bought in at a lower price, thus if someone dumped out they would be doing so at a loss.
This is how you can asses and gauge the ‘probability’ of a rally taking place. Ask yourself what stage is this market in? Is the sell resistance high or low? Is there an incentive for traders to dump out? These are all questions that will reveal the likely hood of a major price move taking place. No Fibonacci required.
This strategy can be used on any popular coin that has been around for awhile and has had good volume. There are several variations of this play which I will cover at a later date.
Tip:
So much is made out of “entry / exit points”... But when you boil down to the essential minerals of trading – an entry or exit “point” holds very little relevance whatsoever. If you are spending your time trying to pick bottoms and tops then it is certain that you will never find any success whatsoever. Trying to pick a bottom or top is essentially an attempt to force an opinion on a market – and that never ends well. Your job is to find high probability trading opportunities. Think to yourself – “where can the most money be made”?.. “If I buy in, then what needs to happen to bring me out with a profit?”.. “Is there good trading volume?”... “Is there momentum – when were the last executed trades?”.. This is the way you need to be thinking. When you grasp this, you will suddenly find yourself being bought out of the market at the top because you correctly assessed the trading volume in relation to the sell orders... you will find yourself “buying at the bottom” because you’re able to properly asses sell resistance. Don’t be like everyone else, don’t just take the textbook trades.. wherever there is a full blown rally, there is a breakout brewing up in another market.SIDENOTE: Look at each market (coin) as a venue - a venue that has a max capacity. In our case the venues capacity, instead of human beings, can only be filled with BTC (trading volume). So, If a coin has already attracted a tremendous amount of volume, volume that is magnitudes above what the logical part of your brain would deem average levels – then that particular market is filled (or close to being filled) to its maximum capacity. Thus the only thing left to happen is for the BTC to come back out of that market – causing the value to plummet. Note: BTC is a buy right now. Pay attention to the price and execute your buys at the low points. Oct - Dec will be very interesting.
Twtter: @Pumper_Ryan follow for daily picks, and updates.
