In crypto, the only two factors that are ‘inevitable’ are price advancements (pumps) and price declines. There is not one intrinsically valuable asset that is traded in the altcoin market – in fact, quite literally, value in this market is denoted by the ‘perception’ of how much money can be made (or lost) by trading a particular coin.
Simply, the only reason you would buy into a coin in the first place is because you expect to be able to sell it to someone else at a higher price. That in itself is manipulation – or the attempt to profit because of manipulation.
You have to be fully aware of the fact that if this was a market based on morals, and honour – the price of a coin would never change. Every altcoin would have one sticker price, and that’s it. Clearly though, this isn’t the case…
… In fact, prices change on a constant basis in the crypto currency market. This is because perceptions change on a constant basis.
You could be buying into a coin because you have completed hours of research and are now dead certain that it’s price is going to climb and provide you with a substantial profit. You will have been pumped up and exited to buy your way into that coin. In your mind, you will have already calculated all of the things that you are going to spend your profits on…. Then, you log onto bitcointalk forums, read one line of negative publicity and, within the space of 5 minutes, your entire perception will have been altered. You will have gone from a state of perceiving value, to now being in a state of panic and fear. This will cause you disregard the dozens of hours you have spent in research, and to sell all of your holdings, even at a loss.
But, just like you determined in your original research – that same coin will begin to creep upwards. Then it will begin climbing powerfully through price range after price range… then it’s will begin to skyrocket in value almost by 150%…
…then, strangely, your perception will have changed yet again. No longer are you fearful because, clearly, this coin has just had a major advancement in value – in fact, now, you will have retuned into a state of perceiving value, and those thoughts of future profits and how you are going to spend them have returned… so what do you do? You buy back in…
Then… and the story is very common… the price begins to plummet directly into the ground almost as soon as you have bought back in.. It drops 20% of value, but this time – you don’t sell.. this time, you hold on – because you just watched this coin climb 100% so now the image of profit is too real for you to let go… The price drops by another 20%, but still – you don’t sell… this time, you continue to hold because everyone on twitter is swearing on their grandmother’s ashes that this coin is going “to the moon”… Eventually, you wind up with a 60% loss and again, you refuse to sell because now, you have decided just to wait for the coin the return back a level where you can get out at even…
But that’s it.. a couple of days go by and the price has still not lifted.. a week has gone by and now you finally decide to sell at a 60% loss.
Then… the price rallies again, this time higher than it did during the last rally.
You see guys, this is a quirk in the way the human mind works in regard to risk and gain. People shy away from risk when it comes to gains, but they will take the largest and most irrational risks when it comes to avoiding losses.
In the above example, there was an initial opportunity to buy and to profit – however, the decision was made to back out of the trade due to the risk of loss.
Then once the coin advanced in price, the buy was locked in and sealed.. but due to jumping in during the wrong stage of the price advancement, the price began to fall.. Yet this time, there was no perception of risk at all, there was no decision made to sell until 60% of the coins value was lost.
The human mind is geared so that you gamble to avoid loss, but you evade and shy away from taking risk when it comes to gains.
Looking at this XQN trade, there was an obvious pattern of movement, that was fairly simple to exploit
You see the most important factor, after every rally – is the percentage decline. A high percentage decline indicates that weak hands (novices) have been shaken out of a coin, leaving the coin in the hands of skilled traders.
I will break down what is clearly visible in the above image
From 13 Nov 2014, the price of XQN began to climb from 1005 Satoshi (on low volume) before settling at 11,253 Satoshi on 22 Nov 2014 – representing a 1019% gain in value.
After this gain, the price – of course – fell into decline. XQN began to plummet and landed at 151 Satoshi by 8 Dec 2014, which is a 98% decline in value
Exploitable behavioural trait: After rallying the price fell into decline, culminating with a -98% loss in value
This wasn’t the end of XQN though (despite how many people labelled it as being ‘dead’)
Having reached its bottom price, the price exploded yet again. By 11 Dec, the price had reached 7235 – this is a staggering 4,691% gain.
If you are aware of “the price cycle” you can predict what happen next…
… after hitting 7235 Satoshi, the price dropped yet again. This time, the descent took place over a longer time span (as I explained in my earlier example, some traders just don’t know when to call it quits)
From 11 Dec 2014, the price began to slide downwards…This downward spiral lasted throughout the entire month of January, and finally came to an end on 5 Feb 2015 at 505 Satoshi – which is a 93% decline
Exploitable behavioural trait: Again, after rallying the price fell into decline, culminating with an -93% loss in value
From this low of 505, the price has since climbed to 5319 Satoshi… another high percentage yield: 953%.. judging from the last rallies, there may be some distance left for XQN to travel.
Overall, this analysis illustrates how to use a coins price rhythm to your advantage. It shows how you can “be 10 steps ahead” of the average trader.
XQN is a coin that tends to decline by 90% every time it rallies, which makes it all too simple to predict.
Following news and updates may be useful, but by the time that update is released – it will already be too late for you to buy in at a reasonable price. You have to realise that your mind isn’t naturally conditioned for you to take advantage of opportunities to profit – it is conditioned for you to behave irrationally when attempting to avoid losses, so keep this in mind the next time you make a trade because, if you are a novice, then this entire market is governed by fear, panic, perception and manipulation – if you are skilled, then you are using all of these things to your advantage.