This is Tai Zen, and in this episode of currency analysis, I want to show you guys how to analyze the price trend of Ethereum, and Ethereum has had a big run-up lately, so I just want to go over this analysis with you guys.
This should be a just a short broadcast here. Hopefully, I can get this done in like 15-20 minutes because I’ve been getting a lot of requests from my friend and from everyone online to follow up with my Ethereum price prediction for 2016.
So, I do a lot of travelling the last couple of days while the price of Ethereum has been running up, and I just want to take a few minutes with you guys just to update you guys on this.
So in today subjective, I’m going to go over What makes an uptrend; What makes a downtrend; How to draw a trend line and then How to use a trend line to identify a few things that’s essential to trading: one is your entries the other is your exits, your stop losses and your profit targets.
And just in case you are new to trading, guys, the entries just get your foot in the door on the trade and the profits come from your exits. So always keep in mind that you want to know where your exits are at so that you can make money on the trade, otherwise you’re not going to make any money.
It does not matter how good your entry is, if you don’t have a good exit then you will not make money, alright. So let me just check real quick here. If you guys want to join me for this and ask questions instead of typing it in, you’re welcome to use a link and join the Google Hangout. So if you guys can hear it, please let me know in the comment section below the YouTube. Are you able to hear me, Eric?
Eric: I already hear you.
So, Chris, you can hear me, so alright, I got my buddy and fellow crypto investor Eric with me to help out with this broadcast, guys. So, while you’re here, chime in.
Chris says it’s loud and clear, and I hear you loud and clear too, Eric. I prefer this to be kind of like a conversation instead of just me speaking only.
If it’s too fast for you, I want you guys to do like the rapper 50 Cent says, ‘just listen faster.’ So, I’m going to use a few charts here, and if you guys want to follow along with me, I’m going to use first the CoinMarketCap. It’s a quick illustration of the liquidity and then I’m going to use the Poloniex Ethereum exchange and I’ll also use the trading view as the analysis.
The trading views probably the best charting tool that I have seen in all my years of trading as it is the easiest, it’s the cleanest and the most intuitive to use.
Before you trade anything, it’s extremely important guys that you make sure that you trade on the exchange that has the highest liquidity. This prevents you from getting slipped. Being slipped means that the difference between the bid and the ask or the sell and the buy.
I’d like to trade silver also, so let me pull up silver here because this is the easiest to explain. So you guys know this is here, on my chart, you guys will notice that the people that want to buy silver they want to buy it for $15.19 and the people that want to sell it, want to sell it for $15.23.
Now in case, you forget what’s the bid, what’s the ask, what’s the offer, and any of that, the Wall Street terms that they use to confuse the public, always remember that the sellers always want to sell it for a higher price. And that’s the reason why this is $15.23.
So when you hit here, you are buying from a seller. Now, the buyers, every time they buy something in the markets they always want to buy it for a lower price, so when you click this button, the buyers will get their orders filled right here at $15.19. So that’s the easiest way for me to remind you guys what’s the bid, what’s the ask, what’s the buy, any of that nonsense.
I just realized if you guys are asking a question; I’m not going to be able to see you. I’m going to move that up there so I can see my cheat sheet and I’ll leave a comment section here so that I can see it whenever you guys have a question or something. That way I can see if anyone has the question as I’m broadcasting this.
When I buy or sell Ethereum, what I normally do is I come here first and I click on the chart, and I really don’t care to look at these lines charts because they don’t tell me a lot of information. So when I come here I click on the Markets tab and the first thing that you’ll see here is that Coin Market Cap does a good job sorting out the exchanges like Poloniex and Kraken and I’m losing at trading Ethereum in Bitcoin, I really do not care about trading Ethereum for US dollars.
What you want to do is you want to look at the volume here and you’ll notice that Poloniex has 57% of the trading volume for Ethereum into Bitcoin and you notice that Kraken has 28%. So you pretty much want to pay attention to these exchanges right about there, the top four, and I’m not sure what Gatecoin is, not very familiar with them but I know that Poloniex and Kraken have been around for a while.
Kraken is actually the exchange that’s going to be handling the Mt. Gox issue. Some of you guys have been in the cryptocurrency for a while, you guys know that Mt. Gox went into bankruptcy and right now they are going to the bankruptcy process to distribute the recovered Bitcoin back to the customers.
And there’s talk that when they finally distribute the Bitcoins from the bankruptcy they are likely to use the Kraken exchange. That doesn’t mean that I am endorsing the Kraken exchange or any of these exchange here guys. I’m just giving you some tidbits of information of who they are.
So once I realized that most of the exchanges of the volume are being traded here on Poloniex and Kraken, then I go to the actual exchange itself to Poloniex and I notice here that the price is obviously running up.
Now the charts on Poloniex, even though they have a lot of volume guys they have the crappiest charts and the crappiest analysis tools that you can imagine for any trading platform and so it really sucks.
So what I do is I come over here to TradingView.com and just so you guys know I am not paid or endorsed by any of these websites that I am using so this is just a neutral perspective. If I was getting paid to support them or anything I would let you guys know, but the meantime I am not, so if I come down here guys, you will see that I click on Ethereum and the first thing I’d like to do is I like to look at the trend analysis from one month out.
hold on. I’m jumping ahead here you guys. I’m jumping ahead of my note here. Let me go really quick what’s make an uptrend guys? What’s make an uptrend is every time the price goes up by this and it comes back down and it comes up, comes back down and comes up, every time it sets a high or low that let that the…
If you guys see that, this area right here is called a low. And if you notice when the price went up, it pulled back down and it pulled back up again. Now you can either view this, the tail, the bottom line underneath this candle body is called the tail and the top is called the wick you guys can look at this right here as the low, or you can look at this one as a low.
Now, this circle tool is not very user-friendly. So that’s a low right there. Now, whenever you have conservative high or low, so you guys see how this low is higher than this low, you guys see that? Maybe you guys see this low is higher than this low. That constitutes an uptrend.
There are several schools of stocks guys. Some people, there are some traders say that as long as they have 2 points of reference, so this is considered one point of reference, this one is the second point, and this is the third reference point, right. So whenever they say this, some people go with 3 points to constitute an uptrend.
Now, the textbook definition of an uptrend is that it produces higher highs and higher lows. So this would constitute the higher high right here guys. I would colour code that red, just so that it’s easy for you guys to understand what I’m talking about, I’m going to colour code these spots right here green.
So that would be a higher low and the red would be a higher high. So let’s go ahead to a higher high up here. That’s the textbook definition guys, is that an uptrend is anything that has higher low and higher high.
To me, that’s not the accurate definition guys because, in real-world trading, the buyers are the one in control of the low. The buyers, not the sellers. The buyers. So every time I try to shoot up, the sellers try to put it back down, and the buyers are pushing it back up and won’t allow the price to go any lower. So it’s the buyers that are in control of an uptrend, and the sellers are in control of the downtrend. So keep that in mind.
And my definition of an uptrend would be, and that’s not just my definition, but most of the professional traders that I work with, they’re my colleagues, our definition for an uptrend of any cryptocurrency is higher lows accompanied by higher highs. The higher high is not main mandatory. It’s just accompanied, alright.
“What do you think of a medium triple candlestick pattern?”, I’m not sure what you’re talking about there, so I cannot answer “Is that the buy signal?”, I cannot answer that Humjob because I don’t know what you’re talking about.
“Can you use pink?”, you can use any colour you want. “I’m feeling fabulous with these high lows.” I don’t know what that means but, alright that’s great. So I’m not sure what that means Humjob so I cannot answer it.
So keep in mind guys, I’m a currency trader. I trade the Forex market, the future market, the stock market, so I’m using my experience in those markets to trade the cryptocurrency market. So some of the new vocabularies that I hear and see in the cryptocurrency market, I’ve never seen it before in the traditional trading world.
So you guys ask me, I might know what it is. It’s just that in the cryptocurrency world, there’re tendencies for people to use a different name for the same things that traditionally use in the traditional trading world, and I might not be aware of what the correlation is there, alright.
So that considers an uptrend guy. A downtrend, on the other hand, is just a complete opposite, right. A downtrend is something that is a higher high that’s accompanied by lower high, followed by another lower high. So you guys see that there’s one high, lower high, lower high, lower high, lower high, and that’s accompanied by a lower low.
So you guys see that lower low right there? This is the reason why I said earlier that it’s not mandatory that it has to have a lower low. You guys see there, that’s a lower low, but this is not lower than this. This is higher than this, right, because this is not so important as the top. But you guys see down here, now it produces a lower low than this. So that’s what a downtrend is.
The first thing, the characteristic you guys look for, is that the top is lower than the previous ones. Any question on the uptrend and downtrend guys? How to recognize an uptrend and downtrend? Anyone?
Alright. So the next thing is “How do you draw a trend line?” I get this question a lot by a lot of traders. Now there are several ways to draw a trend line guys. I would show you some of the different ways, and then you pick out the method best suits you or whatever that you’re doing. VisualVendetta says “I’m so tempted to buy right now”, and I would say do not buy right now but cause if you buy right now, you are chasing price. A professional trader does not trade price.
Now you want to be an amateur trader, you’re welcome to chase price because that makes you an amateur trader. So if you don’t chase price, then you’ll be a professional. So you want to be an amateur trader that does not make money in trading, then you would chase after. So do not chase after price.
If you see a long green candle like this, like that, you never ever chase after it. Look at these long green candle guys. Do not chase after this. If you buy in right now, you are considered a sucker. You are considered an amateur.
Do not buy in right now. It doesn’t matter if it runs up another thousand dollars. You do not buy in until it pulls back to a balance support level. So do not buy in right now.
So I don’t want you guys to think that I’m doing this analysis to pump the Ethereum or anything. I’m telling you guys because I see so many amateur trading in the troll boxes that are jumping in.
Thing like this happens in trading guys. You will miss a move. This happens all the time in trading currency market, it happens in the Forex market, in the stock market, it happens in the options market, the future market, do not chase after price.
You have a certain amount of money in your account, you want to make a wise decision and give yourself a high probability and trade with the trend when there’s an opportunity. If it’s not an opportunity, you sit on the sideline with your hands under your butt and sit on it and don’t do anything until the price come to you. Do not run and chase after price. Let price come to you.
So, basically, right, the way that you draw a trend line, there are several ways to do it. I first draw it like this. I put the trend line and I draw it. Some of these I cannot delete guys. Some of the green lines that I redo, I cannot delete because I’m using them. So if you guys don’t mind, I don’t want to redraw it again.
So what I do is this. There are several ways to draw a trend line. There is no correct way to do it. So if anyone tells you this is the best way or something, they are lying to you. They don’t know what they talk about. There is no best way to draw a trend line.
It is important that however you draw it, you draw it the same every time. So let me get rid of some of the visuals right here so that you guys can see what I’m saying. I have limited screen space here. I draw my trend line so that it hits the lows of each of these. Now some people will say “Tai, how come you’re not touching the wicks?” I do not touch the wicks guys.
What I draw is called “a majority rule”. That means if I draw it from the corner of this candle body, and I touch the tail of that candle body… Let me try to modify this thing for you guys. If you see how I draw this trend line, it touches 1 point, 2 points. If I raise it over here, to this, notice how it touches that corner, that 1 point, that 2 touch points, that 3 touch points right there on the bottom of that tail, and then there’s almost the 4th touch point here.
So the majority rule is when you draw the trend line, you want to touch as many points as you can. So if you draw it here and here, you’ll see that it touches that corner, I mean that tail, that one and that one. So there are 4 points right there. And then if I touch it here, it touches that corner and that corner, that wick and that tail right there so that 4 points.
I don’t know if you guys can see it or not, it also touches the body of that corner right there. So the more majority hits that touch that trend line, that’s what I prefer. And then you have to adjust as the trade goes on.
So any question on that guys before I move forward? No?
Now if you choose to do the majority rule, the majority touch technique that I’ve just used, then make sure you guys use it the same every time. If you guys use it from the low to the low like this, there’s nothing wrong with that either. Just make sure you do the exact same way every time and don’t change it up, just because somebody else tells you something different. So that how you draw an uptrend.
The way you draw a downtrend is the exact same way. So if it is a downtrend, you would draw from the high like this to where it touches the majority if you do the majority rule, it would be something like that. Do you guys see how it touches all these points right there? And come down to here.
Now if you use the high point method only, then it would be like that. It touches that high point right there, and this high point right here, and that high point right there, and it almost touches that one right there. Like I said, either one, it’s up to you.
Now what I normally like to do it is to use a channel where I am trading, because I don’t want to be outside, I want to make sure that I trade inside the channel. So here is an example of a channel. I’m coming over here to the parallel channel tool, and I will draw a trend line at the bottom, and when it does this, I let go and pull over here and now I have a parallel channel like that. And let me colour code it purple so that you guys can see what I’m working at, right there.
“If we see a quadruple candlestick convergence on the mend but it’s purple instead of red, is that a buy?” “Should we wait for the random line or doing random things?”, I don’t know what you guys are asking because those are not traditional trading questions. So Humjob asked the triple candlestick pattern, and now Akiva asking the quadruple candlestick pattern.
I was a former art teacher guys, so I like to use a different colour. Plus, it stands out on the chart because I have so much red and green on there. The colour doesn’t mean anything, even the colours on these sticks, they don’t mean anything.
Just remember the Japanese used to make it black and white, the American when they brought it America convert it to red and green. So that doesn’t really mean anything. Whether the candles are red or green or not you know, I’ll still be able to trade even it in black and white.
Because you can look at when the price opens and closes, you can determine where it’s at. There are some traders are colour-blind. They cannot see the red and green so they just use black and white. You guys notice how the price went up this trend right here, and it is through that trend.
When it does that, you got to be careful because any minute it’s going to snap back to its min which means that it comes back to here anytime, right. So be careful about that guys. Now what you also do is when that happens, right, I’d like to draw a new channel from here to here like that.
Now I want you guys to notice that once I drew the second channel here… I’m going to colour code it a different colour just so you guys know what I’m talking about. I’ll code that pink. Now if you guys notice that the pink channel is thinner and the pitch, the angle of it is a lot steeper than the purple channel.
Notice how wide this channel is guys. Notice the width of this channel and the wide it is. If how this one is very narrow. So when the price does that, that means that when the channel becomes thin and the angle of it is very inclined like that, that means that it is, there is a lot of momentum in the trade. There’s a lot of energy. There’s a lot of fuel behind that trade or behind that move.
So when that happens, if you try to jump on like right now, you’re jumping in at the wrong time. And here’s another thing that I want you guys to notice: notice how the height of this move… I want you guys to notice the height of this move. Pay attention here guys. You see the high of this move right there? You see the high from that low to that?
Notice how we have that, and we also have this. See this right here? See when it ran up to about right there. Do you guys see that? It started right here and skyrocketed to here and it paused and it went sideways.
Now I want you guys to pay attention to that, and notice how, when we move to over here, and we put at that low, this runs up right here did not reach that high. But if we move over here, from this low down here, notice how it ran up almost that high. And then if we notice from here, and it went sideways, and then we notice that it ran from here all the way up to here, the bottom of that candle right there, all the way up to here and then it came back down.
So you guys notice that. And then right here, right there. Let’s just say it continues that pattern. I’ll run up to here and more likely to a pullback, so what happens is if you guys get it right here, you will get slaughtered because when it comes up to here and hit that pink trend line, and hit the distance that normally travels, it’s going to pull back, and you guys will sit there and cry about it. You guys see that.
You don’t want to get caught in that pullback and try to go long. So what you guys want to do is wait until it comes back and hit this trend line or this trend line, and then get in. At least you go with the trend and you go at the bottom of the channel. Do you guys see how this channel right here, the purple channel, you see that? Let me ask you guys this, “Do you guys want to get in right here, at the bottom of the channel or do you guys want to get in at the top guys?”
Type it in at the chat box so that I know that you guys understand what I’m talking about. “Do you guys want to get in at the bottom of the channel or at the top of the channel?” ‘Bottom of the channel’, exactly. ‘Bottom, of cause”. That’s right.
So if we come up here guys, right. Look at that. It’s near the top of the pink channel, so getting in here would be an extremely risky trade because your stock loss still going to be outside that channel. You see that.
Let me do this guy’s so you guys understand, because sometimes, people, the beginning traders, they don’t realize the risk that they’re taking, right.
The Dynamic Duo says he’s hungry, get some food, man. Get just some food. Get just some slice of bread man. Get some chicken wings, right. Don’t be watching this hungry man. You’re not going to learn if you watch this hungry.
So right there, guys. Let’s say that you guys get in right here, right. I’m going to colour code this red to symbolize the risk. In other words, if you get in right here, at the bottom of the trend line, and the price starts to move out of this, and it closes below the trend line, you get out. And if it goes up to here, then you take profit.
So let’s say that you go like that. And I’m going to colour code these green guys. Do you guys see that? So this is the risk that you take, right here. This is the risk that you guys take, right, and this is the profit that you’ll make. And I’m going to be conservative guys. I’, just go right there, because it’s rare that you get the top to the bottom. So let’s say you do that.
You guys notice how much is my risk to reward here guys. I’m risking this much with is 1, 2, 3, about 3 and a quarter reward for 1 unit of risk. Now in trading, this, this unit of risk can concern as 1 R, which means 1 risk, and then it’s up here would be considered the reward, right. So basically you can say that this is 3 units of reward for 1 unit of risk you’re taking, right. You always want to do those guys.
You always want to take the trade that gives you a potential of 3 units of reward or better. The reason why is because you’re a beginning trader, most beginning traders, ⅔ of their trades do not make money. Let me say that again. If you’re a beginning trader, more than likely, ⅔ of your trades will not make money. They will be unprofitable.
Therefore, the other ⅓ of the trade that is profitable, you got to make sure there’s enough room to get at least 3 units of reward out of it. That way you can afford if you wrong on ⅔ of your trade and still make money.
You got to a bunch of amateurs on the forums and the chat box and the troll box that do not know how to trade. And what they do is they try to go for a 60% winning percentage, 70 80 90 winning percentage. When you hear people say that guys, just stay away from them because they don’t know what the hell they talk about.
A professional trader that trade with the trend usually has about 33 to about 43% winning percentage. So that means they right usually on 33 to about 43% trade. And the reason why they can still make money is that the size of the winner is significantly bigger than the size of their losses.
Does that make sense guys? Does that make sense or am I just not making sense? You guys understand that you want the size of the winner is significantly bigger than the size of your risk, right. Type in ‘Make sense’ or something in the chat box guys. Let me know. “How do you backtest your strategies?” Don’t waste time backtest your strategies.
The way that you learn trading is the trade in a live market with the smallest size that you can risk. The beauty of cryptocurrencies guys… I love trading cryptocurrencies because you can risk a dollar on a trade, you can risk 15 cents on 1 trade, to see if your system works or not. Don’t waste time backtesting anything. That’s a waste of time.
You guys want to learn how to trade. You got to make live trade and make it with the smallest size possible. If you could trade 1 share, you trade 1 share but you can’t because most stock exchanges, the commission on them is a dollar per trade-in and a dollar per trade out. So it’ not very costly and effective to trade 1 share.
But if you’ve never traded it before, that what you should be trading like 5 shares, 10 shares. If you’re trading currencies, you trade by 1 micro lot, 2 micro lots. The best things are that while you guys are trading the Bitcoin, you can trade the very very small size. You can trade like 1 millibit, 2 millibit, right, 3 decimals places after it.
You trade small unit, and you make about 15 trades and you average out the result of those. I’ll talk about that in a different video guy. I’ll talk about how to test your system in a different video.
In this video, I just focus on the trend, because a lot of people have been asking me about the Ethereum trend and the price when they get in and when they get out. So we know that we get in near the bottom of the trend guys, then we wait.
So let’s say that the price is right here guys, we don’t do anything, we just wait. And we put our orders in near here. You guys can see how is this low right there? You guys see it right here? You guys see that low right there. Do you guys see that? Let me know if you guys see these guys, alright. This is not 1-way communication here. We’re going to do this as a team guys.
“How do you guess when a steep trend is loading steam?” “What is the best way to predict the trend?” I’m showing you guys how to predict the trend right here guys. I’m showing you guys right now.
So when this comes over here, I’m going to look to get in right there, and this is how much risk I’m going to take. And I’m going to get in, and I’m going to look for it to move to the other side of the channel like that. So when it hit that line, that supports level, that’s where I get in, because it matches up with that support from this tail here.
This is what call a confluence of support and a trend line. “Use indicators TDD”, I don’t know, I do n’t use indicator guys, I just trade of a price. An indicator’s nothing but a derivative of price. All indicators are a derivative of price.
You cannot automate what I’m talking about guys, no matter what anybody says, no matter how you automate your system, your trading. It doesn’t matter what your strategy is in trading, there’s only so much you can automate because trading is a human activity.
Let’s just say, I’ll give you guys an example because I get asked at all the time I want you to make your strategy. You can program the computer so that the price hits the trend line, you get in, and it closes outside, the candle price closes outside of this, you get back out, right. No matter if you automate it, or you do manually, right. If you’re a beginning trader, ⅔ of your trade usually do not make money.
That’s something that you guys have got to understand. When you’re a beginning trader, more than likely, ⅔ of your trade use will not make money. They are unprofitable. Stop focusing on the strategy and focus on risk management. The trade management. What do you do when your trade goes against you? You get out? What do you do when the trade goes in your favour? You let it run.
We’ll talk about trade later, let’s just focus on the trend line here. I don’t know what TDD is. I don’t use any indicator, so I don’t know… To me, it’s waste of time. They’re all lagging. They all have to wait until the price is done before they can calculate their indicators. I don’t use them.
Alright. So when the price comes down here. Now, look at that guys. What happens if you miss this move because it never hits the trend line? You just wait. Lock and load and wait for the next trade, right. “The Dynamic Duo”, Oh you’re talking to the viewer, you would be happy to send me some links. I’m not sure what kind of link you’re going to send me Akiva.
But this is how I trade guys. This is how I trade off the trend line and of the support and resistance, you know. So you can send me all kinds of links but I’m not going to change my strategy because it’s already making me money. So I’m not going to go to waste time. I already know that I have a system making me money, so I’m not going to waste time learning a new system.
The hardest thing in trading is to stick to your stop losses because ⅔ in my trade isn’t going to make me money so I have to be disciplined and resilient and have the mental toughness to get out of the losses when I have them.
So looking for a new strategy is not going to change anything. Because whenever a strategy is used on a market the highest win percentages is usually around 60% but keep this in mind guys if you use the strategy that wins over 50% of the time, you’re giving up something to get those winning percentages.
So don’t think that you have a high winning percentage that’s the end all be all or that’s the Holy Grail. Most of the time my winning percentages are between 36-38% but I make money. That’s all it matters, that you make money. Don’t worry about how many times that you win, worry about that what the net profit is at the end of the month.
So now you can adjust your trend line to touch this like that. I’m messing up here. I don’t know if any traders that backtest so waste a time. Only the amateurs backtest that stuff, only the amateurs. The guys don’t make money in trading waste time backtesting. The guys have trade and learn a trade for real, they trade with small size on the real market.
Yeah I mean if it works for you, I’m not a hedge fund, I’m not a hedge fund manager so I can’t speak for the hedge funds. I’m not saying it’s wrong guys, I’m just saying in the individual traders at home, that trade at home, that manage all the accounts that not managing millions and millions of dollars of somebody else.
I cannot speak for that because I don’t manage millions of dollars. And if I say that I’ll be lying to you. I have friends that are hedge fund managers I have friends… but I cannot do what they do because I don’t have the kind of money they do.
When you have several million dollars in your account to trade with, you get all kinds of good rate and a good deal with the beers, you get first priority and getting your trade filled.
So I use TradeStation and when I trade stocks at TradeStation, I know for a fact that if you have a bigger account they fill your orders first. They say they don’t but I went to a trade show one time and I called out one of the TradeStation’s developers and some of the engineers that were there at the trade show and I called them out and I said, “Hey man you guys are giving first priority to guys who have bigger accounts” and he was like: “No, we don’t.” And I said: “Yeah, you do. Because I put orders in before other traders and I see them getting filled before me.”
And, they wouldn’t argue you about that. The reason why they wouldn’t argue you about that is that you can sue for that if they say: “No, they don’t” you can prove that they do. So just be aware of that guys.
If you’re a hedge fund and you’re listening to me, you should go and listen to other hedge fund traders to see how they trade. You should not be listening to me. If you’re an individual trader trading 5, 10, 20, 30 thousand dollars of your own money, then it was your time to listen to what I’m saying.
But if you trade a million dollars and 10, 20, 50 million dollars, you need to go and listen to another hedge fund trader do that. I didn’t mean to get off track guys but I just don’t want you guys to think that I know how to do that when I don’t.
Do you guys understand how the trend works? Hey, I wish I had millions, too Dynamic Duo and I know Eric wishes he had millions too but we don’t so we got to work with what we have. If Ethereum runs up to 10 bucks or 100 bucks an Ether then we can be a millionaire and I’ll go hang out with the hedge funds managers, figure out how they do it and I’ll relay back to you guys.
“The prices headed in the next few hours?” I’m not sure if you’re saying that I provide solid reviews of trading fundamental Chris or if you want me to cover solid reviews of trading fundamental.
Hey guys if I talk about solid reviews of trading fundamentals, it would be so boring that everybody would log out. The reason is that trading is not what people think it is.
Everybody’s focusing on entries and nobody focuses on exits. It’s the exits that make you money. If you don’t know how to trade guys, this is how you learn how to trade. You learn what to do when the trade is going against you and what to do when it’s going in your favour.
These are the two skills you got to learn. The third skill is the size of each trade. The size of each trade is a hugely important factor. Everybody wants to know what the prices of the Ethereum are going to do in the next few minutes or next few hours, here’s the problem guys, this is a vertical price. It’s not even a trend, it’s so vertical which means it’ll snap back in a moment.
When that happens we got to go to a lower time frame. So we go to a lower time frame and then we can see what’s going on. So we drop to a 15-minute time frame. Oh, speaking of time frame guys, I’ll talk about how to use the time frame in a separate analysis video
But just so you guys know, when you guys trade, use the 1-month time frame, the 1-week, 1-day, 4-hour, the 1-hour, the fifteen-minute, the 5, 3 and 1-minute. Notice that I didn’t say 45-minute, 2-hour, or any of that nonsense.
The reason why is because you want to trade on a time frame where there’s a lot of eyeballs looking at it so that the traders are probably using this, looking at the same chart. I have never seen or heard of anyone ever trading on a 45-minute chart. I’ve been trading since 2008, since the beginning of 2008, that’s 2008, 9, 10, 11, 12, 13, 14, 15, 16 I’ve been trading for over 8 years. I’ve never heard or seen anyone trade on the 45-minute chart before.
People trade on 1-minute chart, 3-minute chart, 5-minute chart, 15-minute chart, 30-minute chart, 1-hour, 4-hour, 1-day, 1-week, 1-month but not 45-minute. Now there are a few amateur traders think that they’re going to get a head start, or head read or they’re going to front run everyone. No, they’re not. They’re just a bunch of amateurs.
Don’t waste your time listening to that nonsense. I’m going to just drop it down to 15-minute time frame guys and I’m a slap on a parallel channel again, I’m going to say this again guys. I use the majority touch rule so I’m going to … right here the majority the touches are right there. The majority touches are right there so I’m going to do it.
Now if you go with the tails then you would do it like that. You can also do a majority touches like that too because it’s touching that tail, that tail, that tail and this corner right there. And then I’ll do like that. So right here.
Now if you look to trade short term, you would have got it right here, right, you would’ve got it right here. And your risk would’ve been like right here. Right there. That’s the problem with the steep angle guys, the steep trends like these, the risk is a little bit higher. Because this is the…
You’re going to get in right here and you’re going to put your stop loss below the low of this. So if the price comes down to here and stops you out, you’re done, you’re out. So now when you do that look at this. Your gains… Now I want you guys to notice how I measure the gains here. I want you guys to pay real close attention here right. I want you guys to notice this.
Notice how when the price comes up it goes 1 candle, 2 candles and another third candle it runs up. One candle, they go sideways, 1, 2,3,4,5,6 candles then it runs up. The problem is when it ran up and ran up to the other side the channel. So that’s what I do Dynamic Duo. I put stop losses of the previous low.
So this is the previous low. Notice how this one did not run to the other side guys? So just be aware of that. Be aware of that. So when it does that, you come up here and notice the spacing here. Notice the width there to about there. Notice the spacing, how wide it goes sideways.
So when it’s here, see how the prices guys. So let’s say that we hit ‘buy’ right there… Just for practice right here. Let’s say we get in right there, my stop loss is going to be right here and you got to put that thing right away because you never know what’s going to happen. So that’s my risk.
The problem with making short term day trade is that it’s very difficult to get 3:1. Just be aware of that, when you’re making a day trade, it’s using it like 2:1. Your win percentages are a little bit higher, it’s around probably 40% but your reward is not that high.
So when you do this, what you do is you measure this, more than likely prices going to go sideways up to here and it’s going to hit somewhere about there. You’re going for a trade that pays like 2:1 and that’s normal in a day trade because that’s what it is because you’re trading on a 15-minute chart.
Now I personally do not like trading on a short time frame because you get stopped out more frequently. I like to stay in a trade long enough so that you get longer and longer move. I like to capture this entire move like this all the way up.
Because it’s the same risk, you risk it down here, you’re risking to all the way up there. When you do this like here like this, you got to make sure that if you’re going to day trade and you take these types of aggressive trade right here, you’d better have a good entry, you have a good winning percentage of at least close to 50%.
Otherwise, the math would not work. The math would not work. So right there, we will do it, we’ll see how the trends place out if it comes up to here, we take profits, when it comes down to here, we just get out. How often are you going to get stopped out when you are a beginning trader?
Two thirds, Dynamic Duo’s listening, Chris’s listening, 66%, so if I put on a hundred trades like this, 66% will get stopped out. Because this is the short term trade, to be fair, it’ll be a little bit higher, just as you guys know that. It’ll be probably like around 45-50%.
Now if you’re not hitting those numbers, you should not be taking the short term trades like that. You should back out to a 1-hour, or 4-hour charts and take those trades. For me, taking these trades is extremely risky, so right there I just got stopped out.
It hasn’t touched yet, but more than likely I got stopped out. In the real world of trading, the spread will have stopped me out right there. So that trade is dropped in the book as a lost. Because in the real world of trading, that would have stopped me out even though it hasn’t touched the line yet, that would have stopped me out.
Notice the price has just popped up, you guys notice that. I want you guys to notice, did you guys just notice the price popped up, you guys notice the price was down here and it popped back up like right there. Did you guys notice that? As it’s extremely important to know that guys. What just happened? What caused the price just popped up all of a sudden like that? What causes that guys?
Dead cat bounce? You can call this dead cat bounce guys but the problem with calling it dead cat bounce is that what does that mean? What does “dead cat bounce” mean? Whenever you hear traders say things like that, it’s really hard to learn how to trade from that type of information. Because what’s the dead cat bounce?
What happened is these guys. There are 2 types of people. There are people that miss this move up here and they want to buy down here. There’s people want to buy down here right there. They want to buy right there at the green line. So what happened is when a buy hits it, it triggers, their limit orders and they all get filled. All their orders get filled right there so it pops back up like that. That’s what it is.
A dead cat bounce is a bunch of buy orders coming into the market all at once. Now to me, saying that a bunch of buy orders just got filled pushing the price up makes a lot more sense and is useful information to me as a trader versus calling it a dead cat bounce because I don’t see any dead cats on here. I don’t see any cat. I’m an artist, I’m an art teacher, I’m pretty visual but I still don’t see any cats here.
Now I know Robert Kiyosaki from “Rich Dad, Poor Dad”, he was the one who made it popular. He had made that term. I don’t know if he invented it but I know he’s the one who made it popular – the term “dead cat bounce”.
But to me that’s not a dead cat bounce, just buy orders getting filled. There’s a bunch of short term traders and scalpers that just want to get in right here. For me, price came outside the zone, it went below this low, it closed outside the trends so even if it’s not triggered, even if this is not triggered my stop loss that was here earlier, more than likely I will get out of that trade simply because the candles close outside the trends.
A retracement is nothing more than people taking profits guys. They’re a bunch of short term traders that sold short right here and now they’re taking profits. So what do they have to do to take profits, they got to buy to cover.
When they buy, what happens is the price, it’s pushed back up. They push the price back up. Every time the price does this, it breaks the trend line then you got to adjust the trend line. So I would redraw it like this right there.
Here’s the thing though. I don’t like it when the trend line is that low. Let me show what I mean by that. When the trend is like a 35-degree angle like that, a 30-degree angle to like a 60-degree angle that’s the ideal trend I want to jump on.
When the trend is vertical like this or when it’s flat like this, it’s really hard to trade. The reason why is because when it’s flat like this, there’s not going to be a lot of movements, and when it’s like this, there’s going to be a whole lot of movements that it’s going to … so this is going to be a lot of movements that are going to really scare you.
Yeah, you got a new trend line, every time your trend line is broken you have to readjust. So here’s the thing, guys. If you draw a trend line on the short term… so let me just show you guys this. If you draw a trend line on a 1- minute like this, this trend line is not going to be as strong.
That 5-minute trend line is going to be a lot stronger and has more validity and the chance is that trend line is going to hold is going to be higher simply because on a 5-minute there’s more volume traded in a 5-minute
If you go to a 15-minute, there’s even more volume being traded. So the higher the time frame the more likely that the trend will hold. If you do it on a… like that more likely it will hold and bring come down to here.
Now, some of you guys are watching this right now, I know what you’re thinking because I used to think like that when I first started out trading. Some of you guys are thinking: “Man you should have stayed in that trade Tai and not get out because it’s going back in the direction that you had anticipated.”
So here are the problem guys. What happens if I don’t get out and the trade does this? Like it did in the DOW or it does one of these. I cannot afford that in my account so I will get out. Because there’s no law that says I cannot get back in. You guys realize that there’s no law says that I cannot get back into the trade.
I normally use my trend lines on a 1-hour or higher. It’s rare that I use 15-minute because the chance that you’re getting stopped out in a 15-minute, 5-minute and 1-minute are very very high. So on this particular trade, if I’m trading this on a 1-hour, I see it’s coming back down to the trend line so this is where I would likely to get in.
I actually do this, you see where the low of this guys, this low right here, right where the low of that, so I just add 10 ticks above it. Because see how the price came in this area and popped back out.
When I normally do when I’m trading currency and stocks, I put it here and I put in 10 ticks of above it in the whole area where I want to get in.
And then I put my stop loss 10 sticks below it. In this case, 10 ticks is going to be too wide.
So I just go to the low where the launch began and I put in 10 ticks above and 10 ticks below from my stop loss and whatever the width or is it, I calculate my position size to make sure it’s correct and I usually only risk 0.25% guys so if I have a 10,000-dollar account and I risk 0.25%.
So 1% would be a hundred dollars, a quarter of that would be 25 dollars. So the size of my stop loss right here would be only 25 dollars or less.
“What if it’s broken…” BitcoinMedellin, her, the pasta BitcoinMedellin, are you in Medellin right now? “What if it’s broken then it goes back into the trend again? Like it explodes up like right now ETH is moving up back into the trend line you created?”, so that’s a good question.
Right, that’s a good question because sometimes that will happen. So let’s drop down to a 15-minute right. So what I do is I give myself 2 bullets. What I mean by that is that I will take 2 shots on a 15-minute chart, on a larger time frame, I’ll take up to 3 shots.
“In Poblado Medellin, está en Colombia, Poblado Medellin is in Colombia, no?”. I’m just asking if BitcoinMedellin is from Colombia here.
That’s my stop loss right there guys. Right there. I will get in like here and the red line is my stop loss and then I will take… If I get in right here, notice that this is my risk. “Este es mi Riesgo” I did not know that there would be Spanish people listening in guys so I would try to explain some of this in Spanish too so that they can understand it.
“Esta es mi gananci aqui”. This will be my reward here. I’m risking this much to make this much. This way my win is significantly bigger and what that does is it allows me to have a lot of losses and still make money in trading. So now I hope that makes sense to you guys.
BitcoinMedellin asks: “Hey if it goes back up, what do you do?” Where I originally got in at and my original stop was below here, so what I’ll do is I will get back in right there and I put my stop at the low of this right there like that. So if it comes back up to here, then I’ll get in.
The problem with these guys the problem with this is how much risk I’m taking. I’m taking that much risk and how much reward that I’m getting? If you do that, you’re going to have high accuracy. Does that make sense guys?
We talked about the entries, getting in where there’s a confluence of support or resistance against the trend line, we talked about the exits that we get out at the last low. And then we get out the profits target is on the other side of the channel.
Sometimes I like to get in on the long term channels like this. And when the price comes back down to here, and to this area that’s where I’ll get in. So I’ll get in anywhere in here, anywhere in here I will get in.
The reason why I do that is that I can risk to this much, I always check to see how much I’m risking. I’m going to risk that much if I’m wrong I’m going to lose that much.
However, if I’m right, which is going to happen a third of the time, that’s 1 unit of reward for me that is 2 units and reward for me and 3 units and reward for me right there. Actually, this is going to be 4 units and reward.
The reason why I say that is because you guys see how wide this is when the price shot up right? Notice how the price shot up and there are 1, 2, 3 candles before the shot up again there’s 1 2 and it shot up right? So more than likely, the price comes down to here and goes this way, it will stagger like this. And it’ll be more like this. And it comes up like that to somewhere around there. “Will it hit $10 this week?”
Now I’m looking at these charts in Bitcoin and you guys ask me how much it is in Dollars it’s really hard for me to compute because I’m used to trading everything in Bitcoin, not in Dollars.
I trade currency, stocks and futures in Dollars so that it’s easy for me to understand and remember. Every time I trade whether it’s Ethereum or Bitcoin or Doge or NXT or any of that, I do it in Bitcoin so that I can keep track of what the value it is each time.
What’s $10 in Ether right now? 0.04. Now I don’t see that. And here’s why I don’t see that BitcoinMedellin. BitcoinMedellin asked if it’ll reach 0.04. Everything can happen I’m not going to say no.
But the probability of that happening is very very low in my opinion and here’s the reason why. If you guys watched my Bitcoin, my ETH price predictions, right now it’s $4 and it says 0.01 then $10 should be around 0.02. It should be around 0.02, it wouldn’t be around 0.04 because that would be 4 times. I think what The Dynamic Duo has, 0.25, that would be more realistic.
If you guys notice, I took profits on my ETH IPO Ethers, me and my buddy Eric took out some profits to cover our original investments. You guys look at the volume here; you see one thing that is beautiful about trading cryptocurrencies is that volume is actually real. It’s not like in the stock market where they publish bogus volume for people.
Pay attention to this very closely. Notice how the volume is very thin, there was not a lot of volumes the day that Ethereum was opened to the public for trading right here. There’s hardly any volume here whatsoever so my buddy Leon, he wanted to take profits at 100 and I said, “Hey wait a minute, let’s hold up here”
Because in my 2016 Bitcoin prediction video I forgot to drop it down to 1-hour chart and look at this volume, I made a mistake on that, the volume is so thin that when the price reaches this 100 millibit line right here, it’s going to bust right through it because there’s not a lot of volumes, there’s not a lot of sellers there. Likewise, when it comes up to here, to 130, notice that there is hardly any volume there.
At the 130 millibit, notice that it’s the 4th candle here and there’s hardly any volume, if I mouse over it, you guys will see that there’s… I would be very comfortable right … The price’s at 111 so the current price right now is 119, so it’s about right there.
Yeah, the current price is about right here. If it runs up to 130 I would be very comfortable holding on to my trade right pass that because there’s now a lot of short sellers right here, there’s now a lot of volumes.
All the pre-sellers, now you’re going to put yourself in the shoes of a pre-seller like I’m one of the pre-sellers that bought during the presale, Eric bought during the presale, my buddy Leon bought during the presale.
Most of the presale people have already taken the profits out already, I believe that most of the pre-sellers actually took their profits down here. The reason why I’m confident in saying that is because right here is where all the volume is that… see all the volume here, it’s between 60 and 80, that’s where most of the volume happen.
The price was sitting here for so long going sideways because the sellers would come in and sell it, the sellers, the buyers come in, the sellers come in back and forth back and forth because people will try to unload their presale Ethers during this whole period right here.
So that’s why I unloaded my presale Ethers as well. Matter of fact, I unloaded my Ethers I think right about here, right about here I think it was either here or here. No, it must have been here because it was just last week. Yeah, so right here.
So if all the presale investors took out their money and to cover their initial investment, they’re going to be cool with letting than the profits run. That’s what I did, that’s what Eric did. You’re still there, Eric?
Eric: Yeah, I’m still here but I can’t type in the box.
Yeah, so what’re your thoughts here? Did you take out some profits out right?
I’m on the same boat as you, I took them out between 85 and 98 and so I’m on the same boat there. All my positions are covered, my initial investment and some are covered and here on out it’s basically dealing with potentials and the potentials we have is also having to deal with Homestead and the release of a whole bunch of other stuff.
And not to forget that Ethereum is still in an infant phase, as far as the general public is concerned and a lot of people are becoming aware right now, I have no problems with leaving my investments in there and let the profit run.
So I’m going to jump around a little bit and there’s going to be people who pushed the price around and think, “Okay, now it’s going to take,” but when it comes to watching the volume watching the directions of the market going and also keeping in mind that it’s still infancy phase, there’s still… even if it is a bubble it’s still growing, nowhere near the popping point, I don’t believe.
Just because we see a new peak on our charts that doesn’t mean we’re at the popping point of a supposed bubble. So there’s still a lot more to be done here. I’m not getting out any time soon. So right now it’s all profits for me and I’m letting the profits run.
Tai: Yeah, and that’s also the same for me too guys, I’ve already covered my initial expense so the rest of this is just profits. Because of this runs up, there’s going to be a lot of people selling here guys. If you’re a long term trader, I would wait until it comes over here and I will take a shot when it comes over here to this side of the trend line or I would wait until this long-term trend line right here…
If you guys remember from my Ethereum prediction video, I anticipate that the price is going to snap back and retrace all the back down to here. That’s why I have a purple line in there. Now with this kind of momentum, I might have to adjust that prediction a little bit because it’s so far outside of this dark green trend channel.
So if I was not in this trade now from the beginning like Eric and I was, I would wait until it comes down until here or to this side of the trend line to get in and then… or I would wait until it comes down to here and hit this thick green line right here and then take it from there.
So those are different places that I would look to get in and things can change guys. Two, three days later if this shoots up to $10 like Rain lead was asking about then everything changes.
Do you guys have any questions about that guys? Was this helpful for you guys? Let me know if this is helpful and maybe in the future, I’ll do this more often. I think there’s like a delay too because the hotel’s where I’m at there’s some very slow Internet so I think there’s a delay because I know that on the time I ask until the time I see the response from everyone there’s usually a 30-second delay or something like that.
Eric: There is, there’s a delay between the voice on the YouTube video and versus voice on the Google Hangout because I have the mute one because I was hearing doubles.
Yeah, alright let’s see anybody has questions over here. No questions over here. If you guys miss this move do not panic and freak out. There are always other opportunities. The market will be here a thousand years from now. “Do you think Okcoin is preparing to add ETH when Homestead is released? Is this rumour true?”
I want you guys to realize something. This is my policy on news announcement and everything. Let’s say I get in right here, where do I get out guys? Where’s my stop loss going to be? Going to be underneath right? Do you see that? Let’s say when I get in right here, and my stop losses down there. Now let’s just say that Okcoin adds Ethereum after Homestead is released, but the price runs down it stop me out. I’m going to get out. I’m going to get out.
Now let’s just say that Hillary Clinton gets elected president and the price runs down and stops me out. I’m still going to get out. Let’s say that Kraken gets hacked, I’m still going to get out and let the prices here. Let’s say that they come out with Fast and Furious 10 and it was a flop movie and the price drops down to here and I’m going to still get out.
It really does not matter to me what happens and why the price gets down to here. I know that ⅔ of my trades are unprofitable, the other ⅓ of my trade is profitable. When they are unprofitable I need to get out.
I set up an account with Poloniex but I have not used it yet because I was trying to convert presale Ether into Bitcoin and I’m just testing it out. So I’ve been using a ShapeShift.io to make the exchange.
Now look at this guys, it’s gone to back up but it doesn’t matter because had it gone down, it would have killed me. So you can never say… oh, by the way, I just want to throw this out too before I wrap it up.
Remember I told you guys I’ll begin right here right? Here’s something I forgot to mention to you guys. If I get in right there and my stop loss is here guys, as soon as the price breaks this high right here. If you guys do this, make sure you guys understand how to put your stop losses. Let’s say that you break this high, candles come up, and it breaks the high of this then I would immediately reduce my risk to be lower than the candle.
And let’s just say that this continues up like this right? Let’s say that it continues up like this and if it does that then I’ll move this up to here like that. And when it goes up higher, then I will move it to the break even.
Bitcoin volume is 80%…Vitalik… Vitalik is a cool dude man. I actually interviewed him during Texas Bitcoin Conference with my buddy James D’Angelo and I’ll probably go see James and bug him in the next couple of days here in Boston to see what he’s up to maybe we can do a video of his thoughts on the Ethereum.
I like to get his thoughts because he’s very technical and insightful about these things. So I’m trying to get the hold of James D’Angelo and see if we can do a video and if I do then I’ll probably announce it on the trading view and let you guys know that to join us.
Yup, trading is all about patience, trading is all about patience guys alright? Alright, guys let me wrap it up here. It’s 11:30 here in Boston, Massachusetts where I’m broadcasting from and I need to get to bed early so I get up tomorrow and go and see if I can get over there and harass James D’Angelo.
And I don’t know, BitcoinMedellin, I’m not sure if Vitalik gets the Chinese involved. That’s good for everyone because the Chinese, they’re not afraid to trade you know. I hope that I mean anybody that can do anything to promote Ethereum or Bitcoin or NXT or Doge or anything.
Anything is good as long as it’s a legitimate currency. Alright, guys, I appreciate you guys joining Eric and myself on this and we will look forward to seeing you guys in the future episode of the currency analysis. You guys have any last words before I hang up before I stop the broadcast?
Eric: No, I’m good to go, thanks for watching guys.
Hasta la vista. And thanks for watching down there in Colombia.