Scalping the More Liquid Coins Counter-Trend
Buying a downtrend is generally to be avoided. However, there can be some great lessons by implementing a methodology that survives a downtrend and thus should profit under most circumstances.
One of the underlying features of these coins is the incredible volatility. Thus fading the volatility is a profitable edge by itself. The execution of this trade takes advantage of this. In this example am looking at a coin (DGB) that had a massive move to the upside and couldn't sustain those levels.
It is worth noting that most coins hold a similar pattern to this one, however the more illiquid coins are only really tradeable on the first/second dump - whereas in this case it was easy to execute at anytime. Personally I traded this twice on the way down. Overall it's a really good "bread and butter setup", very helpful for learning how the market works; and honing your patience - but it's definitely not the be all and end all.
Steps:
(1) 2-3 separate order entries. The last one must be relatively bigger than the first ones. If you have a bias on the coin (thus willing to accept a poor initial entry) you probably want to go with the 3 separate entries, because your first one won't be as good. In this case your first entry if you had a bias would be as it retested the prior low (which then got blown through).
(2) The goal is to buy a flush, and then take profit into a natural retracement back (say a 50% retracement roughly). Note that on all coins, and all setups the goal should always be to buy some sort of dip/flush. It is amazing how good entries they seem to give. General guide for a flush seems to be 10-20%, I have found success with looking for 20% flushes, then when they retrace 50% of the move it is a nice 10% gain.
(3) So stagger entries below the previous low, first one say 10% below, second one 20% below. Note that this is somewhat coin dependant. Also note that you're trying to buy accelerations to the downside, not a grind to the downside.
(4) Risk control: Two things for risk control. Puking out after a big move downwards. If you've bought a 20% flush, then it needs to puke 40% for you to stopout (roughly), this is why this setup has a high probability of success. Second thing is that if you ever end up with a poor average entry price; adjust exits so that you lower size into first pop. Do not get greedy when you have a poor entry. If you take some off it means you can put it back on at better prices; and thus fight the trend for longer. Staggering exits can help with this.
I find that thinking of the last entry as a way to control risk helps with getting a good entry and with taking it off ASAP.
Summary:
(1) Patience for entry. Anticipate how low it could go within this wave.
(2) Stagger entries.
(3) Take profits quickly when have a lot of size. Stagger exits.
One of the underlying features of these coins is the incredible volatility. Thus fading the volatility is a profitable edge by itself. The execution of this trade takes advantage of this. In this example am looking at a coin (DGB) that had a massive move to the upside and couldn't sustain those levels.
It is worth noting that most coins hold a similar pattern to this one, however the more illiquid coins are only really tradeable on the first/second dump - whereas in this case it was easy to execute at anytime. Personally I traded this twice on the way down. Overall it's a really good "bread and butter setup", very helpful for learning how the market works; and honing your patience - but it's definitely not the be all and end all.
Steps:
(1) 2-3 separate order entries. The last one must be relatively bigger than the first ones. If you have a bias on the coin (thus willing to accept a poor initial entry) you probably want to go with the 3 separate entries, because your first one won't be as good. In this case your first entry if you had a bias would be as it retested the prior low (which then got blown through).
(2) The goal is to buy a flush, and then take profit into a natural retracement back (say a 50% retracement roughly). Note that on all coins, and all setups the goal should always be to buy some sort of dip/flush. It is amazing how good entries they seem to give. General guide for a flush seems to be 10-20%, I have found success with looking for 20% flushes, then when they retrace 50% of the move it is a nice 10% gain.
(3) So stagger entries below the previous low, first one say 10% below, second one 20% below. Note that this is somewhat coin dependant. Also note that you're trying to buy accelerations to the downside, not a grind to the downside.
(4) Risk control: Two things for risk control. Puking out after a big move downwards. If you've bought a 20% flush, then it needs to puke 40% for you to stopout (roughly), this is why this setup has a high probability of success. Second thing is that if you ever end up with a poor average entry price; adjust exits so that you lower size into first pop. Do not get greedy when you have a poor entry. If you take some off it means you can put it back on at better prices; and thus fight the trend for longer. Staggering exits can help with this.
I find that thinking of the last entry as a way to control risk helps with getting a good entry and with taking it off ASAP.
Summary:
(1) Patience for entry. Anticipate how low it could go within this wave.
(2) Stagger entries.
(3) Take profits quickly when have a lot of size. Stagger exits.
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