How patient can top cryptocurrency traders be? My mentor when I first entered the crypto circle spent 80% of his time waiting and 20% trading. Now he lives comfortably, fishing and playing golf, only catching a few waves of market activity each year.
I still clearly remember his feelings that day: sometimes life is so wonderful, when you try your best you don’t get it, but when you truly let go, the result comes unexpectedly.
My mentor was also a veteran back in the day, adept at chasing highs and cutting losses. After suffering heavy losses in his account, he temporarily exited the crypto market, only to pick it up again later in life, unexpectedly turning things around. I’ve summarized sixteen key elements among them to share with everyone.
1. Choose altcoins in a bull market, buy BTC in a bear market; this is my secret recipe!
2. Coins that show increased volume at the bottom must be closely monitored, as this is a signal for a potential start; don’t miss it!
3. For coins in an uptrend, the best time to buy is when it pulls back to important moving averages. Remember to seize the opportunity!
4. Do not trade frequently; making a few big trend trades a year is enough. Greed can lead to significant losses!
5. You must control your position size well; never go all in. Leave room for yourself to cope with market changes!
6. Do not average down on losing altcoins; timely stop-loss is a wise move. Don’t let yourself fall deeper!
7. News can only serve as a reference; do not blindly follow the trend; otherwise, the consequences are yours to bear!
8. Do not touch unfamiliar coins; focus on the track you are familiar with to ensure a stable victory!
9. Do not be swayed by market emotions; remain calm and rational to make the right decisions!
10. When most people are optimistic, it is often when the risk arises; remember this, don’t let yourself become the one left holding the bag!
11. When most people are optimistic, it is often when risks arise; remember this, don’t let yourself become the one left holding the bag!
12. Learn to stay in cash and wait for the market to give clear signals before entering. This way, you can avoid unnecessary losses!
13. Do not follow the crowd in hot speculation; hot spots often come quickly and go quickly. Don’t get stuck!
14. You need to have your own trading system and strictly adhere to it to maintain stable returns!
15. Investing is a long-distance race; maintaining a good mindset is essential to laugh until the end. Don’t let yourself give up halfway!
16. Investing does not necessarily mean making money; it is highly likely to lose money, so try to invest with spare cash. Investing with spare cash will improve your mindset, and the probability of winning will increase. Remember this, don’t let yourself fall into difficulties because of investing!
Playing around in the cryptocurrency circle is essentially a contest between retail investors and institutions. If you don’t have cutting-edge news or first-hand information, you can only get cut! If you want to layout together and harvest from the institutions, feel free to contact me! [Public Account: Trend Prediction] Welcome like-minded individuals in the crypto circle to discuss together~
Spend a lifetime only buying this trend, from huge losses to huge profits!
This method has been practiced in over ten thousand trades, with a win rate of 98%! Last month in March, I made 120,000 U in one month!
There are two types of engulfing patterns: bullish and bearish.
The engulfing candlestick pattern consists of two candlesticks, thus belonging to the double candlestick pattern category.
The structure of this pattern is very easy to recognize. On the chart, the first candlestick is completely engulfed by the next candlestick. Remember, to form an effective engulfing pattern, the body of the first candlestick should be completely contained within the body of the next candlestick. Please see the example of the engulfing pattern in the chart below:
This is how the engulfing pattern appears on the chart. As mentioned above, the first bearish candlestick (red) is completely engulfed by the next bullish candlestick (green). Similarly, the reverse scenario is also possible. The engulfed candlestick can be bullish while the engulfing candlestick can be bearish.
Potential of the Engulfing Candlestick Pattern
The engulfing candlestick pattern has a strong reversal signal. If the price forms an engulfing pattern during an uptrend, it sends us a signal indicating that a top may be forming.
Conversely, if the price shows an engulfing pattern during a decline, it indicates that the price movement may be forming a bottom.
Types of Engulfing Patterns
As mentioned earlier, there are two types of engulfing patterns: the bullish engulfing pattern and the bearish engulfing pattern. Now let’s understand these two engulfing patterns respectively:
Bullish Engulfing
Bullish engulfing patterns typically appear in a bearish trend. It starts with a bearish candlestick on the chart, which is then completely engulfed by the next bullish candlestick's body. This pattern creates bullish potential on the chart and may reverse the current bearish trend. Please see the bullish engulfing candlestick pattern in the chart below:
Note that the first candlestick in this pattern is bearish, and it is completely contained by the next bullish candlestick's body. This forms a bullish engulfing pattern, suggesting a trend reversal. An effective bullish engulfing pattern means that after a recent decline, a bullish trend may begin.
Bearish Engulfing
The functions of the bearish engulfing pattern and the bullish engulfing pattern are exactly opposite. The bearish engulfing pattern typically appears in a bullish trend. The pattern starts with a bullish candlestick, which is then completely engulfed by the next bearish candlestick's body. This pattern creates strong price reversal potential, and the current bullish trend may shift to a new bearish trend. Now please see the bearish engulfing pattern in the chart below:
In the above chart, the engulfed candlestick is bullish (green), while the engulfing candlestick is bearish (red). The body of the second candlestick completely contains the first candlestick, completing the bearish engulfing pattern on the chart. The bearish engulfing pattern may indicate that a new downward trend will begin on the chart.
Confirmation of the Engulfing Pattern
Confirmation of the engulfing pattern occurs on the candlestick after the pattern. It needs to break through the body level of the engulfing candlestick to confirm the validity of the pattern.
An effective bullish engulfing pattern will subsequently be followed by a third candlestick (bullish) that breaks upwards through the body of the engulfing candlestick. An effective bearish engulfing pattern will subsequently be followed by a third candlestick (bearish) that breaks downwards through the body of the engulfing candlestick. As shown in the diagram below, this illustrates the confirmation of the engulfing pattern on the chart:
Please note that this time we saw the confirmation candlestick after the pattern. When you see such candlestick behavior after an engulfing pattern, it will confirm the validity of the pattern.
Engulfing Pattern Trading Strategies
We have discussed the structure of the engulfing pattern in detail. Now let’s talk about the trading strategies related to this chart pattern.
Entry for the Engulfing Pattern Trade
The entry point for a trade is usually when the engulfing pattern is confirmed. This is the third candlestick (the one after the engulfing candlestick); it should break through the body of the engulfing candlestick and move in the expected direction. When the candlestick closes beyond that level, we confirm the pattern and can open the corresponding trade.
If the engulfing pattern is bearish, a price breakout should occur below the engulfing candlestick’s body. In this case, we should prepare to short. If the engulfing pattern is bullish, the price breakout should occur above the engulfing candlestick’s body. This means we should go long.
Setting Stop-Loss for Engulfing Patterns
Without a doubt, controlling risk should be your top priority in trading. Therefore, your engulfing trades must set stop-loss.
The best stop-loss position in engulfing trades is outside the limits of the engulfing pattern. If the engulfing pattern is bullish, the stop-loss should be set below the lower shadow of the engulfing candlestick. If the engulfing pattern is bearish, the stop-loss should be set above the upper shadow of the engulfing candlestick.
The above chart illustrates how to set stop-loss when trading bullish and bearish engulfing patterns. If the price fails to move in the expected direction and triggers the stop-loss, it proves that the trade hypothesis is wrong, while protecting your funds from minimal loss.
Setting Profit Targets for Engulfing Patterns
A rule of thumb is that engulfing trades should be held at least until the price movement equals the size of the pattern. This means the minimum profit target pursued from the engulfing pattern should equal the distance between the upper and lower shadows of the engulfing candlestick.
When the price movement reaches this distance, you can choose to close all or part of your position. If you choose to continue holding part of your position, you need to closely monitor price movements for potential exit opportunities. This includes support/resistance breakouts and trend or channel breakouts. Chart and candlestick patterns are also very important here. If you find chart/candlestick patterns that conflict with your current trade, you may need to close your position.
Engulfing Patterns and Price Action Strategies
Now let's illustrate price action-based trading strategies with the engulfing pattern. Please see the chart below:
The above chart shows the hourly chart of GBP/USD (British Pound/US Dollar) from January 1 to January 5, 2016. The chart depicts a bearish engulfing pattern and its trading rules.
The chart starts with a price increase, marked by the green arrow. You will notice that the price movement only forms bullish candlesticks. Suddenly, we see a relatively large bearish candlestick that completely engulfs the previous one. This confirms the presence of a bearish engulfing pattern on the chart.
However, in this case, we need to see a confirmation candlestick before we can consider entering a position. The next candlestick on the chart is again bearish, closing below the body of the engulfing candlestick. This is the confirmation needed to trade based on the bearish engulfing pattern. The stop-loss for this trade should be set above the upper shadow of the engulfing candlestick, as shown in the above chart.
The yellow arrow in the chart shows the size of the pattern and how to apply the minimum profit target on the chart. This target is achieved in the next candlestick that appears after the engulfing confirmation.
This trade can be extended for more profit. You can use price action rules to determine the final exit signal. You will notice that the price of GBP/USD formed two large bearish candlesticks on the chart, which would double the trade profit. However, the next candlestick on the chart is a hammer reversal pattern, also known as a Pin Bar, which has strong bullish potential. When the hammer pattern is confirmed, the trade should be closed. As you can see, the next candlestick is bullish and breaks above the hammer pattern's upper level. This confirms the validity of the hammer reversal, generating an exit signal for closing the short position. Bearish engulfing trades should be closed at the close of the bullish candlestick following the hammer pattern, as indicated by the second red arrow in the chart above.
This example demonstrates how price action rules help find the most suitable exit points on the chart.
Engulfing Patterns and Support and Resistance
Another effective way to trade engulfing patterns with price action is to find the pattern at key support and resistance levels.
If the price approaches a resistance zone while a bearish engulfing pattern appears on the chart, this will create very strong bearish potential on the chart. Conversely, if the price approaches a support level while a bullish engulfing pattern appears on the chart, this will create very strong bullish potential on the chart.
These situations provide a high probability of success for trading. Many times, when you enter at the right moment under technical convergence, you can enter emerging trend reversals early. Now, let’s see how to combine the engulfing pattern with support and resistance levels:
The above is the hourly chart of USD/CHF (US Dollar/Swiss Franc) from February 19 to February 24, 2016. The chart shows another bearish engulfing trade, which occurred after the price and psychological resistance level.
The black horizontal line in the chart represents the USD/CHF parity rate of 1.0000, a very strong psychological resistance level. After a strong price increase, USD/CHF encountered this resistance and subsequently tested it twice more. On the third test of this resistance level, the price formed a relatively large bearish candlestick that engulfed the previous bullish candlestick. This created a bearish engulfing pattern on the chart.
Confirmation of the bearish engulfing occurs on the next candlestick, which is bearish and breaks below the body of the engulfing candlestick. The closing of the confirmation candlestick provides a signal for short entry.
Stop-loss should be set above the upper shadow of the engulfing candlestick, slightly above the 1.0000 position.
After that, the price began to decline. Subsequently, the minimum profit target of the pattern was achieved (as indicated by the yellow arrow). You can close part of your position here and keep part to aim for further price declines.
Note that USD/CHF continues to form lower highs and lower lows during its decline, which provides confidence for the downtrend. Suddenly, the price begins to consolidate, and we marked the upper limit of the range with a thin black horizontal line. Once the price breaks through this resistance and closes above, the trade should be immediately closed. As you can see, this forms a higher peak on the chart, indicating that the bearish trend may be interrupted.
Combining support and resistance levels with the engulfing pattern is a very excellent price action-based trading method.
Let’s look at another example of a bullish engulfing pattern in EUR/USD: As you can see, the bullish engulfing candlestick pattern exists, indicating a possible buying opportunity.
The above trade was executed through the following steps:
1. Identify the bullish engulfing pattern.
2. Execute buy order at the price level of 1.1301 after confirming the pattern.
3. Based on a 1:2 risk-reward ratio, the profit target is set at 1.1347.
4. The stop-loss is set at 1.1278, below the lower shadow of the second bullish candlestick.
Engulfing Candlestick Patterns: Pros and Cons
Both bullish and bearish engulfing candlestick patterns have their pros and cons, as shown in the diagram below:
Summary
The engulfing candlestick pattern is a double candlestick pattern. It consists of two candlesticks, where the second candlestick completely engulfs the previous one, including its shadows. The engulfing candlestick pattern has strong reversal potential on the chart. We identify two types of engulfing candlestick patterns:
◎ Bearish Engulfing: Can be found at the end of an uptrend. It starts with a bullish candlestick, followed by a larger bearish candlestick, whose body completely engulfs the first candlestick in the pattern. This creates bearish (reversal) potential on the chart.
◎ Bullish Engulfing: Can be found at the end of a downtrend. It starts with a bearish candlestick, followed by a larger bullish candlestick, whose body completely engulfs the first candlestick in the pattern. This creates bullish (reversal) potential on the chart.
Confirmation of the engulfing pattern occurs on the next candlestick on the chart:
◎ If the engulfing pattern is bullish, the next candlestick should be bullish, and its closing price should be above the body of the engulfing candlestick.
◎ If the engulfing pattern is bearish, the next candlestick should be bearish, and its closing price should be below the engulfing candlestick's body.
Here are three basic rules for engulfing trading:
◎ Open trades when the candlestick closing is confirmed.
◎ Set the stop-loss order outside the opposing side of the engulfing pattern.
◎ Maintain a minimum price movement for trading equal to the size of the engulfing pattern, or use price action rules to extend the trading time.
The high-probability price action method for trading bullish and bearish engulfing patterns is to look for the pattern at important support and resistance levels.
Spent five years, from 50,000 to over 36 million, going through thousands of days and nights, drawing over 800 charts, summarizing the secrets to making money in the crypto world: (Trend Trading)
Today I selflessly share with everyone. The method is very simple and practical, and even beginners can get started immediately. I suggest directly following and saving it.
Trend trading refers to the trading method of trading in the direction of a strong price increase or decrease. Different traders may have different definitions of trends.
For example, a trader who prefers high volatility assets may only consider that an asset is in an uptrend when its price rises by 20% or more.
A low volatility trader, on the other hand, may only need a slight price movement to consider that a trend has formed.
Regardless of the time frame or strategy, the goal of trend trading is to identify trends and find ways to join them with the lowest risk. To this end, this article will discuss several trend trading strategies and reveal how to find trending assets.
First, let’s talk about how to identify trends.
Trend Trading Indicators
When trading, the less subjective your view of the market, the better. Therefore, you can use technical indicators to judge market trends.
Trend Line
Trend lines are a good way to clearly define market trends. While there is still some subjectivity since you need to identify the starting and ending points of the trend line, with some practice, you should be able to identify key support and resistance points, thereby clarifying the trend.
For a bullish trend, you need to connect the lows and highs to form an upward channel. After all, an uptrend can only be confirmed when you have a series of higher lows (HL) and higher highs (HH).
When the market is in an upward trajectory, the price should not fall below previous lows.
Similarly, for a bearish trend, you just need to reverse the lows and highs.
Please note that the two charts above are actually of the same stock, just in reverse trends during intraday trading. Trends can help you reveal the trading direction you are in. The advantage of trend lines is that as you continually draw trend lines, your eyes become increasingly trained to predict the stock's trend direction.
This helps set goals and reversal points in your trading process.
Trend Channel
Furthermore, you can use trend channel drawing tools. These channels will create a parallel clean line. However, they will not allow you to create wedge or diamond shapes.
Generally, trend channels work best with large-cap stocks: these are companies with higher market capitalization and liquidity.
Slope of the Line
Another point to note is that you need to identify the minimum slope of the line, which will trigger a trend formation.
Strong trends typically have a slope greater than 50 degrees, creating strong upward momentum.
This is completely subjective. Nevertheless, if you are trend trading, then the trend should be strong enough to capture your attention.
Moving Averages
Moving averages are another excellent indicator you can use to measure trend strength.
On larger time frames, you can use a simple method to observe whether the price is above or below the 200-day moving average. However, another method is to look for strong trends, during which the average lines do not cross during upward movements. The spacing between the moving averages indicates that the stock is strongly rising across all periods (short-term and long-term).
To further illustrate this, we can filter out those stocks where the 20-day, 50-day, and 200-day moving averages overlap on the daily chart. In other words, the 20-day moving average is above the 50-day moving average, and the 50-day moving average is above the 200-day moving average.
This tells us that the short-term moving average is above the long-term moving average, indicating an uptrend. Of course, the opposite is a downtrend.
Example of an Uptrend
From the above chart, you can see that the purple 20-day moving average is significantly above the red 50-day moving average. Moreover, below, the 200-day moving average is also sloping upwards.
These three moving averages are neatly aligned, providing a strong signal that the trend is very strong.
Non-Trend Example
Now that you know what a strong uptrend looks like, take note of the difference between GOOGL and XNCR trends.
Look, the market has a lot of oscillation, right?
The above chart shows two moving averages, the 10-day and 20-day exponential moving averages (EMA). You can see the backtesting situation between the 10-day and 20-day moving averages, which clearly indicates that the stock price is not in a strong trend.
Example of a Downtrend
ABIO showed a significant sell-off after reaching an approximate high point of $18. Since then, the stock price has not recovered.
The above chart clearly shows a strong decline in stock prices. Notice that the moving averages do not cross at all during the decline. To enhance the trend's validity, the moving averages always maintain a significant distance during the decline.
It should be noted that this trend is difficult to find. You certainly don't want to stand on the wrong side. Unfortunately, some sell-offs do not produce pullbacks, making it impossible to provide low-risk entry opportunities.
Momentum Oscillator Indicators
Another indicator you can use to analyze the market is the momentum oscillator. These indicators have no upper or lower limits, allowing oscillators to fluctuate with stock price movements.
The TRIX indicator (Triple Exponential Moving Average) is a momentum oscillator that oscillates above and below the zero line. In the next chart, we will discuss a stock that is in a strong downtrend.
As this stock continues to decline, notice that TRIX has remained almost consistently below the zero line.
It is worth noting that TRIX does not react quickly because it smooths three exponential moving averages, making it a good indicator for measuring trends.
Observe how TRIX remains below the zero line when stock prices fall. Remember, this does not mean TRIX will not occasionally break above the zero line slightly.
Please remember that in the market, price action rarely fits perfectly into the frameworks specified in technical analysis books.
More Trend Trading Examples
In our first example, we see a stock that is clearly in a downtrend. You can see the stock is forming lower lows and lower highs.
Next, we have a strong bullish upward trend, forming higher highs and higher lows.
I hope these examples help you see different trends. Here’s another:
Can you see the lack of any trend in the chart above? This is what we call a ranging market, or securities without a clear trend. Most such stocks are in a range-bound oscillation.
Reasons for Trend Trading Failure
Trend trading, like any other strategy in the market, will never have a 100% success rate. Usually, when prices peak, break through their channels, or supply is too heavy, bullish trends fail.
Conversely, when prices plummet or demand shows support, the downtrend will end.
The key lies in studying trends, identifying consistency between volume and price action.
Not adhering to stop-loss
When you trade a stock that is in trend, you feel very good. You don’t have to do much, and money flows into your account continuously. However, if you buy trending stocks at the moment of reversal, you might get caught in trouble.
This is because entering late can lead to a terrible reversal, with the stock price eventually falling back to where it started.
Therefore, you must use stop-loss; otherwise, the trend will become your worst nightmare.
If you find yourself buying at the top of a strong trend, do not add more positions, as this violates the low points of each decline. This practice is called averaging down and can lead to devastating consequences.
In the example above, we pointed out what would happen if you bought support in a strong upward trend channel and the trend failed.
As you can see, if you do not set a stop-loss below the tested low, things can quickly become very bad.
Strategies for Joining the Trend
Now that you know what to avoid, let's look at a few strategies to help you smoothly join the trend.
1. Moving Average Pullback
In a strong trend, prices often pull back to important moving averages, such as the 20-day or 50-day moving averages. If these pullbacks continue to rise, they typically provide a good opportunity to join the trend while keeping risk low.
Institutional investors prefer to buy at lower prices, so prices often find support at these levels.
Let’s take the above GOOGL example to see how buying near the 50-day moving average is an excellent decision.
We saw three excellent buying opportunities for pullbacks on the GOOGL chart, all occurring near the 50-day moving average, with arrows marking these opportunities. Each buy was a great profit opportunity.
If the trade does not succeed, you can set the stop-loss below the consolidation range each time to control risk.
2. Mean Reversion Trend Trading
If you do not like using moving averages, sometimes channels can be more effective. We removed the moving averages from the GOOGL chart and this time we added a channel.
Note that the buy point corresponds to the low point of the channel, while the sell point corresponds to the breakout of the high point of the channel.
This can be a very simple and effective method for managing short-term positions. Essentially, you buy on pullbacks at support and sell at highs.
The key to trend trading lies in your entry point, stop-loss, and chosen trading method. Whether using moving averages, channels, or oscillators, you need to master each method to develop your own advantages.
The biggest difficulty in trading is not anything else, but the fear of losing money!
So how do you overcome the habit of being afraid of losing money?
The great philosopher Russell once said: The fastest way to overcome your fears is to do what you are afraid of. Aren’t you afraid of losing money? Then go practice losing deliberately.
Step 1: Prepare 100U
Step two: Lose this 100U within a week. But this does not mean you should act blindly; no blind trading, no blindly increasing leverage, no liquidation, strictly set stop-loss, and must strictly execute opportunities within your trading system.
Aren’t you afraid of losing money? Don’t you not believe in your trading system?
Come on! The best way to eliminate fear is to face it, so go ahead and lose! This 100U is for you to lose; if 100U is not enough, come again with 100U. When you feel numb to losses, that’s when you succeed. At that time, you will understand what I often say: 'Losing money is normal, missing out is also normal; only by accepting this can making money also become your norm.'
Only through repeated losses and playing against yourself can you transform and overcome the fear of loss. From now on, whether holding positions or entering the market, you will act decisively.
Let me tell you secretly, if you really do what I just said, the result is likely not to lose everything, and you might even double your capital.
So by then, you will uncontrollably want to increase your capital investment, but when you go all-in with 1000U or 10000U,
You’ll find that your old problem has returned: still afraid of losing money, what to do?
Question 1: What to do if you are still afraid of losing money?
Adjust your position size to an appropriate level
Question 2: What is the appropriate size?
A position that allows you to sleep well.
Question 3: When can I increase my position size?
You can still sleep well after increasing your position size.
But please note! The deliberate practice method I just taught requires you to have your own trading system. If you don’t even have a trading system, then you have no right to fear losing money!
Successfully recoup the losses, double the account. Follow the old ways, position yourself in advance, and enjoy the big gains!!!
Stay Tuned: SKATE MEMEFI