Understanding market cycles of a coin is paramount for building a good position. Accumulation reveals itself to the trained eye when a coin decreased significantly in value. When you notice above average volume activity and a healthy uptrend in price over a medium short time inside a close to horizontal price channel as depicted in the chart above. Make sure to never judge accumulation from a 24hr chart!
You will find that restricting oneself to only buy into coins that are in accumulation greatly improves the profitability of your trading. However, that is counter intuitive to the common traders believe to only run after the spotlights.
The fundamental thing how to profit on an institutional level is to go long on the stock when it is depleted. When everybody screams this coin is dead and a scam.
Guess what its easy to purchase coins especially under those circumstances. No rush in an all or nothing I need to get into this coin now or never. Just patiently, you got all the time in the world, feeding yourself like a caterpillar on a blueberry branch. Take a note on optimal position sizes. Do not dilute your position in to too small of a fraction of a bitcoin. In doing so you destroy your ability to compound properly on your returns. For an upper bound of your targeted position read the average volume history of previous distribution phases from the chart and deduct how much of that demand you will be able to supply and get away with it. Of course, nowadays, for most coins the distribution pie got quite big so your upper bound is most likely limited by your very own affordability.
The important thing to note on such a chart in healthy accumulation is a succession of higher lows driven by slowly but steady volume increase. The skilled minority is lacing the charts with clues of their accumulating positions. For our study of PascalCoin we can see that the 24 hour volume bar indicates an above average trading activity compared to the previous 30 days. A much better predictive timescale than the short term 24hr chart window most exchanges want you to focus on.
Having spotted such a chart the next step is to find out what might cause the rising interest in demand. Now what are the possibilities of news connected with positive volume build:
1 Development cycle updates
2 Embrace from third parties
3 Expected utility gain
4 Upcoming exchange listing
For the sake of argument we will neglect altcoin price relations to bitcoin and the general fact that each month more and more novice traders are entering the crypto arena. Some google kungfu and the information we need is presented to our eyes. The development team announced through their ‘official’ channels that V2 release is coming up. When you accumulated your position its time to patiently wait. In the case of PascalCoin the wait wont be long.
However, one can not always be that lucky so make sure you will be able to afford that waiting period as you have to be in the game to win and being early in the game means usually longer waits but much bigger payoffs that cant be compared to a short term approach in trading crypto.
The highest figure trades I won came all from extended waiting periods not caring about the everyday chart fluctuations not wasting time starring at flashing red/green candles all day. In fact, I would not spend more than an hour of the day on my portfolio needs. The rest you will automate with notifications that trigger your actions as need arises.
I am not advocating to take extensive losses during those waits!
Restricting your loss in any trade will keep you in the game to fight another day. Don’t let your ego and reverse loss psychology deceive you. Cut losses as early as possible. That gives you the ability as a trader to be much more aggressive in compounding your trades and you still have the opportunity to engage in them.
But more on cutting losses as well as avoiding dead coins in later posts. Make sure to subscribe ;-)
Your advantage, nevertheless, will always be that identifying a coin in accumulation properly will limit your downside risk drastically right from the start. Mastering the virtue of patience will close the deal and drive you into a previously unknown profitability. Simply not achievable by spotlight chasers. As you see your educated take on the chart evolve driving you deeper into profit as the updated chart that developed during the writing of this article confirms it is a good time to think about preparing your exit at an appropriate moment.
The concept that needs to be learned is to recognize the market cycles distribution phase.
All coins go through market cycles. Remember that.
Attention is a costly good. Once attention hit the spotlight it can only be focused on a few places at a time and it cant be kept for long for the skilled minority is sure to deplete the current opportunity and to prepare the next action as soon as their supply has been shifted to the current reactive demand.
The show must go on...This is crypto!!!
In the next post we will further analyze PascalCoin and highlight specifics of the Distribution phase.
Stay tuned and subscribe. Ryan
Thanks for the informative post. Do you think the whole crypto is in accumulation mode?