Hello world!
I was asked to speak on TA + Crypto in one of my ‘Wolf Pack’ member’s Telegram channel + a Q&A session afterwards. This is all the writings compiled into one article. I didn’t plan any of this, just sort of went with whatever I could think of at the moment and covered the bare basics. Maybe I’ll add on to it in the future with more advanced sessions, but this is it for now. I hope you enjoy!
“I’m just winging this so I’d rather not be distracted halfway through a thought process
So to start things off, I’ll explain the basics of what TA is and why it is important.
- TA stands for Technical Analysis. It is used to analyze the market’s history (and psychology) to predict what the future may hold.
I personally believe that TA is even MORE important in Crypto than in regular Stocks.
The reason for this is because Cryptocurrency is extremely young, compared to stocks / forex.
Since the overall market cap is just a small fraction of the other markets, Cryptocurrency is a lot more susceptible to volatility + market swings .
Anyways, since Crypto consists of such a small market cap and are so volatile, regular ‘mom & pop’ day traders have a lot more impact on the market than in Stocks and FX and A LOT of the traders coming into the crypto space are fairly new traders. They hear of it as the ‘hip’ thing that will make you lots of money (which is true) and start rushing to begin trading. You’ll see plenty of young 19 — early twenties traders playing in the markets. Needless to say, a lot of the traders don’t start with that much experience and when they come into the markets one of the first things they will Google, or are told to learn, is TA.
When you have a bunch of people learning the very basics of TA and their accumulated capital is the thing that moves a market, then expect the market to work EXTREMELY well with basic TA. As opposed to stocks where it is mostly dominated by institutional money and moves a lot slower than crypto due to it’s overall market cap.
I have found that BASIC TA (Triangles, patterns, fib levels) is almost always more powerful than the more advanced stuff like Harmonics (Gartley / Butterfly patterns). I believe this is due to the fact that the large portion of new day-traders learn the basics and it works for them so they just stick to it. TA is supposed to be about understanding the mass’ psychology behind the markets, but with a market that is, for the most part, ‘simple’… then keeping it simple will turn out to be a lot more effective than throwing out advanced TA.
That is why I personally ALWAYS use the basic stuff and try not to stray too far off into the more advanced TA indicators + patterns.
So what are the basics of TA?
- Trend Lines (Support, resistance level)
- RSI (Relative Strength Index ( I prefer Stoch )
- Patterns (Flags, Double bottom/top, Head & shoulders, Wedges / pennants)
If you can learn these basics and apply them correctly, I will tell you right now that you will become a winner in the market.
So I’ll break down these basics further….
Trend lines:
Trend lines are basically just lines that connect the highest-high points (ceiling / resistance) and the lowest-low points (support / floor). Example:
When there is a new high and then a lower high afterwards, this becomes a new trend ceiling. Same goes for supports. Notice that every time it hits the point, it either bounces or shorts down.
Once the 2 points intersect it will then create a breakout point. This is where “Bears & bulls” battle it and ‘bet’ on whether the market will go bullish (up) or bearish (down).
There are many indicators that help with figuring out whether you should be a bull or bear:
- Look at how strong the support / ceiling is. You can figure this out by seeing at how many points the price touches the ceiling or the support. If there are 7 ceiling hits and only 3 supports. Most likely it will break down instead up up.
- Use other indicators such as RSI / Ichimoku Clouds. I personally prefer RSI. Ichimoku is also very powerful, but people use mixed settings which could throw off the support from other Ichimoku users. However, it is still very powerful and gives a lot of good signals.
If you’d like to learn about RSI or Ichimoku, I recommend just YouTubing instructional videos. Investopedia.com is really good, but it can complicate things for the more novice user.
On the note of trend lines / supports, a tip that I would like to give is to ZOOM OUT!!!!! You may be approaching a breakout point with, what may seem like, strong support, but this could be a false-indicator because there may be a strong ceiling point from months ago. One of the biggest mistakes I see on the markets is that people only analyze a small section / portion of the market and don’t take a step back to look at the WHOLE picture.
This is how I called the ‘bear’ on Bitcoin back when it was 2500–2600
While everyone was looking at all the bullish indicators from the last month or so, I took the time to look at the 1-Week chart on Bitcoin which clearly showed that the price was far from the organic support. (Screenshot coming up)
If you take a look @ this chart (Yep, thats right.. I went all the way back to $6.50 price) then you can clearly see that the previous run was high from the floor support and was due for a correction.
This exact same trend support was shown on ALL of the exchanges.
Compared to the previous bubble though, this one was NOTHING. A tiny bump on the chart. That is why there were so many people still bullish (including myself) because history tends to repeat itself. However, one needs to take into account the ‘catalyst’ as to why the previous bubble was so dramatic. Basically, BTC hit the mainstream for the FIRST time and institutional money flooded in. Unless there is a similar, epic, catalyst.. don’t expect for history to repeat itself and Bitcoin to rise up to 1 million dollars anytime soon.
So anyways, lesson: Zoom out… ALL THE WAY if you have to.
I’ll try to quicken this up since I’m making probably taking too much time. Anyways, another important thing to learn is patterns.
The basics are Flags, Pennants, H&S + wedges.
Flags are great indicators (Bull flag / Bear flag). They literally look like tiny little flags. Whenever there is a big spike from something like… a triangle breakout, then there will always be a point of consolidation. This big spike is the ‘pole’ the consolidation level is the actual flag. Example:
This is an example of a bullish staircase, something that would be considered a healthy climb. It consists of multiple flags being posted on top of each other which builds the stairway to heaven.
Note: flags can also be a pole with a consolidation tunnel (instead of the triangle shape) however, these usually look like this when you either A) zoom in closer, or B) when it is a bigger flag / higher cap coin.
H&S (This one is an inverse / inverted H&S) are another basic pattern. The larger the H&S, the more likely it is to be a correct pattern. If you zoom in close, you’ll notice that a lot of the H&S tend to not stick. A H&S pattern is an indicator / signal that the market is changing trends. A regular H&S is bearish. The head would be the highest point and the right shoulder would indicate the turn to a bearish downtrend. An inverted H&S is the exact opposite, as seen recently with Bitcoin.
(Also notice the flag on the top)
Wedges are other reversal signs. They can be used within micro movements or longer term. I personally enjoy tracking them within tunnels for small day-trading short-sell movements.
Example: This is a micro wedge. You can see the market moving up and creating a wedge. If I were day-trading this, I would sell near the top of the wedge and buy in a little bit lower.
People commonly mistake wedges as a powerful trend reversal pattern. This is false, most of the time the drop would be fairly small. However, if you win a lot of these small bets, your compound gains will amount to A LOT. I tend to do this during bull-runs up so that I can accumulate more and more coins before I dump.
A falling wedge is just the opposite of a rising wedge. It is a great way to buy in low on a position.
All of these patterns will be posted ALL OVER the charts. Pattern traders are very common and I have found it to be extremely successful / useful / powerful.
I am definitely a pattern trader.
hrmmmm… Been writing up a lot. Trying to see what more basics I could throw out that can be used for powerful returns
Some basic Pro-tips:
DO NOT OVER-TRADE!!!! People lose a lot of money by going in and going out and in and out, blah blah blah. This is a MAJOR mistake by a lot of new traders. You need to have patience to play this game. We are in a bubble, so most of the time you’ll just have to wait 1–2 weeks to even see your money come back. If you can’t survive for 1–2 weeks without trading, then you need to stop throwing your entire paycheck / savings into Crypto. That is extremely dangerous.
Keep up to date with news. Catalyst trading is some of the most profitable trades you can do…. but also some of the most dangerous. For example, if you predicated a catalyst happening BEFORE it hit the media, then you will win / save lots of money. I saw BTC locking in BIP191 Segwit when I saw it go up to 77% for the first time. However, once it (basically) confirmed, the media all covered it and we had a crazy rally up to current levels. If you’re ahead of the media, you will win. If you’re late, then take some time to step back and read all the indicators on the markets to see if the FOMO / FUD already took it’s course or of you’re still early to catch on.
NEVER FOMO / FUD. It is always safer / better to bet in a market that you can read, than to just go in blindly and hope that everything will be ok. It is fairly hard to call the top of a catalyst rally, so if you’re late to the party, holding off until the consolidation period is, in my opinion, a very smart thing to do. Same with dumping. If you see that the market is dumping because of some FUD catalyst, hold back and wait for the bounce-back. The last thing you want to do is dump @ the bottom or buy @ the top. People always think that the best chance of getting the most profits is hitting the ‘tippity-top’ or the ‘very-bottom’. WRONG! It is a lot more profitable to slowly build compound gains that will make you more gains in the future, instead of trying to hit all of these tops & bottoms. Those are risky trades and suicidal hunts for ‘fools gold’.
And make no mistake, there is ALWAYS a consolidation period and ALWAYS a bounce-back. Wait until one of those phases to buy/sell. The price will never go 0 to 100 in the matter of minutes. The markets move a lot slower than that.Never margin. Period.
Oh, Also! Learn how to read candles
Some more tips:
Before you try to become a wave-riding short-seller, learn to become a position trader first. This basically means that you place yourself in GREAT positions and just hodl until you are happy with your gains. People think that you have to be in EVERY up / down swing. You shouldn’t. In fact, you will most likely lose more by trying to ride the waves. They can be brutal, and unless you are willing to pay a lot of money to learn how to master it, I recommend that you don’t even attempt it
Q & A:
That is over-charting. I tend to not let trend lines break over candles, unless it is to display a new trend support / floor from a previous tunnel’s ceiling. Example:
This is the only time I let trend lines break through candles. Otherwise, I would delete the line if the candle breaks through since the trend is no longer respected.
Can you go into more detail about the logic/math behind putting money into alts to accumulate more bitcoin? I “get it” but its still a bit confusing.
Altcoins are usually paired with BTC. BTC is paired with FIAT (USD, etc). The end-game goal is to gain more FIAT. With that being said, alts are always connected to FIAT through BTC. So if BTC goes up, but the price of alts stay the same (paired with BTC) then alts automatically go up in regards to FIAT. This is because smart $ accumulate alts at low price support points because they know that when the altcoin market does rally, they will double their gains by buying altcoins cheap.
How/when do you know that a ‘high’ is a ‘high’ or a ‘low’ is a ‘low’? how long do u need for a price to bounce from it to be sure about it?
When the candle closes out and the trend reverses, then that will solidify that point of being the bottom / top
I recommend waiting at least a few candles before setting the trend lines. If you try to do it like RIGHT after, then you risk the chance of it being a ‘fake-out’
You said that on this market TA works better because in crypto there are no institutional traders yet. Does it mean they don’t use TA?
There are definitely institutional traders. Of course there is, however, a large portion of the market consists of regular day traders, a lot of them being ‘novices’… which is why I say the basics are so powerful in crypto.
Especially for the smaller movements.
How long are you in TA overall? Are you more profitable than buying/holding and if so then how much?
I don’t believe in buying & hodling ‘forever’. Those are investors, not traders. I believe that one should realize their gains, especially in a new volatile market like crypto because you never know what may happen. For example, if someone bought BTC @ 2000 and it went up to 2700 and they didn’t take profits because, #HODLFOREVURR”…. then BTC hard forked… they would be fucked. On the other hand, they could have won a lot hodling vs trading if things went good and they didn’t have the experience trading.
Beginner traders will MOST LIKELY make less than #HODLFOREVURR investors. It is known as ‘paying your tuition’. However, I believe that if a trader can stay afloat long enough to accumulate experience, they will make more money in the long run than an investor.
What % of TA would you say is correct? It seems that sometimes a chart can have multiple indicators confirming a down/up trend but then goes the opposite way?
You will never be 100% correct on TA. TA just gives you data to make educated guesses. Mixed indicators are very common and that is when you look for even more indicators / signals to solidify your thoughts. However, be wary of using too many indicators. I often see charts that are just CLUTTERED with indicators. I personally cannot chart like this. It hurts my head. Too many indicators = more of a chance of getting mixed signals which can really mess up your views on the market.
So in a bullmarket, how many trades do you do in a week, on average? You said over trading is not good so I just wanted to see how many you personally do over a week?
It depends. I consider myself a fast- aggressive trader so I think I over-trade more than the average ‘successful’ trader. But I also started as a ‘fast paced’ trader moving around in the micro swings. However, my capital is now too big so I can’t move as smoothly as I used to in such small spaces. I would say 4–8 trades a week is relatively healthy.
Assuming, you want to trade a particular altcoin against BTC. What are those basic stuff one need to considered in reading the chart???
- Always check the BTC price. If BTC rallys, the altcoin is most likely going to go down or stay stagnant.
- The basics are all listed above.
Your best top 3 TA tools are?
- Triangles
- Patterns
- RSI
Wolf, how do you determine the buy zone?
I like to buy @ the bottom / turn of RSI. When RSI is curving up on multiple time levels (1H, 30m, 15, etc) then that is a clear indicator of the market buying in.
Which of the TA pattern can you advice to learn and master?
- Triangle
- Flags
- H&S
- Pennant / wedges.
- Cup & Handle (Real ones, not ugly ones you see posted all over twitter)
- Double tops / bottoms.
I also recommend learning Elliot Waves.
Those are fun.
How long did it take you to get to the point that you could run an analysis, and then go to the mall knowing that your coins were fine? I might be the only one, but when I have a bigger bag, I tend to watch the market.
I watch the markets all day, everyday (14–20 hour work days). But over time you build the experience to be comfortable enough to just let it be.
So I totally don’t get it why u called it top on BTCUSD, last time it pumped so hard it didn’t stop that early. See pic below:
Because the last time was a MAJOR catalyst. It was the first time institutional investors / the public / media has ever covered bitcoin to make it known. Bitcoin is now known, so it would need a catalyst of equal proportions to make it boom so high… which is unlikely.
If you are expecting a certain market move (up, down, circles), how do you calculate how much time it would take for it to take place? Is it because of the chart time frame you are using? for example if I’m looking at 1h chart then I should expect in the next “hours” ?
I use tradingview.com. @ the bottom of the charts there is a time stamp, so I can calculate when / where the breakout will be.
Getting a good position is like accumulating at a very low support or the coin coming up to a breakout position.
How much weight do you place on volume?
I only look at volume to see if a rally is fake or not. For example, if there is a big green flag pole posted, but the volume is low.. then it just indicates that the sales books was really thin. That could be a bull-trap so buying it during those periods can be risky.
How do you determine your chart time frame for technical analysis
I try to focus on the 1H candle charts. But I go as far back as I need to in order to get a clear picture of the market. I look @ 30M and 15M simply to see where the 1H trend is moving towards.
What other source of learning would you suggest other than Investopedia? What do you think about babypips?
I’ve heard its good but I personally have never visited the website.
www.stockcharts.com is good too, I’ve used that one.
One last question that applies to the call on ETH. Can you quickly review your bear trap call and how you view it as a bullish play still? The traps seem more difficult to read.
3 soldiers + RSI has been on floor for 30m and 1h. The hack FUD is fueling the bears, but I think it’ll bounce back up. *P.S. I changed my views after this training sessions. The market did go up a little bit, but it was quickly shot down due to strong Parity Hack FUD
**P.S.S. I was right the first time. Ends up being a bear-trap. ETH looks bullish again. These mixed signals were really hard to read, at the time.
How do you use RSI to take entry and exit?
If 15M + 30M + 1H RSI is all at the top/bottom and curving, + candles read as an reversal, then I enter / exit.
When you are drawing lines do you try to draw it top/bottom of candles or is it ok if some spikes crosses your trend line?
If there are lots of wics showing, I’ll sometimes draw multiple lines to connect and see every possible scenario. As far as spikes breaking through, so long as it isn’t a very pronounced break, I’ll leave it as a fake-out.
I don’t want to sound condescending but I’m curious to know how much of your gains could be attributed to sheer luck in a volatile market like crypto? Obv your TA skills are good. In addition how much do whales manipulate the market that novices don’t understand?
Some of my calls are definitely due to luck, however if you've been following my Twitter, I would have to be EXTREMELY lucky to get as high of a win/loss ratio as I have. Also, whale manipulation is definitely real. However you need to learn their tactics so that you can avoid falling prey to them. Most of their traps are placed when you look really close. For example, large sale / scare walls to keep buyers at bay or to scare people into dumping so that their buy orders get filled or so that they can drive the price down to buy in cheaper. I have done this myself, and you can too. You only need about 100K to to make some decently scary / supportive walls. If you play a large stack on top of someone else’s large order, it’ll make it even stronger. I do this a lot on GDAX to move the markets when I’m day trading.”
Welp, that basically covers it. Had to cut the sessions due to my daughter being hungry. Maybe I’ll release some more educational info next week…. and maybe I’ll actually prepare beforehand, haha.
Cheers!
Respectfully,
-The Wolf