After buying a cryptocurrency, the question of its sale arises. What moment to choose in order not to miscalculate and get rid of the asset at its peak, right before the start of the decline. Determining the right time is possible, but it requires a deep dive into the topic and some luck!
There are no unambiguous factors that will always prompt the moment of sale. In the case of cryptocurrency, market indicators are interpreted ambiguously, and none of them can be considered in isolation. All fundamental and technical factors must be studied together.
One of the strongest fundamental factors that can be interpreted unambiguously is legislative regulation. The news that large states (China, the European Union, the USA, etc.) are going to limit the spread of cryptocurrencies can be regarded as a signal to sell. Legislative bans will inevitably negatively affect the rate of cryptocurrencies. However, today such news is unlikely: China is going to launch a digital yuan, the European Union is thinking about a digital euro, etc. Blockchain and digital currencies are gaining popularity.
“In principle, I would not recommend to private investors to short cryptocurrencies: it is better to choose a long-term retention strategy. At the same time, the rate drawdown should be regarded as a good reason to buy at the lows and average the position '
Any correction or trend change is usually accompanied by a sequence of certain signs. Speaking about the analysis of exchange instruments directly, the specialist recommended analyzing in a complex: the coin chart, the order book and the tape - the trading history.
1. On the cryptocurrency chart, it is necessary to determine the significant levels for it. Most often, these are some extremes that coincide with psychological levels of support and resistance, for example, for the BTC / USD pair - this can be a round price value: $ 10,000 or $ 12,000. A situation where the price has approached the resistance level several times may be indicative. But she could not pierce it.
If such a price level is identified, you can go to the order book and see the accumulation of orders with a large volume. If large orders are located at such a resistance level, then there is a possibility that large players are planning to fix their positions at this level and, possibly, a reversal will follow. Such information should be confirmed by analyzing the stock exchange tape, since large players can easily cancel their orders when the price approaches their levels.
A price reversal or correction is confirmed by the presence of a large number of executed sell orders with a large volume in the tape. An additional signal is an increase in the trading volume at this level.
2. If such a price level is identified, you can go to the order book and see the accumulation of orders with a large volume. If large orders are located at such a resistance level, then there is a possibility that large players are planning to fix their positions at this level and, possibly, a reversal will follow. Such information should be confirmed by analyzing the stock exchange tape, since large players can easily cancel their orders when the price approaches their levels.
3. A price reversal or correction is confirmed by the presence of a large number of executed sell orders with a large volume in the tape. An additional signal is an increase in the trading volume at this level.
“The desire of large players to fix their profits is often accompanied by the creation of a certain 'hype' around a certain topic on thematic resources, for example with DeFi. This is done in order to attract maximum attention from small traders and investors and eventually sell them their volume of cryptocurrency '
Large stake holders, the so-called 'whales', have the main influence on the cryptocurrency market, so it is necessary to understand how they think and move with them, says Anton Kravchenko, CEO of Xena Financial Systems. According to him, much more attention is paid to the question of “when to buy” than to the question of “when to sell” precisely because the “whales” buy when the price of bitcoin is close to or below the cost of mining and almost never sell, except for the situation in 2017. When the gap between the price of bitcoin ($ 19,000) and the cost of mining ($ 3,000) reached more than 500%.
“You need to sell if, for some reason, the cost of mining decreases, and the price remains unchanged (this is an unlikely event due to the structure of the miners market and the link to complexity). Or, if bitcoin quickly overcomes resistance without fundamental factors '
For example, if Bitcoin rises sharply in price to $ 17,000 tomorrow for no apparent reason, it is recommended to sell. Cryptocurrencies are an emerging market, where one should slowly gain positions at understandable prices in order to sell in moments of euphoria. However, bitcoin has already passed the first stages of its formation, which means that periods of mania and falls will be shorter and less pronounced, Kravchenko said.
Traders, investors and analysts can make assumptions about the future movement of the asset price, based on different methods of market analysis. In this case, there is no guarantee that the price will move in the predicted direction.
There are technical indicators that, according to certain rules and timeframes (TF), generate trading signals to sell or buy cryptocurrency. For example, an hourly timeframe trading system written on the MACD indicator. A signal to buy BTC / USD appeared, the user bought Bitcoin. 5 hours have passed, the price does not rise. One of the options with which this may be related is that at the 4-hour TF, the same trading system generated a signal to sell BTC. The older the TF, the longer the investor's time horizon and the stronger the trading signal.
To understand how soon the decline or growth will begin, I advise you to apply graphical analysis (trend lines, various price formations, horizontal price levels of support and resistance, as well as bullish and bearish divergences). For accurate market entry, you can use indicator trading signals (MACD, RSI, stochastic, etc.). But for this you need to understand what they show and how they are calculated, to know all the disadvantages and advantages of trend indicators and oscillators, the analyst concluded.
Happy trading readers!
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