Unskilled traders call it buying and selling. Those in the know call it accumulation and distribution. Why is this terminology used? Simple! The traders who win consistently in Crypto are fully aware that, in order to win, one must only purchase a coin that is trading below value. They are well aware that to win big, they need to ‘accumulate’ a large portion of this coin – which they will then sell at a later date at a severely marked up price.
I have mentioned time and time again that to win – consistently – means that you have to modify not only your approach to the crypto market, but your entire mentality when approaching the market.
The clues are everywhere.
Take for example the equities market. There is a reason share certificates are referred to as “Stock”. There is a reason why we refer to financial arenas as “Markets”, and buying and selling as “Trading”.
This terminology isn’t exclusive to the financial markets, because every retailer in the world holds “Stock” but instead of 10,000 shares in Apple, their stock may be coat-pegs and barbeque stands. Nevertheless, It is the same game.
Every retailer in the world executes a “trade” when they purchase items at wholesale rate, only to then flip those same items to customers at a highly marked up retail price. If you’re thinking buy low, sell high, then you’re absolutely right.
Crypto is no different, it is the same game!
There is a reason why big fur Jackets are cheaper in the summer than they are in the winter. There is a reason why television advertising is more expensive during the hours of 6pm to 10pm (Prime time) than it is during the day (when television sets are off, adults at work and kids at school). If you’re thinking Supply and Demand, then you’re absolutely right.
Crypto is no different – it is the same game!
As altcoin traders, we are no different from giant retailers who buy 10,000 pairs of flip-flops for a wholesale price of $0.50 each ($5,000), who then sell these same flip-flops off at a retail price of $4.00 each ($40,000) – making a profit of $35,000. Now, everyone knows that flip-flops don’t exactly fly off the shelves all year round… that is until summer time when demand is at its highest.
Crypto is no different – it is the same game!
You see, in crypto, prices move in cycles – simply because demand moves in cycles. What I am about to say may sound unfair, but it is a cold hard truth and something that will never change. The majority of crypto traders will always lose out, to the small minority of skilled traders. Here’s why…
1. What to look for
People always ask me how to strike up profit after profit, and I simply tell them to think of trading crypto like owning a store.
Once you begin to think like that, Bittrex then becomes a very useful algorithm that tells you when the most popular items are selling at wholesale rate and when they are selling at retail price – accumulation v distribution.
This cycle is most evident in the Crypto market and occurs in every single altcoin. To those that aren’t aware… observe:
You see guys, the answers to all of your questions regarding price movement is right there – hidden in plain sight.
… Like I explained above, demand for flip-flops is at its highest in the summer. Just like the demand for big fur coats tends to overshoot during the winter. So with that being said, do you think a retailer is going to get the biggest return on his money if he purchases his fur-coat stock during the winter when fur-coats are flying off the shelves at 100%+ mark ups? Of course not! He has to in effect “do the opposite” of his would be customers (the herd) – and buy during the summer whilst the demand and price is at its absolute lowest. To us altcoin traders, that would be “buying at the bottom”.
A skilled traders sole objective is to get novices to buy during the distribution phase, and to sell during the accumulation phase – which, obviously, is the opposite of proper trading etiquette (yet happens consistently day in, day out)
This is why, despite being an expert user of Bollinger Bands and whatever other hocus-pocus tool you have up your sleeve, you still have an endless list of losses from the same market that others are pulling thousands of $/£ from on a weekly basis.
Simply put, if you have 105 indicators cluttering your trade space, then you most certainly aren’t using the charts the way they are supposed to be used – and are therefore hindering your performance.
So guys, use the ALL chart and think before putting on a trade. Ask yourself, am I buying into distribution (marked up prices), or accumulation (wholesale rate). This is how you win again, and again! No voodoo priests necessary.
2. Is that coin worth buying?
The first necessary detail of accumulation, is to gather the largest amount of a coin as is possible. In order for this to be done, manipulation takes place within a certain range of prices to “shake the trees” and force sellers (weak hands, novice traders) out of the market which helps to accomplish the goal of building a substantial position.
As prices are being moved up and down, a trail is left in the order books – and on the charts – for all to see. Which means that any Tom, Dick or Harry can profit from this manipulation in it’s very early stages.
There is no barrier to buying in during the accumulation phase. In fact, the only requirement is common sense, intelligence and doing that one thing that everyone claims to be doing – ‘buying low, and selling high’.
It is that simple, no tomfoolery involved.
However, despite how obvious it is that – to succeed – you must buy during accumulation and sell during the distribution phase, it is only the slight minority who commits to filling their warehouses during the accumulation phase.
A common question that pops up is how to differentiate from accumulation and a dying or dead coin? Simple. You click onto the ‘ALL’ chart, to find recurring price patterns, and price behavior. When these factors are present, you have what we call ‘Long-term Viability’.
Long Term Viability
What you want to see when looking at a chart is three main things. First you want to see that your coin has had multiple high percentage price hikes in the past. This is a good sign of long term viability. If you can see multiple spikes and dips, this means that there are traders who are constantly willing to buy this Coin every time the value declines which is a great indicator when you’re looking to gauge market sentiment towards a Coin. As an example, were going to be looking at URO
Second, you want to see that your Coin has been able to maintain a consistent level of Trading Volume throughout its entire lifespan. This is a sign of strength because, typically, people do not repeatedly throw money at something that isn’t lining their pockets with cash.
If you can see that your Coin has managed to maintain a healthy level of Trading Volume, as illustrated above, over its entire lifespan, then you can rank that Coin high on the profitability scale.
Lastly, and this is probably the most important. The Charts can be used to reveal whether or not your Coin has settled into a rhythm.
An altcoin that has settled into a rhythm will constantly exhibit the same behaviour over and over again.
For example, if a coin has climbed 100%, dropped by -70%, then climbed 100% and dropped -70% on numerous occasions – this is a behaviour makes your coin very predictable and easy to exploit for profit.
The exploitable trait being, it keeps falling by 70%. You can use this to gauge the most optimal entry price.
Now as I mentioned above, the best way to predict where an altcoin is going to go price wise – is to look at the behaviour that it has exhibited in the past.
Is your Coin following a rhythm?
Has it settled into a predictable pattern that can easily be exploited for continuous profit?
Looking at the example above, URO has fallen into the 30 – 45K range twice before exploding and shooting upwards producing staggering returns.
This is an element that is very crucial when planning your trades.
Too often people are swayed by short-term price movement, because they just don’t see the bigger picture. They just don’t understand that if you are approaching this market with a short-term mind frame, then you will only ever make pocket change.
You see, if a coin has exhibited a particular strain of behaviour ‘several’ times in the past – it will exhibit this pattern in the future. With that, I must present you guys with ESCs all time chart just to elucidate how predicable a coin can be once it has settled into a particular rhythm of movement:
Here we can clearly see three identical movements of price. On Oct 10th the price of ESC was sitting at a lowly 71 Satoshi. By the 16th of Oct the price had soared to 669 Satoshi. That is a gargantuan 842% move.
Now that is all fine and dandy… The most important piece of the puzzle is still to come.
After this leap from 71 Satoshi to 669 Satoshi – which unfolded over a 6 day period, the price plunged to 101 Satoshi by the 1st of Nov. An -84% drop.
Exploitable behavioural trait: After rallying the price fell into decline, culminating with an -84% loss in value
As you can see on the chart, it doesn’t end here.
This plunge from 669 Satoshi to 101 Satoshi was followed by yet another price hike. This time the value jumped to 1269 Satoshi, producing a 1156% gain.
By now, I’m sure you’re aware of what happens next, as it has happened before. After reaching a high of 1269 Satoshi, the price of ESC plummeted to 152 Satoshi – an 88% decline.
Exploitable behavioural trait: Again, after rallying the price fell into decline culminating with an -88% loss in value
From this low of 152 Satoshi, the price has since climbed to 806 Satoshi – yet another high percentage yield, 430%.
Judging by what we have seen the past, and also due to sell resistance still being quite low – there is still some room for upward movement here.
Overall, this analysis shows how you can use the rhythm of a coin to your advantage. Why waste time trying to “predict” or assume where prices are going when, in this case, everything is already spelled out to you on the chart.
Clearly, after every rally, the price tends to decline by 80% – 90%. This gives you a clear picture of what would be a “good price” to enter ESC.
The market leaves its own DNA, buried in the charts. These areas of accumulation and distribution remain on the charts forever. The price moves on, but these areas remain, and at some point in the future, price behaviour moves back into these regions, and at this stage, these areas, often dormant for long periods, then become powerful once again.
This is called Market Memory. The reason indicators like this tend to accurately expose true market sentiment, is because they represent a self-fulfilling prophecy. You see, whilst the majority of participants in this market are unskilled – there is a handful of skilled traders who will pass up opportunity after opportunity until they strike upon an instance where multiple factors are aligned to indicate a high probability trade. These traders tend to be looking at the same indicators – thus, they often initiate their buys at roughly the same time – which causes a ripple effect, as more and more market participants pick up on the change in sentiment
Whilst the majority tend to only use the 2minute or 1minute charts (because they are super-fast in and out scalper guys…. who always lose money) – there is only but a slight few participants in this market who are aware of the bigger picture. Thus it will always be this slight minority that dictates the movement of the market and ultimately makes the most money.
3. Is it the right time to accumulate?
Now the charts are useful for revealing what stage a particular price move is in. But your most important tool in assessing where prices are heading is the order book (specifically the sell side).
Often, I hear new traders making reference to “support” and how they will never buy a coin with with low/no buy support. This is known as comfort seeking.
The tendency to do what is comfortable will actually lead most people to experience the most terrible results.
In effect, most people don’t lose simply because they lack the skill to do better than terrible but also because natural human traits entice them into a certain behaviour that will actually lead to worse than random results. The critical implication is that our natural instincts will mislead us in trading. Therefore, the first step to succeeding in Crypto is reprogramming behaviour to do what is correct rather than what feels comfortable.
Personally, I could care less if there is a “safe” level of buy support or zero orders on the buy side, because if I asses the sell orders and can see that a market can be moved easily (due to low sell resistance) then the buy side is entirely irrelevant in that scenario.
In fact if, during a rally, you begin to see buy orders stacking up then that is an indicator of a pending dip because all that does is provide a guaranteed (and profitable) exit for those who got in days/weeks/months before who are already up 100 – 200%.
Your attention should always be on the sell side.
You always want to be aware of how high or low the sell resistance is.
As you can see the resistance in this particular coin is non-existent. More explicitly, it will only take 2.3BTC to move this coins price from 8908K to 12264K which is a 37% move.
During periods of accumulation, sell resistance is very low.
It is really as simple as that.
The order book is literally your window into the future. It shows all the price levels a coin contains – and what needs to happen for a coin to move up or down in value.
After assessing these factors. It is your job to gauge the probability of a move taking place
4. Don’t forget the 24hr high / low indicator. It will see you through a war!!
I know that there are some traders who understand the importance of assessing the 24 hr high / low of the day but, in general, so many people think that it’s okay simply to ignore this indicator (But they will almost certainly have some RSI or Fibonacci tool cluttering their charts)
The 24hr high / low is a tool that breaks down all the key information regarding the daily movement of a coin.
Now, remember what I said earlier about stages. It is very important to assess the 24hr High and Low for any coin that you are trading. This indicator shows if a market has moved and how far it has moved.
If there is an excessive gap between the high and low – and the current trading price is at or close to the high, then you need to look at the spread.
If the spread is tight (0.5% – 2%) then that indicates that buy support is high – and people are battling to get into this coin. Which could be a good thing – depending on what stage into a price move the coin is in.
If the coin is already up 200%+, at its 24hr high and there is a tight spread, then you can expect there to be some dumping action at any given moment because – as I mentioned earlier, those that got in to that coin weeks before and who are already up 50 – 100% now have a guaranteed means of exiting with profit due to the excessively high buy support.
However if the coin is down -80%, close to its 24 hr low (or low for the week/month – look at the charts) and there is a large spread between the bid and ask – there is no incentive for anyone to dump out because no one bought in at a lower price, thus if someone dumped out they would almost certainly be taking an unnecessary loss.
This is how you can asses and gauge the ‘probability’ of a rally taking place. Ask yourself what stage is this market in? Is the sell resistance high or low? Is there an incentive for traders to dump out? These are all questions that will reveal the likely hood of a major price move taking place. No Fibonacci required.
This strategy can be used on any popular coin that has had good volume and is exhibiting signs of predictability. There are several variations of this play which I will cover at a later date.
To make money, is to play the game the way it’s supposed to be played!
Pattern exploitation, Market timing and Price Behaviour form the linchpin of the most basic – but successful – trading strategy.
However, something I have noticed about novice traders is that they don’t research the price history of the coins they trade – thus the foundation of their entire strategy is weak… Also, they are weak handed which is detrimental to their overall profitability.
Novice traders seem to believe that what unfolds in the market within the short space of 24 hours is all that matters. These short-sighted traders are under the impression that holding a position in a coin for longer than one hour is a sin – they even refer to this as “bagholding”. This is why they will forever be novice traders, and will never make serious money.
Novice traders have a misguided view on how this market actually works, so they tend to over-trade. They take pride in the fact that they execute several trades a day, but make absolutely no money in the process.
This is the opposite of proper trading etiquette.
A skilled trader will execute roughly 20 – 30 completed trades in a month and make 10 times more money than a novice trader who executes 20 – 30 completed trades within one or two days.
That is efficiency, and comes down to how well thought out your strategy is.
With that being said I must direct a question toward the novices.
How comfortable would you be taking a position in a coin that is trading with very low volume, has alarmingly low buy support, is on the 5th page of Bittrex and isn’t the ‘talk of the town’?
How comfortable would you feel being told to build a substantial position in this coin, and then to hold indefinitely – even if it means holding for a month straight?
You see, this is trading… This is how things work!
You can’t force an opinion on a market, the market will move when it is ready to move. There is no point saying to yourself “if this coin doesn’t move in two days, I’m selling”… That is an attempt to force an opinion on the market, which never ends well.
Being a skilled trader means:
1. Spotting high probability opportunities
2. Taking advantage of accumulation cycles
3. Having PATIENCE
4. Selling during the distribution cycle
As harsh as it may sound, this is the truth: trading Altcoins is so profitable right now, because it is the only market where 99.8% of the participants have absolutely no clue as to what they are doing.
So many people lose money in Crypto, which means that there is the small minority that consistently makes money. Again, and again.
It’s like I mentioned in a previous post, if a betting game among a number of participants is played long enough, eventually one player will have all the money. If there is any co-operation, Intel or strategy involved, it will accelerate the process of concentrating all the stakes in a few hands.
Lucky for you guys, being a skilled or unskilled participant in this market is merely a choice. And every time you buy a coin at the top of the market, you are choosing to remain an unskilled trader. Conversely, every time you buy into a coin during the accumulation phase – you are choosing to win.
The choice is yours.
With everything said, I must state: The traders who are successful in this market aren’t the ones who spend the entire day sitting in front of the screen trying to catch quick 10% profits from coins that are selling at severely marked up rates.
The traders that win consistently do their homework. Before the start of each month, week and day – they already know what they are going to buy and what they are going to sell.
They buy into coins during the accumulation phase of the price cycle, which allows them to dictate their own prices when it comes time to distribute their holdings to the rest of the market.In essence, whilst most novice traders “trade the market”, skilled traders “make the market”.
The funny thing is, the only barrier to becoming a skilled trader is understanding the difference between wholesale and retail prices.