Recognizing and understanding trends is obviously an important part of positioning yourself for success as a trader.
As I learn more and more about trading in general I'm starting to be able to more easily spot trends and better understand with some predictability how the market is going to move.
This post is inspired by a post that was recently trending on Trading View regarding market cycles and phases. It really connected with me as I've noticed that I'm spotting more and more patterns with every passing day that I'm trading.
Of course anything can happen at anytime, and when things go bat shit crazy that's when I step back. Some great advice that I've picked up is You don't have to trade all the time, you're not going t miss out, there will be other opportunities.
Being able to step back and remove my eyeballs form the 5 minute candles every now and again really helps. Now when I can't spot the trends I wait it out, and sure enough a more predictable pattern will play out eventually. Sometimes it's really helpful to just Zoom Out!
Spotting Trends
This is a pretty basic but lets have a look at ETH year to date, 24 days into January. Looking at the daily chart we can identify Accumulation, Reaccumulation, and the Downtrends.
Accumulation Phase - January 11,12,13th there a was an accumulation phase following a decent downtrend. That dip was to the tune of apx 30%
Did you buy the dip? There was an accumulation phase that lasted for a couple days before the uptrend really started to take hold.
There was another accumulation phase more recently, with the 27% drop that occurred from the 19th to 21st. We've since recovered nicely and have just moved past another accumulation phase.
People talk of smart money, and are referring to institutional investors. But smart money can be you too, that can be us! That simply means zoom out and understand the macro, don't panic. Understand the phases and learn where you can sell and where you can accumulate to maximize your gains.
Reaccumulation Phase - As recently as January 22nd, 23rd. Essentially when the market moves sideways, and consolidates.
Personally I really like trading during these phases while the overall movement is upwards or bullish. There are nice swings especially with ETH where the price is up and down a few % through the day with opportunities to day trade and grow the money pile.
Marked in yellow here, the market is going sideways for a number of days following a low accumulation phase, there are swings up and down, and often you'll see them get tighter and tighter. I like to imagine that tension is building up before it explodes, hopefully moving up.
We're looking at the Hourly chart above, but these can be spotted on hourly and 5 minute charts too in the form of bullish pennants - A continuation candlestick patterns that occurs in strong uptrends.
This is a 5 minute chart from the 22nd to the 24th of January, very recent. Look at the pennant and consolidation, the tension is winding and boom, it breaks to the upside.
Unfortunately I was with friends last night watching UFC and enjoying some beverages so I wasn't able to trade this.
Downtrend Phase - January 9th and 10th, as well as 20th and 21st.
Easy to spot, can't miss them, and possibly fear and anxiety inducing drops. We've seen two good ones so far this month to the tune of 30% and more recently 27%.
It's during this time I go to Tether and wait it out and look for the bottom. I don't try to catch the falling knives, I need to see a bounce of some sort. A good bunch of hours where the price has hit a line of resistance and is holding.
Everything is life and seemingly in this universe exist within cycles. It's all around us in everything, including the markets. As a trader I'm trying to tune into these cycles, understand them, not fear them. Learn them, and move with them, with the aim of better identifying opportunities to maximize profitability. Need to make that money pile go up!
Ciao for now,
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Very interesting ... I'm trying to get a grip on this too. I know there are ways to gain money here, but not when I don't understand where it's going, and why it's going that way, and most of all, when I don't understand what I am doing ...
So lately I'm diving into this theory too and hope I will be able to get it into my blond mind.
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I think the more you watch and look for these three or four phases the better a feel you can get for where things are going, on a daily chart.
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Trends are super important for smaller traders.
We can't steer the ship but we can follow when it starts to turn.
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exactly right, and I sit and trade and watch the orders come through. It's neat watching the wars between bulls and bears, where the momentum is, seeing whales come in move the needle.
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Oof, so much to learn. Talked about it earlier today with @hetty-rowan that we should both really learn how this all works. But damn. it's so much where to start :)
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yeah it can be a bit overwhelming, I'm still learning. Heck like everything in life there's levels to this, so I just hope to be able to stick with it long enough to actually be good at it.
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