This method is not a magic trading formula, just another simple and easy to follow perspective on preventing irrational/emotional trades that get you rekt at bottoms at tops.
The Given: When price moves up fast and sharp, traders usually look to take profits resulting in sell pressure. It's also the same vice versa as when price moves down fast, traders look to buy low, and sell high. Now there are obviously other technical indicators that help traders make these decisions but let's keep things as simple as possible for now, focusing strictly on the visual chart and price action.
As a beginner it's easy to FOMO in early when price rallies up, especially in a bull-run where these cycles can last months. The same also goes for rallies to the down-side resulting in fear-selling. We've all been there before at some point in our early trading life. This is the result of inexperienced trading of course and a lack of understanding in the market and trading psychology.
The bitcoin stick method is a very simple method that can help you be more aware of these situations and prevent FOMOing in at the top of rallies, and selling at the bottoms where emotions tend to get the best of inexperienced traders.
How does it work?
As you can see above, i drew lines from the bottom of the candle bodies to their tops in the previous bull run. If price just continues to go up without a retracement, your line would be almost completely vertical. This is where it is time to be cautious with regards to buying-in.
The same goes for the lines I drew from the top of the red candle bodies to their bottoms in the current bear cycle. If price continues to go down without a retracement, your line would be almost completely vertical once again. This is where it is time to be cautious with regards to selling your bags.
Now this doesn't mean because your lines are vertical that the price is going to move the other way at that very moment, in fact price can continue to rally.
In a bull cycle these scenarios are what creates a blow-off top as you can see above. This is where the noobs get separated from the elite as inexperienced traders would get fearful of missing out on profits so they buy way up here from the more experienced savages who know when to get tf out.
It's very hard to predict how high or low btc rallies but as a trader that shouldn't really matter as we're not in the game of guessing are we? When you find yourself in these scenarios it's good to just understand that price can still continue to move in the same direction but it is a matter of time before the trend cools off. Now you can position yourself for a low-risk high-reward trade.
Why did I include the 200 MA?
The reason for why I included that is to just get you to understand once again that this stick method is just a perspective or personal tool you can use to prevent FOMO and fear selling. Other technical indicators and tools should definitely be used so you can have a more educated and calculated approach to executing your trades.
For Example: The price has currently been rallying up, and if you were to draw lines there it would almost be vertical. The 200 MA is also right there around 9.2k and turning down, so this helps me realize that maybe it isn't time to ride this rally, in fact maybe I should sell some bags and anticipate a movement down in the short time frame. Again though, I have no idea how high we can go. We can extend past 9.2 from here before we begin to pull back.
Please like and share if you found this information useful. Comment if you have any questions or feedback at all.
Knowledge is power my friends. Safe trading :)
The Given: When price moves up fast and sharp, traders usually look to take profits resulting in sell pressure. It's also the same vice versa as when price moves down fast, traders look to buy low, and sell high. Now there are obviously other technical indicators that help traders make these decisions but let's keep things as simple as possible for now, focusing strictly on the visual chart and price action.
As a beginner it's easy to FOMO in early when price rallies up, especially in a bull-run where these cycles can last months. The same also goes for rallies to the down-side resulting in fear-selling. We've all been there before at some point in our early trading life. This is the result of inexperienced trading of course and a lack of understanding in the market and trading psychology.
The bitcoin stick method is a very simple method that can help you be more aware of these situations and prevent FOMOing in at the top of rallies, and selling at the bottoms where emotions tend to get the best of inexperienced traders.
How does it work?
As you can see above, i drew lines from the bottom of the candle bodies to their tops in the previous bull run. If price just continues to go up without a retracement, your line would be almost completely vertical. This is where it is time to be cautious with regards to buying-in.
The same goes for the lines I drew from the top of the red candle bodies to their bottoms in the current bear cycle. If price continues to go down without a retracement, your line would be almost completely vertical once again. This is where it is time to be cautious with regards to selling your bags.
Now this doesn't mean because your lines are vertical that the price is going to move the other way at that very moment, in fact price can continue to rally.
In a bull cycle these scenarios are what creates a blow-off top as you can see above. This is where the noobs get separated from the elite as inexperienced traders would get fearful of missing out on profits so they buy way up here from the more experienced savages who know when to get tf out.
It's very hard to predict how high or low btc rallies but as a trader that shouldn't really matter as we're not in the game of guessing are we? When you find yourself in these scenarios it's good to just understand that price can still continue to move in the same direction but it is a matter of time before the trend cools off. Now you can position yourself for a low-risk high-reward trade.
Why did I include the 200 MA?
The reason for why I included that is to just get you to understand once again that this stick method is just a perspective or personal tool you can use to prevent FOMO and fear selling. Other technical indicators and tools should definitely be used so you can have a more educated and calculated approach to executing your trades.
For Example: The price has currently been rallying up, and if you were to draw lines there it would almost be vertical. The 200 MA is also right there around 9.2k and turning down, so this helps me realize that maybe it isn't time to ride this rally, in fact maybe I should sell some bags and anticipate a movement down in the short time frame. Again though, I have no idea how high we can go. We can extend past 9.2 from here before we begin to pull back.
Please like and share if you found this information useful. Comment if you have any questions or feedback at all.
Knowledge is power my friends. Safe trading :)
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.