have you heard "the market is in two ways, long and short" motto?
well, I should disagree!! or atleast I need to warn you, and challenge the idea.
WHY?
because a short position is more risky + it has more cost
about the cost, the minimum cost of a short position which a long position doesn't have is margin (lending) cost.
about the risk, if you long with no leverage, the risk of getting zero (or liquidated) is almost zero. cause the coin won't go to zero (probably!) but there is no end upward! so you can get liquidated.
So, the market is not in two ways for same risk and cost. we have to be more patient and cautious in short positions.
here is a suggestion with a chart sample of current updated Cardano chart.
about Cardano
lovable and adorable Cardano is a public blockchain platform that aims to run smart contracts wiser than its elder brother, Ethereum. It is open source and decentralized, with consensus achieved using proof of stake. It can facilitate peer-to-peer transactions with its internal cryptocurrency Ada.
let's get to chart which you may know it has gained a lot in recent bull ran for almost all cryptos:
explanation:
a rally to the ATH records and losing momentum, and then there was that big drop. after a drop different bearish scenarios may happen:
- bear flag
- bear pennant
- Y wave
also some bullish scenarios can happen but it's not our topic. so, let's assume we have set a probability for more drop; where we should enter a short position?
I have marked two zones, where the price has rejected from, as it seems it is in Y wave pattern.
the risk of high reject zone is too high, the next one has a less risk, but below the line below two lows (or the Fibo level in blue line) there should be a less risky point of entering a short position.
calculate the Risk to Reward Ratio for each signal and measure them.
for Stop loss, my suggestion is above the higher reject zone.