How to ladder buy BTC and other Alts
Updated
Hello everyone,
As I'm writing this, the market is currently in a downtrend, and there are many people trying to predict where the price might go. This is a very difficult thing to do and most end up completely wrong. In this idea, I'm going to share with you guys my method to buying during a drop in the market.
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What I've highlighted and drawn:
1) The red box, double top, drop zone, which we will refer to as our initial high.
2)Predicted support zones with green boxes
3) Weak support area in orange.
4) Areas of interest circled in yellow.
5) Buys that are captioned.
I will now explain each of these, and how I came up with them.
==================================
First off, you will notice there are 0 indicators, no RSI, no MACD, and no moving averages, so how can we figure out areas where we might be able to buy anything?
1) The Red Box area is obvious to most, there is a double top with sell off.When it goes below the orange support, this confirms the double top. (Some use Elliot waves, Fib retracements and other methods to help with confirmation, I simply see red and a sale below to confirm this.)
2) The green boxes are predicted and placed based on previous strong green candles in the previous bull run were. (A word of caution, we don't automatically buy here, read everything first.)
3) Weaker support zone is tougher to identify and I personally call it this because in the event of a sale from the same top zone,(Red box area) this is the riskiest position to buy.
4) So with that out of the way, we can now move onto why these areas are circled in yellow:
A) We see either an engulfing green candle, a green candle with a long wick or prices moving up multiple days in a row.
B) These candle closings are what I use as confirmation of a support in this area.
5) Now for the juicy part, the buys. I'm going to give this one it's own sections because it's more involved then any other section.
==================================
Buying:
1) I picked 3 buy prices based on the zone we were in. None of these are the best price. Just a disclaimer, you will RARELY EVER GET THE LOWEST PRICE EVER. So first off, get the idea of lowest price out of your head.
2) Got that lowest price idea out of your head? No? Go back to number 1......
Got that idea out now? Good. So how do I come up with this price? After the initial strong green candle closes, we wait for the close of the next days candle and then place a buy order in the body of the 2nd closing candle. We don't use wicks because there is a far lesser chance that we will see those prices.
Example on buy#1:
Strong candle close = about 8400 to 9400
Next day close = 8900 to 9900
Based on this = 9200 is within the body.
Now that you know how to find the areas of interest (yellow circles), areas of predicted support, (Green boxes), and where to place the buy (Body of candles), you can buy right? Well not yet. You still need to know how much you should buy to ladder responsibly.
==================================
Final Step: The buying!
Okay after I established my areas, where I would buy after confirmations and such, how do I know how much to buy? There is no secret here, just rules you come up with. My method is a formula:
First, I figure out how much capital I have to invest in this market. I'm going to use $10,000.00 as an example:
Next, I divide the top price by my potential buy price (not the one I have yet, but what I will be placing my buy order for.) and subtract 1.
Finally, I take that number and multiply the amount of money I'm willing to invest in this market.
The whole formula looks like this:
[(Top price/Limit buy order)-1]*Current Investment Capital = Your buy amount.
For consecutive buys, use the remaining capital.
==================================
Going to place the example of buys in a followup post, I hit the character limit!
As I'm writing this, the market is currently in a downtrend, and there are many people trying to predict where the price might go. This is a very difficult thing to do and most end up completely wrong. In this idea, I'm going to share with you guys my method to buying during a drop in the market.
==================================
What I've highlighted and drawn:
1) The red box, double top, drop zone, which we will refer to as our initial high.
2)Predicted support zones with green boxes
3) Weak support area in orange.
4) Areas of interest circled in yellow.
5) Buys that are captioned.
I will now explain each of these, and how I came up with them.
==================================
First off, you will notice there are 0 indicators, no RSI, no MACD, and no moving averages, so how can we figure out areas where we might be able to buy anything?
1) The Red Box area is obvious to most, there is a double top with sell off.When it goes below the orange support, this confirms the double top. (Some use Elliot waves, Fib retracements and other methods to help with confirmation, I simply see red and a sale below to confirm this.)
2) The green boxes are predicted and placed based on previous strong green candles in the previous bull run were. (A word of caution, we don't automatically buy here, read everything first.)
3) Weaker support zone is tougher to identify and I personally call it this because in the event of a sale from the same top zone,(Red box area) this is the riskiest position to buy.
4) So with that out of the way, we can now move onto why these areas are circled in yellow:
A) We see either an engulfing green candle, a green candle with a long wick or prices moving up multiple days in a row.
B) These candle closings are what I use as confirmation of a support in this area.
5) Now for the juicy part, the buys. I'm going to give this one it's own sections because it's more involved then any other section.
==================================
Buying:
1) I picked 3 buy prices based on the zone we were in. None of these are the best price. Just a disclaimer, you will RARELY EVER GET THE LOWEST PRICE EVER. So first off, get the idea of lowest price out of your head.
2) Got that lowest price idea out of your head? No? Go back to number 1......
Got that idea out now? Good. So how do I come up with this price? After the initial strong green candle closes, we wait for the close of the next days candle and then place a buy order in the body of the 2nd closing candle. We don't use wicks because there is a far lesser chance that we will see those prices.
Example on buy#1:
Strong candle close = about 8400 to 9400
Next day close = 8900 to 9900
Based on this = 9200 is within the body.
Now that you know how to find the areas of interest (yellow circles), areas of predicted support, (Green boxes), and where to place the buy (Body of candles), you can buy right? Well not yet. You still need to know how much you should buy to ladder responsibly.
==================================
Final Step: The buying!
Okay after I established my areas, where I would buy after confirmations and such, how do I know how much to buy? There is no secret here, just rules you come up with. My method is a formula:
First, I figure out how much capital I have to invest in this market. I'm going to use $10,000.00 as an example:
Next, I divide the top price by my potential buy price (not the one I have yet, but what I will be placing my buy order for.) and subtract 1.
Finally, I take that number and multiply the amount of money I'm willing to invest in this market.
The whole formula looks like this:
[(Top price/Limit buy order)-1]*Current Investment Capital = Your buy amount.
For consecutive buys, use the remaining capital.
==================================
Going to place the example of buys in a followup post, I hit the character limit!
Note
Example is going to be our 3 buys with and without stop losses. ***Apologizes for not including this in the previous post, but for consecutive buys, we use our limit buy order price as our new high in the formula for consecutive buys***
Without the stop losses, just straight buying and holding:
Buy 1 = 2,717.39@9200 or 0.29536 BTC with $7282.61 remaining
Buy 2 = 693.58@8400 or 0.08259 BTC with $6589.03 remaining
Buy 3 = 1098.17@7200 or 0.15252 BTC with $5490.86 remaining
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0.53047 BTC was bought for $4490.86
Our average buy price comes out to be 8465.81
Now the same scenario but with stop losses. The stop loss that I'm going to be utilizing is the bottom of the wick on the strong candle or support area. (Whichever is lowest.)
Buy 1 = $2,717.39@9200 or 0.29536 BTC with $7282.61 remaining
Stop loss = $8,374, $268.16 is lost from our position of $2717.39
$9,731.96 Remaining
Buy 2 = $926.85@8400 or 0.11033 BTC with $8805.11 remaining
Stop loss = $7752.00, $77.47 is lost from our position of $926.85
$9654.45 Remaining
Buy 3 = $1609@7200 or 0.22348 BTC with $8045.45 remaining
We don't get stopped out.
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0.22348 BTC was bought for $1954.55
Our average buy price comes out to be $8884.32
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Yes, the average buy price is more expensive in the 2nd example, but the overall capital risk is smaller. Both of these methods are valid because:
1) You can purchase more with your remaining capital if you deem the market to have turned.
2) In the first method, you can never get flash stopped out ever, because you have no stop loss.
3) I didn't take into account exchange fees, because every exchange varies.
4) I didn't take into account taking any profits on bounces, or even moving up the stop loss. These are strict examples just on how I buy, not how I sell.
With that said, both of these positions eventually ended up profitable even if you didn't buy a single other thing with your remaining capital at the end of the buys. Keep in mind that the end of the day, trading is about buying position that will end in profit. We want more capital than where we began. When we choose to buy a position, we are taking on risk. This is how to mitigate that risk, this is how I do it.
With that said, this is my ladder method and I just wanted to share it. May you trade responsibly and never ever become a bag holder.
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**Final tidbit**
This was all done without a single indicator and if used correctly, they can aide us in our ladder buys even further.
Trade active
For those that have been patient, I'm taking my first buy right around $7400.00. As you see, with these candle closes, we have a buy available to us here.-Buy position is going to be about 20-25% of mu capital. (Less is also valid for those that never believe in buying more than a smaller amount in one position, EX never more than 10%.)
-Stop Loss for me at 7065.
Disclaimer
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