What Goes Down Must Come Up - Navigating Bitcoin's Correction
During an uptrend, we have this saying - what comes up, must come down.
The similar notion can be said during a downtrend, but in an opposite direction - what comes down, must come up.
Following this series of downtrend within the Cryptomarket, we can actually maximize the intra-cycle volatility which we see within the smaller timeframes. In this chart, we used a common indicator and strategy which everyone uses and applies with their own trading strategy. But in this chart, we combined the following strategies to come up with a way of navigating the downtrend:
- During a downtrend, there will be a point in time wherein the price gets oversold in the RSI.
- The moment wherein the price starts declining but the RSI has started increasing, that poses a signal wherein a bullish retracement is bound to happen.
- Entry points will vary depending on different support levels, as much as possible, set a stop loss for 5-10% in order to secure your capital.
- As for Exit strategy, the suggested take profit areas are determined by the resistance areas forming.
- Previous support will now act as a resistance, hence the resistance areas are a good levels for exiting a trade (either fully or partially).
- Once you've exited a trade, you now wait for the next indicators to form, especially if you see a downtrend continuation. In that case, you now wait for the next bullish indicators to form.
In this example, the Bitcoin downtrend which started late November 2021 has been forming multiple instances of a bullish retracements using bullish divergences and resistance areas. While you are shorting within the bigger timeframe, it is still possible to long every bullish retracement opportunities that you can find in the smaller timeframes.
To summarize:
- During a downtrend: being bearish in the bigger timeframe doesn't mean you have to be always bearish in the smaller timeframe;
- And during an uptrend: being bullish in the bigger timeframe doesn't mean you have be always bullish in the smaller timeframe.
The similar notion can be said during a downtrend, but in an opposite direction - what comes down, must come up.
Following this series of downtrend within the Cryptomarket, we can actually maximize the intra-cycle volatility which we see within the smaller timeframes. In this chart, we used a common indicator and strategy which everyone uses and applies with their own trading strategy. But in this chart, we combined the following strategies to come up with a way of navigating the downtrend:
- Relative Strength Index (RSI) Bullish Divergences
- Support and Resistances
- During a downtrend, there will be a point in time wherein the price gets oversold in the RSI.
- The moment wherein the price starts declining but the RSI has started increasing, that poses a signal wherein a bullish retracement is bound to happen.
- Entry points will vary depending on different support levels, as much as possible, set a stop loss for 5-10% in order to secure your capital.
- As for Exit strategy, the suggested take profit areas are determined by the resistance areas forming.
- Previous support will now act as a resistance, hence the resistance areas are a good levels for exiting a trade (either fully or partially).
- Once you've exited a trade, you now wait for the next indicators to form, especially if you see a downtrend continuation. In that case, you now wait for the next bullish indicators to form.
In this example, the Bitcoin downtrend which started late November 2021 has been forming multiple instances of a bullish retracements using bullish divergences and resistance areas. While you are shorting within the bigger timeframe, it is still possible to long every bullish retracement opportunities that you can find in the smaller timeframes.
To summarize:
- During a downtrend: being bearish in the bigger timeframe doesn't mean you have to be always bearish in the smaller timeframe;
- And during an uptrend: being bullish in the bigger timeframe doesn't mean you have be always bullish in the smaller timeframe.