I posted an idea recently with one example, showing how bearish divergence is a consistently good indication of a possible dip.
What would have allowed most people to protect their investment / gains in this market? Being able to know when to swap your longs for shorts, tether up, or cash out. Well this is the best, simplest, and most consistent indicator that I have found to date.
What is bearish divergence? When the price is rising (i.e. forming a series of swing highs) while the RSI peaks showing a declining trend. RSI is simply a momentum indicator but it does provide, those who are watching, advance notice of counter-trend price movement. Most - not all altcoins are linked quite closely to BTC, but you miss out on some gains from a minority of your altcoins when you sell up based on this idea.
There are a four examples on this chart. None would have lost you money had you taken them as a prompt to start to exit longs. Well, you may have exited BTC at $17,500 and missed the ATH if you acted on the first trend-line. But that isn't terrible if you consider lot of people rode right into the middle of the bear market and lost a lot more.
To make the trend-line, two peaks is best, often you will see three progressively lower swing highs while the price is looking super bullish. When you see that, remember that the price WILL correct soon. Everything traded on open markets corrects at some point
Bullish divergence (at the bottoms) is a little less evident on the daily scale (as the price often stops free-falling and spikes back up without making a series of swing lows), smaller time-frames like the 4hrly or lower may be better. I am talking about significant turning points of the market, not sub-waves or small bounces.
As you can sometimes get slightly premature signals to exit, I would recommend backing this up with Elliot Wave counts and wave extension expectations. Also, if you swap your long for a short as soon as bearish divergence appears, you may not always profit. Cashing out and waiting to see what direction the market is heading might be tough but it is a good way to protect your funds.
If you follow this, all you need then are RSI rules (based on whether you are in a weak / strong / neutral bull vs bear market) to start to exit your short position and also a stop-loss lowering strategy. Personally, I try to:
- avoid shorting wave 3 peaks (as wave 4 is long, complex, and does whatever it wants normally),
- be active in lowering my stop to break-even. If my stop is hit then I am no worse off and can always re-enter. Also, if the market drops 10% and then heads back up after a week or two then I am in the same position I was in and haven't lost anything.
I haven't been an active trader for very long, am not a professional, a financial advisor, or your Mum. So please do your own research and protect those funds people.
What would have allowed most people to protect their investment / gains in this market? Being able to know when to swap your longs for shorts, tether up, or cash out. Well this is the best, simplest, and most consistent indicator that I have found to date.
What is bearish divergence? When the price is rising (i.e. forming a series of swing highs) while the RSI peaks showing a declining trend. RSI is simply a momentum indicator but it does provide, those who are watching, advance notice of counter-trend price movement. Most - not all altcoins are linked quite closely to BTC, but you miss out on some gains from a minority of your altcoins when you sell up based on this idea.
There are a four examples on this chart. None would have lost you money had you taken them as a prompt to start to exit longs. Well, you may have exited BTC at $17,500 and missed the ATH if you acted on the first trend-line. But that isn't terrible if you consider lot of people rode right into the middle of the bear market and lost a lot more.
To make the trend-line, two peaks is best, often you will see three progressively lower swing highs while the price is looking super bullish. When you see that, remember that the price WILL correct soon. Everything traded on open markets corrects at some point
Bullish divergence (at the bottoms) is a little less evident on the daily scale (as the price often stops free-falling and spikes back up without making a series of swing lows), smaller time-frames like the 4hrly or lower may be better. I am talking about significant turning points of the market, not sub-waves or small bounces.
As you can sometimes get slightly premature signals to exit, I would recommend backing this up with Elliot Wave counts and wave extension expectations. Also, if you swap your long for a short as soon as bearish divergence appears, you may not always profit. Cashing out and waiting to see what direction the market is heading might be tough but it is a good way to protect your funds.
If you follow this, all you need then are RSI rules (based on whether you are in a weak / strong / neutral bull vs bear market) to start to exit your short position and also a stop-loss lowering strategy. Personally, I try to:
- avoid shorting wave 3 peaks (as wave 4 is long, complex, and does whatever it wants normally),
- be active in lowering my stop to break-even. If my stop is hit then I am no worse off and can always re-enter. Also, if the market drops 10% and then heads back up after a week or two then I am in the same position I was in and haven't lost anything.
I haven't been an active trader for very long, am not a professional, a financial advisor, or your Mum. So please do your own research and protect those funds people.