How To Trade Bitcoin After A Major Pullback
Volatility is a traders best friend and when you’re able to execute your trading plan, good things happen
Have you noticed the screenshots of supermagical profits that kept showing up on social feeds as Bitcoin continued its record-breaking run to 60k have suddenly disappeared?
Everything that those crypto influencers and traders are posting now is vague and shrouded in fear, uncertainty and doubt.
Right now, its clear than ever that FOMO and FUD is what fuels the crypto markets.
The fear of missing out simply makes yoloing into a trade during crazy Bitcoin price rallies a no brainer. That’s why the say everyone is a genius during bull markets.
But FUD is something else. This is because even the best traders out there struggle to cope with the market conditions that are created by extreme fear.
State of the crypto market at a glance
Emotions have remained high since Bitcoin made a 50% correction (from around 60k to 30k) on May 20. Emotions and sentiments meter indicate the crypto market has been gripped by extreme fear for three weeks.
In an ideal market, extreme fear signals buying opportunities, but we are faced with a different reality. People are complaining about BTC doing nothing and being hard to trade.
Technical analysis has been rendered worthless. And without the tools to make sound and objective predictions, traders feel trapped.
What would a smart trader do in these market conditions?
Lets quickly go back to the emotions and sentiments meter that is officially called the Crypto Fear & Greed Index. If this tool is showing extreme fear, you have potentially rewarding trading opportunities. But before anything, you should work on your own emotional overreactions.
Then look for great setups and gather confidence to execute the trade.
When the market is gripped by extreme fear, the price action will be range bound, at best, as it has been since the correction to 30k and its unlikely to see big breakout candles which are common when extreme greed is driving the market.
If you have traded crypto during bear markets, you know that a 2% movement per hour is very tradeable.
For instance, for most part between 2018 to 2020, Bitcoin price would move less than 0.5% per hour.
How to hone the skills and actually kill those tight ranges
Few things that will help your stress level in a range bound market almost instantly:
Never go all in on one position, always scale in slowly so you can Dollar Cost Average if price initially doesn’t go your way.
Stop using high leverage (more than 10x).
Always have some capital on the side, always!
For example, if you plan on spending $1,000 on a trade position, only spend $800 and always have that $200 available on the side for something unexpected.
Never forget that new reservations can emerge at the slightest sign of weakness in the price action.
And the price action is designed to shake you out. Don’t let it fool you into thinking you are in a different stage of the market cycle than you really are.
In this context, do not listen to those influencers who are saying the bull market is over. We are still in a bull market and the top traders in the market will have you for lunch every day if you do not trade the price action.
Focus on the long-term play
Again, search for great setups and enter that trade. But what matters most is the long-term performance. An entire year is considered an ideal timeframe.
But this can be extended because trading is a long journey. For example, on busy days, some top traders move USD 20–30 million in volume.
You could be up 50k, down 80k, up 120k, but your edge is refusing to pay attention on the daily performance. Focusing on the long-term trading plan is hard but it pays off.
Conclusion
Day trading Bitcoin and Alts isn’t easy and most traders lose capital due to inexperience. During the bull run cycle, you are much better off just putting together a diversified portfolio of Bitcoin and Altcoins and hodl it for 6–8 months or longer. Also don’t copy trade crypto influencers blindly. Most of them will mislead you because, after all, everyone is trying to advance their own interests in the market.
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