VEN/BTC Trade Example - What to Look For In an Oversold Bounce

BINANCE:VENBTC   VeChain / Bitcoin
We love it when prices are going up but what if when prices are trending lower. Can you profit from that too?

Well, let's take a look.

When prices move lower rapidly and the indicator(s) gets oversold, some of the best rallies occur when they bounce back. These trade opportunities are the so-called "oversold bounces".

Usually, these oversold bounces can be very lucrative to take advantage of when you can trade them actively and manage your risk well.

There are a few ways to trade oversold bounces but here is my take on how to trade them with a recent trade example on VEN/BTC (Binance)

On March 1st and again on March 3rd VEN/BTC got oversold, meaning the hourly RSI was < 30 (25 and 21) after being on a downtrend for several days:

As you can see, both bounces had a significant move up (about 14%).

But what's interesting is that the second bounce had a ( bullish ) divergence on both the RSI and the MACD , after prices made a double bottom , which usually signals a reversal as well. So in this instance, you had multiple signals an oversold bounce is likely to come.

But why at these levels? Is there are a reason why VEN/BTC did bounce on these two levels so significantly?

Well if we take a broader look at the 4-hour chart:

You can see that these levels where previous (support) areas where VEN/BTC have bounced from previously as well.

So in summary, what to look for when trading an oversold bounce:

1. After a runup, prices have retraced and are in a clear downtrend. Also, haven't touched or reached the (50) ema for quite some time.

2. RSI indicator < 30. Usually the lower the RSI , the bigger the expected bounce. This is why I prefer an RSI < 25.

3. Ideally, you want prices to be at or close to (key) support levels.

4. And if you have a ( bullish ) divergence in the RSI and/or MACD indicators, then your chances of success will increase significantly.

And as an extra bonus, you can look for double (or triple) bottoms which is an indication of a trend reversal.

Also to take into consideration is the timeframe and the market cap of the coin your trading.

When using longer timeframe you can expect bigger moves/bounces but it will take longer to reach those levels.

And as with the coins market cap, prices of coins that have a large(r) market cap tends to move less and slower compare to smaller cap coins.

This way you can change/set your timeframe accordingly. So for instance, smaller cap coins they usually tend to move more and faster so therefore you can get a good trade or return on a relatively small timeframe, e.g. 15 min.

Conversely, it's better to trade in a longer timeframe when trading a big( ger ) cap coin cause they tend to move less and slower.

This way you will have a better chance of being in a trade with good enough room for profit, especially with the big( ger ) cap coins.

So in this case, size does matter ;)

If you found this post informative and helpful, please give a like and or share. Leave a comment if you have any questions.

And until next time, good luck with your trading!
Thank you! This is the kind of posts that make this fora excellent. Keep em coming ;-)
Trade_Masters castaneda
@castaneda, Thanks. Will try to make more informative posts like this.
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