Why does only technical analysis make sense?
The issue is that if you are a trader, you are dealing with market sentiment.
So that is no matter what the news is about.
If you see the signal - you open the position.
If you can read what the market told you - there is no sense in tracking the news feed.
I will tell you more - there is a chance to get stuck in a variety of contradictional news and opinions and become so uncertain that you won’t be able to conduct a successful trade session.
So I can tell for sure: don't get stuck in the news, that can lead to information over-saturation that will make you exhausted and you will feel uncertainty - as it is your main enemy.
If you trade crypto
Especially on the crypto market - the principle of the movements on such an enormous market without any institutions are under the law of mass psychology.
You can use the fear\greed index to indicate people's mood.
Usually, before the massive dump there is a variety of whip up news about the market going up. That is true, of course, the price is really rice. However, that is not a good signal to buy.
A lot of young traders have a tendency to succumb to this temptation and start to buy when others sell.
“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful” which belongs to Warren Buffett makes sense not only in investing.
There is a famous story, we don't know if it's true, about how in the late summer of 1929, a shoe-shine boy gave Joe Kennedy stock tips, and Kennedy, being a wise old investor, thought, “If shoe shine boys are giving stock tips, then it's time to get out of the market.” https://time.com/5707876/1929-wall-street-crash/
When the market is overheated, most traders will fix their profit.
To stay in the line you should think like other traders: understand when the majority will buy and when they will sell.
For you to get to know a little bit more what actual trading is about, let’s take a look at traditional trading sessions. Of course every trader is an independent entrepreneur and each has his\her own style. However, all pros have something in common.
So you as a trader should be focused on searching for opportunities.
Market is full of opportunities, your first step being the trader - to find them.
And if you are a beginner - do not try to find them where there is nothing to find. If you are not certain and start to convince yourself - leave this instrument. Go ahead in searching for opportunities that are worth attention.
In such a case in a field that is full of roses you are trying to convince yourself that this dillwid is a pretty plan too.
The second step - you should calculate your risk and allow yourself the exact amount of money that you will be ready to donate for the profit.
That's definitely important.
Don’t put it all in.
We are not in a casino.
But for the game theory lovers I can also remind you of successful trading - that about probability theory. The amount of winning deals should be greater than losing one.
The psychology bible of trading written by Mark Douglas - Trading Zone will tell you more about how to form the right mindset for becoming a successful trader.
Loose deals will always take place. Nobody can know for sure what the price will be in the next two seconds. Noone can predict the future. Noone can know about everything that is going in the world in certain moment of time. Our brain simply can’t keep all the info in one moment.
But you will ask - how to be certain in such an uncertain world ?
You should decide each time what you can do to overcome such unpredictable obstacles with current instruments, information and possibilities that you have at your disposal.
Ask yourself opening the opposition - how much I can allow myself in such a situation?
The main thing that you should learn in the very beginning is money management and risk management. Riding this knowledge will lead you to success. Remember that there are a lot of possibilities and you have an enormous amount of chances. The point is not to get stuck in one deal.
And then just keep going - decide when you will close, where you will take your gain.
Read the market as it can change his mind each second.
Great marketologist says that the customer is a woman.
The market is a woman too.
Work carefully and it gives you more than you expect.
Do it with pleasure.
You should define your goal.
Otherwise you have a risk not to take profit at all.
To predict the FOMO (fear of missing out) close your position as soon as you get that you can’t be sure that would be on the market in the nearest future.
In a perfect world - set your goal - TP in the very beginning.
Important: while setting the take profit pay attention to what the market allows you, not that how much you would like to earn from the position.
While learning, each trader faces obstacles. We are not machines, and money is associated with two main factors that influence humans comfort - safety and commitment to delight. That is the reason this profession needs high quality self-control.
In the very beginning traders usually faced with such an emotional traps:
3 High emotion
Due to all his or her career, a trader can round this circle not at once.
If that would be interesting for you - I will explain these stages further. Just let me know if you are ready to discuss.
If you are struggling - read about psychology, consult with a specialist (but formulate your questions correctly) or just take time to relax - that is normal.
The main in technical analysis:
- Understanding the market
Patterns and indicators signals also take place but remember that they should just help you to become more sure in the deal. Or to warn you. They just reflect the past and to get stuck in the past is an unforgiven thing in trading.
To dedicate strong levels you can use info from DOM - Depth of Market.
So here we can see where we can take profit and set stop loss orders.
And if you start trading I recommend you to use non-lose strategy.
My logic if following:
We have a good amount of orders to buy on level 3100 ETH. (green line on screenshot)
We have strong resistance on 3200 ETH - red line on the screenshot.
The market is bullish, so that gives a benefit for the buy position.
But in case the trend will change - we have a strong support level of 3100 ETH - as a majority of traders showed a willingness to buy for this price.
I am setting the Stop Loss under the supposed level - 3087 ETH. As I always give some gap in case there would be hight volatility.
There are three variants:
- To remain the position as it is.
But remmember that there are also a possibility to hide an order and DOM should be your additional helping instrument in trading. It can't show you how market will looks like in a second.