Successful Crypto & Bitcoin Price Action Strategy
There are many ways you can trade cryptocurrencies - either Bitcoin or any other altcoin - depending on what you base your predictions on. From fundamentally studying the asset, reading news and press releases that may modify the price, to evaluating how its price fluctuates, traders have myriads of opportunities when it comes to how they want to evaluate the market.
And, when it comes to technical analysis, price action is the main protagonist of any profitable trader's studies.
What Is Price Action?
Price action is the movement in the price of an asset. Whenever you look at a chart, you are indeed staring at price action.
That is because every candlestick shown on the chart is the representation of price action.
Why Should Traders Take Price Action Into Consideration?
Well, that's an easy question to answer.
Price action can tell an experienced trader what to do next. It lets you know how strong a trend is doing, where important support and resistance zones are or if there are any important bullish or bearish Price Action Patterns. If the movements increase in size, then the trend has momentum; in the opposite case, it's losing its power and might get to a sideways trend and to a low volatility period.
Let's look at a D1 BTC/USD chart for a moment:
Just by looking at the price action, you can spot two incredible opportunities for long-term traders:
But, price action goes a long way for more than just studying past opportunities.
- Shorting from June 7th to the 25th was an amazing opportunity.
- Going long around July 13th until the 24th would have given anyone a huge profit.
- Consequently, immediately going short until August 10th would have given a huge profit likewise.
How Can You Use Price Action For Trading Today?
Price action - what is really happening in the market - is the ultimate confirmation of a possible trend.
If Bitcoin's price movements increase, then it means that the current trend is going strong. However, if the opposite happens, then the trend is losing momentum, and the more it diminishes, the more it becomes prone to a reversal.
Let's look at the same graph with a little visual aid:
Here, we can easily see how the downward trend started at the red arrow, right after the upward movements started decreasing and were not able to break the previous swing high of the market - this means that we are in a bearish trend.
I held my horses for an extra day. That's because I always need confirmation.
Note: I already saw the price action suffer while going up, so I already have the idea that a bearish trend may really start.
The next day, there it is! A bearish movement that's even bigger than the first red candle, so I place my SELL order. The next day, there's a huge drop in the price, so we're already multiplying our investment.
My Stop-Loss was simply placed above the swing high (above the high of the green candles).
And it is after this downward swing that the market met a support zone, and it received a small bullish boost (this move formed a new support zone). However, I have no reason to believe that the trend is ending due to the huge previous candle, so I stay in the trade and it quickly falls further.
Note: I could have sold in fear due to the previous (decreased in size) swings, but I would have still made a huge profit.
Then at the blue arrow after a huge price drop, there is another bullish move - another warning for my SELL trade appeared, but BTC started moving lower again - so I marked the high of this bullish swing by the red line shown in the chart below:
And soon when Bitcoin broke the red line, it was clear that the bearish trend was about to end - due to the reason that the market started making higher highs. This was my exit point for this trade.
Sure, it was possible to make a little higher profit, but I had already made thousands from a simple trade opened and maintained just by judging price action!
Also, remember that it is impossible to catch any market and in the long-term exactly on its lows and highs. Me as well as you and every other trader simply open each trade a little bit later and exit a little bit later as well. But still, it is possible to make huge profits in the long term.
And of course, in case of BUY trades, my Price Action trading looks similarly only in the opposite direction.
This is for the introduction of successful Price Action trading, in the following articles I will show you how I exactly count and judge market swings as well as how I combine Price Action to make highly probable and successful trades.
Take care and trade well!