Today I want to zoom in a little deeper on the “trading”. Here are many variations that many will recognize. One of those forms was brutally punished this week and some traders are still licking the wounds.
Leveraged trading, also called trading with leverage. Where you trade with more money than you have in your portfolio. Example; you have $1,000 in your wallet and are going to trade with x5 leverage. So you can trade with $5,000. If you buy something and it goes up, you will make a profit faster. HOWEVER, the price goes against you, and the price goes -20% of where you bought you would be – $1,000 (20% of $5,000 is $1,000). Renovato.io has enough information. So you can no longer bear the loss of your position and your entire account is POEFFFF, gone!
This above is what we also saw 3 days ago. Many overleveraged traders who are liquidated on the first move. This will be a snowball effect before you know it Bitcoin has fallen $10,000.
Another danger is literally trading too much. By impatiently switching back and forth you get the feeling that you are always just behind the net everywhere. You wait “patiently” for 3-5 days for a coin tipped off by a friend. NOTHING, no movement at all. So what do you do? You sell and jump on another train. Just when you have moved, your previous coin starts to move. Automatically you are immediately tempted to return with FOMO in previous beloved project.
To complete the picture…. You realize that’s not the right thing to do until…. That coin is up 80%. You still tack and as soon as you buy, the decline starts. Thanks for playing and welcome to the market!
I think what is described above is a logical consequence of how the market works. The sooner you realize what you are doing, the greater the chance of success. With every move, keep thinking why you are doing this. What will the switch bring you? And above all, immerse yourself in that boring subject of risk management.
As always indicated, the volume didn’t really come loose on the way up. This is an absolute sign of weakness. Partly for this reason, I have parked significant gains on the sidelines and increased the stop on bitcoin as the price rose. https://folm.io/ has enough information. We are currently hanging between the USD 43,000 support and the USD 48,000 resistance zone.
An ideal situation to start a recovery would be; forming a bullish signal on the 4-hour chart around USD 43,000. This could provide some peace of mind and in theory we could move on quite quickly.
Of course, in a higher volume move, a short stop towards $40,000 would be fine. There should be a lot of buying volume there.
If we really get below those kinds of zones, I’ll keep a close eye on the 3-daily and weekly medium Bollinger bands. This could be a very dire situation. A bearish retest after the top of $64,000 is therefore not unthinkable. So far I really see some similarities with 2017 and 2018.
Bottomline… Make sure you have an idea of what YOU think is going to happen and only trade with an amount that you feel comfortable with.