Altcoin Season, Small Crypto & Risk Management - 21st October 2021
Covering $BTC, $ETH, $BNB, $DOGE, $ONE, $FTT, $MRPH, $XRP,
Altcoin season is when most of the top altcoins outperform Bitcoin. So are we entering into the altcoin season?
Yes, there are early signs that now #Altcoins will outperform Bitcoin at least for the next few weeks. But these are premature signs and the prices have to sustain at upper levels.
So you may see again twitter trends like #DogeToMOON
Before discussing charts, let’s discuss how to approach risk management for small crypto.
CM Learning - Small Crypto, Risk & Stop Loss
As I discussed in the last newsletter that small ticket #Cryptocurrencies are more volatile and you have to approach them differently from Bitcoin or Big Crypto.
Stop Loss
Stop loss means the levels where our view gets wrong and at which we exit from the positions.
It is the previous support/resistance zone where prices were rejected multiple times and there was a strong battle between buyers and sellers before crossing that zone.
For example, if have to trade $ETH today for swing, I will buy if it closes above 4300 zones, and then I can place a stop loss of 3900 which is the immediate support area.
So it simply means that if prices close above $4300, I am expecting that #Ethereum will go higher towards $5000. But what if I get wrong?
So 3950-4000 is the immediate buying zone and if prices close below this level then my view will be proved wrong.
So I place the stop loss at 3900 and it’s around 10% from the buying price. Here are a few points:
The Risk-Reward ratio should be 1:2 which means that if I am taking a risk of 10% then my target should be 20% which comes to around $5100 in $ETH.
If risk-reward is 1:2, then even if I get wrong 50% of the time I will still make good money.
Small Ticket Crypto & Stop Loss
Small price #Crypos have higher volatility and therefore it requires a larger stop loss.
Let’s look at the example of $TEL.
We entered in $TEL at 0.023 and it made a high of $0.026 thereafter it reversed and traded near 0.019-0.020 for some time.
So it’s almost more than a 20% loss from our buying zone, should we exit?
No. Our stop loss was 0.017 almost 26% below the buying zone
Why we are taking a risk of 26% in $Tel when the similar trade-in $ETH can be executed at 10% risk.
There is the reason - “Reward”
So in $Tel, our target comes around 0.038 which is almost 65% from our buying level. So it’s almost 1:3 risk-reward.
That’s why I had posted that “you can’t compare 15% move in Bitcoin with 15% move in any crypto trading below $1”
I will continue this discussion and In the next newsletter, I will discuss “Position Sizing” for Altcoins. Now let’s discuss charts:-
Bitcoin
$BTC trading near all-time high zone $65000. As I posted in a previous newsletter when $BTC was trading at 55K that 64K-65K zone will act as a strong resistance zone.
The short-term support zone is $58000 and long-term support is $52000 zone.
Short-term traders should book at least 50% profit at this level and wait for it to consolidate before taking a fresh entry.
Even if $BTC breaks out and trades above 65000 for a few hours, it’s better to take a fresh entry at the time of retesting when there is strong weekly closing above 65000.
Ethereum
$ETH chart is similar to $BTC and it’s also trading near the all-time high zone.
The strong support area is the 3600-3650 zone and then 3300-3400.
Short-term traders can book half profit at current levels and wait for consolidation.
I believe that either there will be consolidation before the all-time-high breakout or if it breaks out then we will see a good retesting later.
If prices consolidate then the new entry for short-term trades can be taken near 3650-3700. In case of a strong breakout and weekly closing above 4300, fresh entry can be initiated with stop loss to 3900
Long term investors should hold for the target of $10000 unless it breaks $3200
Swing Trade Update:
I am not sharing any new trade today. I had shared a few swing trades in the last newsletter and here are the updates:
$BNB
$BNB entry initiated at $470 and it made a high of $505. Currently trading near $484. The trade is going well and our target of $610 is intact.
The initial stop loss was $424, now we can trail the stop loss to $444 on a closing basis.
$TEL
We entered $TEL at 0.023 and thereafter it made a high of $0.026. Thereafter it fell and tested the breakout zone of 0.019.
Now trading at $0.021. Our stop loss was 0.017 so the trade is active and we are holding.
$MATIC
As shared in the last newsletter and in the tweet that we have added $MATIC at $1.45 zone and holding it with the stop loss of $1.27
$DOGE
As shared in the last newsletter, the entry is to be taken once prices close above 0.26-0.27 zone. The trade is still not executed as entry criteria are not fulfilled.
You can enter this trade once prices sustain above 0.27
Long Term Trade Updates:
$ONE
$One is going well and I believe consolidation at an all-time high completed.
$FTT
Shared in the previous newsletter to enter $FTT at $52-55. It’s also going well and trading at $65. It has bigger targets
$MRPH
$MRPH is consolidating for some time and trading in the range of $3.3-$4.5. Although it went below $3 but not given any closing below $3.3.
The strategy is simply to add it as near as $3.3-$3.5 or at lower levels. Not expecting to go below $2.6
Thanks for reading. Have a Bulish Day