Disclaimer: This post is purely educational. You need to form your own conclusions. These are the methods that have worked for me personally.
This guide will showcase many different tools, ideas and strategies that you can combine to hopefully beat the odds. The content will be sorted most important top down.
Higher Highs, Higher Lows.
This could be the price of a coin, the volume, RSI, or just about any other indicator. It’s pretty straight forward, if you see higher highs & higher lows – you’re likely in an uptrend.
Sometimes it can feel risky entering into a position when a coin has already climbed upwards. The assumption is that the trend will continue based on past higher lows as seen in the screenshot above.
This has to be one of the most important things to watch for. When a coin is coiling into a wedge, or is pushing sideways in a channel, it will eventually break up or down. You’re in for one hell of a ride either way. When you see it break upward, that’s the time to enter into your position, partial (safer) or full (riskier).
In the screenshot above, the wedge breakout would have been my first “Huh, this thing might go higher” moment. Maybe buying a small position. It continues to bust past the 50 and 100 day moving average, this is a big buy signal for a lot of people, including myself. Of course getting above the 200 Day MA is super bullish. Houston, we have liftoff.
Lower Highs, Lower Lows
The inverse of higher highs, higher lows. You should cautiously be watching for double tops, lower highs & lower lows. Should you find yourself at what you think might be the peak of the pump, you should take profits and start to average out into Bitcoin.
Strategically repositioning is absolutely critical. When you spot a double top, volume declining, moving averages being broken downward, SMS indicator stuck in the red, you need to act.
Technical Indicators – A Belief System
One of my favorite technical indicators I prefer to use is Nicholas Merten’s SMS indicator. The SMS indicator is a powerful technical indicator as it combines 3 other indicators, all in one. The squeeze momentum, MACD and Stochastic RSI indicator.
Another one of my favorites is a simple one: volume! Volume is critical to any market. Typically, I run the 30 day moving average on volume, which can be helpful to spot up or down trends. Seeing higher highs on volume is always a good sign.
Speaking of Moving Averages
My preferred moving average time-frames are: 50, 100, 200 Day SMA. These longer time frame moving averages can keep you in check should you decide to start watching the 4h, 1h, or god forbid minute time-frames.
Understanding the Current Market You’re In.
Don’t get it twisted. If you’re at the 2018 Bitcoin peak and think you’re going to profit, unless you’re shorting, it isn’t going to happen. I don’t mess around with any sort of future or margin, so that’s out of the question for me. Sometimes, the best thing you can do (assuming you took profits) is just to wait.
Fractals – Human Psychology At Play
In the same way that there are economic expansions and contractions over decades, I believe the same thing occurs on a micro level. Human emotions in markets tend to be on repeat.
Along side repetitive swings up and down, you have bots. Trading bots probably make a large majority of trading volume throughout the ecosystem. These bots are programmed off human logic, so they will only exacerbate the boom bust cycle.
History Does Not Repeat Itself, But It Rhymes– Mark Twain
Never Make Decisions Out of Desperation, or FOMO.
When a coin suddenly jumps 40% overnight and you decide to FOMO, there’s a high chance in the short-term you’re going get rekt. That’s not to say that pump couldn’t be the first higher high, but in my opinion, it’s not worth the risk. Wait until you see a few higher highs & higher lows, maybe averaging in slowly during that time.
Only Spot. No Margin, Futures, etc
We can all agree crypto is probably one of the riskiest assets you can currently allocate into, although the stonk market is giving us a run on our money.
In my opinion, you should never dabble in futures, longs, shorts, options, or any sort of margin trading. You’re already in a risky market, while the insane profits might be appealing, the likelihood of you getting a piece of that cake is slim. Personally, I am mostly ignorant to these topics – increasing risk / reward profiles at this point doesn’t make sense for me.
Pay Attention to Shilling (Datadash, Chico, 4chan, etc)
When the popular figure heads talk, you bet people listen. There have been a number of occasions where I have watched Chico or Datadash talk about a certain coin, only to come back 3 months later wishing I had added a position. To a degree, a self fulfilling shilled prophecy.
Careful with 4chan shilling. For everyone 1 legitimate worth while gem, there’s 20 scams right behind it. Always do research on a coin before you throw money at it.
Don’t get attached to any one project “because you like it”
This one can be difficult to master. There are so many promising projects out there, many with great working products. You might find yourself loving the tokenomics, the community & team, the name, the memes, what ever.
When your favorite coin pumps 300% over a week, you should absolutely take profits.
Research – Doing the Leg Work.
Always do your own research. It’s actually a meme at this point, but you should go investigate the team, the whitepaper, the problem they’re solving, the tokenomics, etc. Look for red flags, some are more obvious than others, like wash trading on exchanges. If a coin only has two listed exchanges with obvious wash trading, avoid it.
There are a set of preferred coins I like to bounce between, mostly DeFi plays. I am confident the projects are legitimate and trying to solve a problem.
Which coin to take profits in?
Assuming you’re not on a DEX, lean towards taking profits into Bitcoin. When things start going down, Bitcoin typically holds the strongest. On DEX’es it might be more handy to take profits into ETH as it’s more fluid.
While fiat holds a more stable value (relatively), if the market is on the cusp of a bullrun as we are now in July 2020, moving your profits into USDT can be a costly mistake.
Trading can be as complicated as you make it. The above tools are a good mix of easy to follow technical indicators without overly complicating things. All in all, look for good entry points, seek profits at the top, be weary of quick forming downtrends, reposition accordingly. Easier said than done, right? Emotions are a bitch. Mastering your emotions makes you a master trader.