It is much easier to be euphoric about an asset when it is making you money than it is when it is losing money. You will hear many traders advocating that these corrections are "healthy" for the long term growth of the market, but what does that mean?
Look at this from a longer perspective, about 6 months. You can see a very distinct channel forming, particularly on the log scale of ETH.
Since the middle of 2017, we have traded between two major support and resistance zones running virtually parallel to one another. There is another line in the near-center of these two. The mid-line helps us identify the correction waves properly when we couple with RSI.
Everytime we have have been above the mid-line, we have corrected back down to it. Sometimes bouncing off, sometimes going down to our major support. These significant corrections have been 50-65% in size. This IS significant. But identifying when they are over has led to some amazing gains: 200 and 500%, as seen in the chart below.
In order to fully capitalize on these opportunities, you must be able to identify when the reversal is going to happen. We are currently at the mid-line, so will we reverse back up, or correct down further to support?
I offer the suggestion we will correct down further to the long term support.
RSI is below 30, and we bounced off the top of the channel. The last time we hit the top, corrected to the mid-line, and had RSI below 30, we bounced slightly off the mid-line and corrected down to the bottom of the channel. In fact, each time RSI was below 30 during a correction to midline, we continued down below. We are currently at the midline, with an RSI below 30.
However, after correcting further, we shortly saw divergence on the RSI the next time it fell below 30, then beginning our next bull run.
So then, how should you trade this? Obviously, the maximum profit is if I am correct and we continue down. In which case for maximum profit you would short your positions now and then reopen them later. But now would also be a good time to open the positions to engage in upside potential if the market does reverse at this point.
Although your profits wouldn't be as significant as waiting, you wouldn't miss out if the market bounced off the mid-line. You wouldn't see the same profits, but you would still be in triple digits had you done this move historically, as shown in the published chart.
So overall, when traders say this correction is healthy for crypto, we are looking at a long-term picture. Not one happening over 2 weeks, but instead months, and sometimes even years, and that's how you too can identify opportunities to make significant profits.
Look at this from a longer perspective, about 6 months. You can see a very distinct channel forming, particularly on the log scale of ETH.
Since the middle of 2017, we have traded between two major support and resistance zones running virtually parallel to one another. There is another line in the near-center of these two. The mid-line helps us identify the correction waves properly when we couple with RSI.
Everytime we have have been above the mid-line, we have corrected back down to it. Sometimes bouncing off, sometimes going down to our major support. These significant corrections have been 50-65% in size. This IS significant. But identifying when they are over has led to some amazing gains: 200 and 500%, as seen in the chart below.
In order to fully capitalize on these opportunities, you must be able to identify when the reversal is going to happen. We are currently at the mid-line, so will we reverse back up, or correct down further to support?
I offer the suggestion we will correct down further to the long term support.
RSI is below 30, and we bounced off the top of the channel. The last time we hit the top, corrected to the mid-line, and had RSI below 30, we bounced slightly off the mid-line and corrected down to the bottom of the channel. In fact, each time RSI was below 30 during a correction to midline, we continued down below. We are currently at the midline, with an RSI below 30.
However, after correcting further, we shortly saw divergence on the RSI the next time it fell below 30, then beginning our next bull run.
So then, how should you trade this? Obviously, the maximum profit is if I am correct and we continue down. In which case for maximum profit you would short your positions now and then reopen them later. But now would also be a good time to open the positions to engage in upside potential if the market does reverse at this point.
Although your profits wouldn't be as significant as waiting, you wouldn't miss out if the market bounced off the mid-line. You wouldn't see the same profits, but you would still be in triple digits had you done this move historically, as shown in the published chart.
So overall, when traders say this correction is healthy for crypto, we are looking at a long-term picture. Not one happening over 2 weeks, but instead months, and sometimes even years, and that's how you too can identify opportunities to make significant profits.