Basics of Trading

TRADING IS A HIGHLY SUBJECTIVE BEHAVIOUR, GOVERNED BY TWO EMOTIONS IN PARTICULAR: GREED, AND FEAR. They are trading's north and south poles, you could say, and these poles can flip at any time.

As Warren Buffet famously said, "Be fearful when others are greedy. be greedy when others are fearful." As in many things, it pays to be a contrarian in this game!

Be objective, where others are subjective.

I follow two types of trading strategies: technical, and fundamental. I see the value in Bitcoin, that's why I choose to invest in it. I don't have the same optimism for NFTs, however! Arweave looks good and I am prepared to sink my money into it.

Deep Fucking Value pic.twitter.com/ngDDkzd2De
— Tyler Winklevoss (@tyler) February 2, 2021

Fundamentals are important but they won't help you with timing, as price is driven by emotion, not logic. That is where technical trading comes in. Technical trading consists of two categories: position trading, and swing trading. They both have their own tactics which should not be confused.

With position trading, I follow a yearly cycle, or even a multi-year cycle. On the other hand, swing traders should follow a daily chart. Candles represent the daily close, while pin bars are shorter actions.

Trends usually are long-term patterns, and can be either bullish or bullish. Momentum operates on a shorter time scale. In an uptrend, old peaks will tend to act as support when price breaks down; in a downtrend, they will turn into resistance zones.

When volatility declines, that is a sign that pressure is building up, and that an explosion will occur!

Marc P Markets says price never lingers beneath resistance lines in bear markets. Conversely, price is never content to bounce along the bottom of resistance lines in a bull market... it will rear on up!

Rising price paired with declining volume, meanwhile, is a bearish signal.

The Uncertainty Principle

BITCOIN TRADER d4rkEnergY wrote: "If you want to become a good and successful trader, you need to think like this as a combination between chess and poker." It is a nice quote, but he has a more profound view that technical signs are not fatal warnings, but tools we can manipulate, like burning paper.

On another post, d4rk explained: "Trading is basically like quantum-mechanics. Have you ever heard about Heisenberg's Uncertainty Principle? It is one of the most famous ideas and principles in physics. It tells us that there is a fuzziness in nature, a fundamental limit to what we can know about the behavior of quantum-particles and, therefore, the smallest scales of nature. Of these scales, the most we can hope for is to calculate probabilities for where things are and how they will behave."

It is interesting that you as watch features evolve, what looked at first like a declining channel, turns into an ascending triangle. There might be something of String Theory to this... the trade could be any number of patterns at the same time, vibrating at different positions of the string. looking reading it right. went off 0 years ago.

Juanchobanano accurately predicted the fall of Bitcoin's price, after its peak in December 2017, to US$6050 a month or two later.

Nice idea, but I went off paper burning about 10 years ago. Nonetheless, it is quite obvious that there are waves which ripple through charts, followed by inevitable troughs. That is a matter of science, not interpretation.

MAKING WAVES

IF YOU LOOK at a chart you will see that price never moves in a straight line, it zigzags. For every impulse there is a pullback, reflecting resistance in the market. Often, there is a mathematical relationship between the impulse and the pulbback.

One of the most famous types of wave structure is the Elliott Wave (EV). The positive type of EV consists of five motive waves, followed by three corrective. Waves can be divided into their own motive and corrective waves, all the way down to a fractal level.

CHART PATTERNS

Bearish Flag: After a strong downtrend, price consolidates within two parallel trend lines in the opposite direction, a structure that looks like an inverted flag. Ideally, the pullback should reach about 38.2% (a Fibonacci number). If price drops out of the flag, it could suggest that consolidation has ended, and that a new downtrend is imminent, as long as the first flagpole.

Triangles: Ascending Triangle // Descending Triangle // Risk Reward Ratio

From an EV perspective, triangles must contain at least two lower highs and two higher lows. Therefore, at least four points are required to construct a triangle (and, ideally, there should be 6.) That said, don't make a move until the triangle is at least 3/4 complete.

According to Trading Strategies, triangles can be traded on any time frame, with no indicators required.

Descending triangle, MaidSafeCoin, 2020.

Fibonacci Retracements
Fibonacci numbers are an integral part of Elliott Waves and other structures. Some common levels are 23.%, 38.2%, 50%, 61.8%. Wave 4 of an EV will often retrace 38.2% of the length of Wave 5, for example.

Relative Strength Index: RSI: .
Indicates if a market is oversold or overbought. It ranges from 0 to 100. To be effective, it needs to be combined with other indicators like resistance or support levels. Ideally, you want to be in an area of confluence.

Time To Pay Attention: Famed Bollinger Band Creator Comments On Bitcoinhttps://t.co/20eGsyMbz8

With Bitcoin trading sideways for so long and volatility dropping to such uncharacteristic lows, crypto analysts are watching the Bollinger Bands closely.
Even the tools creator ... pic.twitter.com/fSWoqyklGM
— TradingBTC (@tradingbtc1) July 16, 2020

Bullish Divergence
: See here.

Venzen Khaosan made the observation, in 2014: " This up-sloping support line can be interpreted as Bitcoin’s minimum growth trajectory. It is currently at $120 which means it has doubled since a year ago, and this doubling continues at an annual pace according to the support floor’s present inclination..."

Stop Losses

ONCE UPON a time, I had the general trading rule: "Never sell at a loss". That was my number one rule, actually. I now realize this was naļve. Price can drop at any time, and might never recover to its previous highs. Stop losses can save you from crashes. If price crashes, you will be able to make purchases at lower resistance levels.

As one Steemer wrote, "If you want to protect yourself from risk, you need to set a STOP LOSS order."

Stops are what differentiate a novice trader, from a pro.

As a basic rule, once the asset has dropped more than 50%, it should be placed on a watch order. The existing sell target of this trade should be reduced by 50%. (I can modify these figures in the future!) Beyond a 75% decrease, I should be prepared to sell at a loss. At 75% reduction, the new sell target is the initial purchase price. I don't necessarily have to sell it straight away, but within the next rebound (or surge). There should a time limit for the sale, ideally. Waiting six years to sell something is too long!

An alternative approach: I could sell portions of my trade at a loss, to protect me against further falls.

Finding reliable trading sites is the main problem. One should be aware that exchanges crash regularly taking all your coins. This is a factor of Exchange Rot.

GENERAL RULES
1. Never chase a rally.

2. If I find myself wondering if I have understood the nature of the market properly, that it is a sign this market is Too Good to be True (TGTBT). This is often a red flag that needs further investigation!

Due to the explosive nature of price rises, automatic selling is more of a priority than automatic buying. Basically, once a coin has entered the Fourth Quadrant, I should start booking sales on exchanges.

TACTICS
Rallies
If I make three profitable trades from the one rally, my strategy will change. From this point on, I need to have at two potential sales pending, before executing a trade.

If I continue to make another three profitable trades from the same rally, I will need to have at least three potential trades pending, before executing a trade.

That said, if I fail to make a successful trade within two months of the activation of this change, I can assume that the rally is losing st the default mode.

CASCASING SELL ORDERS

Here is a table showing the 10 grades of sell opportunities for altcoins, for all three fund components:

1. 10%.
2. 25%.
3. 50%.
4. 75%.
5. 100%.
6. 200%.
7. 500%.
8. 1000%.
9. 2000%.
10. 5000%.

TOTAL POTENTIAL GAIN: 896%.

Here is a table showing the 10 grades of sell opportunities, for Bitcoin:
1. 10%.
2. 25%.
3. 50%.
4. 75%.
5. 100%.
6. 200%.
7. 500%.
8. 1000%.
9. 2000%.
~~10. 5000%.~~

AVERAGE POTENTIAL GAIN: 440%.
AVERAGE ACTUAL GAIN: .

Here is a table showing the 10 grades of buy opportunities, for Bitcoin:
1. -10% (GAIN: 11%.) 2. -20% (GAIN: 25%.) 3. -30% (GAIN: 42%.) 4. -40% (GAIN: 66%.) 5. -50% (GAIN: 100%.) 6. -60% (GAIN: 150%.) 7. -70% (GAIN: 233%.) 8. -80% (GAIN: 400%.) 9. -90% (GAIN: 900%.)
TOTAL POTENTIAL GAIN: 192.7%.

One could therefore identify six realistic long targets: US$8000, $7000, $6000 (AUS$8000), $5000 ($7000), $4000 ($5000) and $3000 ($3600). If I had AUS$3600 to spend, I could enter long at each stage with $600, buying: 0.057B, 0.064B, 0.075B, 0.0866B, 0.114B, 0.12B and 0.166B. That's a total of 0.682B!

Now, considering that I am limited to 1/2015th of my CJ cash fund for each Bitcoin purchase, it might be difficult to accumulate the desired levels at the lower targets. Buying $800 of Bitcoin at US$8000 should be easy, because that will remain in the price range for another 18 months. However, I have only another 6 months to buy Bitcoin at $4000. Therefore, it is only natural that buy orders at this level to be 3 times the value (that is, they can be worth 3/20th of the CJ cash fund.)

If I am able to buy an asset at a below target price, I will then be able to sell this asset for a small profit in the event that price is bumping along the bottom of a trough, so long as I immediately place a new long order at the given target price.