Identifying opportunities in the crypto downtrend
Crypto market is clearly in a downtrend. This is a normal part of the long-term crypto market cycle.
As of July 1st, out of 1,500 coins that altFINS tracks, 300 were in a Strong Downtrend and only 31 in a Strong Uptrend across all three time horizons (Short- Medium- and Long-term):
Traders must adjust to these changes in cycle phases. Currently, looking for long (buying) opportunities is like looking for a needle in a haystack and buying dips is like catching a falling knife. It would be swimming upstream. The odds are against it.
Sure, a few coins remain in an uptrend and altFINS can help traders find those rare gems using a market Screener (read how).
But the rest of the market is in a downtrend.
What's a downtrend? Generally defined as a series of Lower Highs and Lower Lows and can be accompanied by price breaks below 200-day MA and Death Crosses (SMA 50 cross below SMA 200).
altFINS has proprietary trend rating system that traders use to screener coins with. Traders can also screen for coins with a Death Cross or price below 200-day MA.
How can a trader make money in a downtrend?
Well, Rule #1 in trading is "don't fight the trend, trend is your friend, always trade with the trend".
Hence, for coins that are in a downtrend, traders should trade with the trend - that means (Short) Selling.
It also means to completely flip the playbook for trading in an uptrend: instead of buying the dips, traders should sell the bounces.
How to find the such opportunities?
Steps to identify Short Selling opportunities:
- Screen for coins in a downtrend using altFINS Screener
- Identify support & resistance zones
- Short Sell when
a) Price bounces back to a resistance zone and gets rejected, or
b) When momentum inflects bearish (MACD Histogram Bars begin to decline again), or
c) Price breaks below the nearest support zone.
- Profit target: next support zone. Stop loss: prior swing high.
Continuing with the Litecoin (LTC) example, price is clearly in a downtrend and has broken through several support zones ($200, $150), which have now turned into resistance. Also, price has broken below 200-day moving average and a Death Cross has just developed.
Price bounced from near $100 support zone to $150 resistance. If it gets rejected here and/or momentum inflects bearish again (declining MACD Histogram Bars), then the price is likely to resume it's downtrend trajectory and revisit $125 or even $100 support zones:
Find technical analyses of top 30 coins in altFINS' Curated Charts section.
In order for traders to be more versatile in any market, one must learn to Short Sell. Watch a video tutorial on how to Short Sell on Binance.
Author: Richard Fetyko, Founder of altFINS, a platform for crypto traders to find trading ideas. altFINS allows traders to screen and analyze over 1,500 coins and 5,000 assets using over 60 technical indicators. The platform also automatically detects chart patterns such as channels, triangles, wedges and key levels (support and resistance), and generates hundreds of trading signals daily.