First point to note: No setup is foolproof. However, past experience and history provides a high probability when you play setups correctly and are strategic with your risk management. From what I've seen, the majority of traders (I'd guess in the range of 60-80%) will lose money trying to trade this environment regardless if playing Bear or Bull. I always recommend using scalp plays and cost averaging to mitigate the risk of a short squeeze in a scenario like this one.
Okay with that being said, Here's how you play the setup:
Remember, there are fractal rising wedges all throughout the major wedge.
The major wedge will eventually reveal itself, and most likely stairstep all the way to the support above (previously the resistance before the recent dump).
The trick is not to over commit on the fractal wedges or you'll get rekt by whale bear.
Set your stop above the support or above the wedge, depending on your risk tolerance. Highly conservative traders should not enter a trade until they have seen the major wedge appear, or use a very disciplined scale in (i.e., commit more at the top of wedges, and be aware a bigger wedge may come so leave some cash to play with.
If you want to play shorter term trades, focus mainly on cost averaging, and take profits as necessary. There will likely be an opportunity to re-enter a position if this is indeed a large rising wedge pattern. In the case it is not, then definitely take profits. (So basically cost average and take profits where necessary). I try not to overthink this. Sell half the position at extreme moves or the bottom of wedges and you'll likely get to re-enter that position and improve your cost basis.
Be extremely patient and stick to your stop. The whale bears will push the price up as much as they can without breaking the major rising wedge. In the process they'll squeeze out baby bears and they'll trick bulls into giving them their money.
When the whale bears are ready, they'll take the elevator down. It usually happens very fast so have some sell targets with limit orders already set. Meanwhile, if you're extra bear-ish, save some of the position in case we find new lows.
I like to move my stops down when i'm in profits or i've achieved a nice cost basis. You can set that to break even, or whatever profit you're not willing to give up.
Remember, short squeezes can happen at any time. You should not take on more risk than you are willing to lose. Always ensure you can stay in the game. Always adapt to changing circumstances and new information.
Good luck! I hope this guide is useful.
Any experienced Bears out there that play similar setups? What did I miss or what can I improve in this play? Look forward to comments. Thank you!
Great insight and this is a similar strategy i've been going with as well. The most important part is setting and sticking to your stops as well as taking regular profit at key levels.
Shadowfigure
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@Brote1n appreciate you stopping by and your comment. It’s great to meet another bear out there working on discipline in a world full of permabulls.
Brote1n
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@Shadowfigure, For sure man. One valuable rule of thumb I like to follow is to always trade in the direction of the overall trend. If there is a major BOS that tells me it's bullish I'll change my bias. The "HODL" permabull mentality (and the "going to $0" permabear mentality) of the crypto market is a bit ridiculous when the chart is literally giving you the answers to the test. Good luck!