[0229] - Crypto Trading Mistakes: Buying Against the Current Trend
As I said in the last article, I have a few friends who are just getting into crypto. So I decided to write a few beginner guides to explain the wild world of crypto investment.
Today is a classic... mistake that I see quite a lot. Buying against the market trend.
The example is a favourite coin of mine to trade, #GoChain, which is an Ethereum clone. I actually traded it all the way up to that first peak and sold for a nice profit back in July and made some gains on the September rise. While everyone was asleep in the bear market because "nothings happening", I was busy making gains on GoChain.
Anyway, todays article is about buying ( or selling ) coins at the wrong time.
If you check the graph, the current market movement is downward. And sharply. The Heiken Ashi candles, which are a variant of traditional candles, indicate that the sentiment for GoChain is down. It's had a nice rise for October and is now correcting in November.
The graph clearly states that. So why, oh why do we see the order book with some fairly large buy orders for GoChain?
This boggles my mind as I see it a lot. Big orders doing the opposite of what the market is doing. Given that whoever is buying is looking at the same screen that I am, I don't understand the logic or what the play is.
Pro traders call this "catching a falling knife" which is the idea that there is higher than usual risk of loss with little/no chance of profits at this stage because the momentum is downward. The market is correcting and while there may be a double top and a new surge, who wants to risk it when there are thousands of other coins at lows and ready to pop?
The knife is falling so let it drop! As with a real falling knife, pick up the coin later after the danger is gone!
Madness
There's no "price strength confirmation" or "bottom" to steal terms used by professionals, meaning that there is no indication whatsoever that this coin is anywhere near slowing its downward momentum, let alone reversing direction to the upside.
None.
So why would you buy something where the market is moving in the other direction?
Looking at that chart, I would expect that GoChain is about half way through its correction and by about November 20-30, will probably have stabilized for another move up.
Patience, Young Jedi
So what do you do if you love GoChain and absolutely have to buy some? I, myself like GoChain and think the project has promise. Having said that I don't currently own any as I traded my entire position on those sweet, sweet peaks.
I'm not emotionally attached to GoChain which puts me in the perfect mental position to trade it. I will wait until I see it at a good price and do the same thing again. Ride those fairly consistent waves and sell down to increase my overall portfolio. Selling your entire position in a coin is not standard practice, it's just how I play GoChain ( and a couple of others. )
Anyway, I hope the graph and the explanation of market movement and macro trends has been helpful.
Thanks for watching,
Brendan Rohan - Indie developer of 'next gen' natural medicine from Melbourne, Australia
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DISCLAIMER: This article and all information on this channel & all content is offered purely for educational & entertainment purposes. Always do your own research when investing money and seek the help of a registered financial advisor.