If you wish to profit from short term trading, then you must learn to recognize the common chart patterns. This is particularly true within the cryptocurrency markets, which is something your trusted cryptocurrency exchange can attest to.
Many traders around the world have made it their business to built their careers around this conception.
To be successful in crypto trading, you would have to identify each pattern and learn how to master its features and behaviors.
Once you discovered how to discern a given pattern, you need to react quickly.
It is not a case of gambling, but planning every trade, you make in advance without deviating from the plan.
One needs to know when:
- A chart experience price fluctuations and a crystal clear turning point or breakout.
- Stop Loss Placement – One must have a safety net to protect your investment as trading is not exactly set in stone. You need to have a certain limit in place in that you should show the maximum amount you are prepared to lose. For instance, you may want to halt a transaction once a price drops say below $170. At this point, you need to sell your shares and cut your losses.
- Have an Exit Strategy – Develop an exit strategy, which is particularly useful for new traders. One needs to know when is the best time to sell. It is best to make use of what they call measured objectives where it is predetermined when you should exit, take your profits, with no regret whatsoever.
With a bit of experience, you can turn crypto trading into a highly profitable business.
Have you heard about recognizing the head and shoulders pattern, which is when the price falls just below the neckline? During this stage, false breaks seem to appear out of nowhere. You will notice that the price dips below the neckline and would rise back again.
Remember, your aim should be to sell out your holdings just before the breakout phase and buy again once the price has dropped.
When to Sell?
It is suggested you place your order just before the previous low, then the minute another low takes place, you should sell all your holdings.
We spoke about the stop-loss already, which is the maximum amount that you are willing to lose. It may be an idea to place your stop-loss above the right shoulder. Do not let the fear of missing out on making a massive profit stand in your way to know when its time to make your exit. If you do, you are at risk of losing any gains you could have made.
You are not in Las Vegas, busy gambling and hoping to win big. This is why you must adopt measured objectives to know when the exit-price was reached.
You can say it forms part of a structured, effective and rigid selling technique so you may avoid becoming greedy in the hope of hitting big profits.
To give you an idea of which strategy is probably the best to follow, have a look at the steps below:
- Draw the neckline, which is the straight line that will touch the minimum price points along the pattern.
- Next, you need a vertical height where you would work out the actual height between the head and the neckline (Maximum price reached)
- Do a subtraction from the breakout point – Wait until such time that the price breaks the neckline. Then, you must subtract the distance you worked out to give you the measured objective.
Taking a Conservative Approach
It is highly recommended that new traders follow the conservative approach when it comes to the double top chart pattern. It is way more trustworthy and does not require a lot of experience to make it work for you.
When to enter? Usually, it is regarded as confirmed once the price goes over the neckline. A breakout will happen later. Do not make a move yet until the formal confirmation took place. You would order just above the neckline.
Be conservative by placing your stop-loss below the two bottoms as explained by your cryptocurrency trading expert. Therefore, you would sell your order when it reaches an area below the support line.
As you would have realized by now, one should always adopt an exit strategy before getting involved in crypto trading.