thread on selling parabolic moves / market tops
- ppl have asked me how to sell tops so I'm making this to show some of the things that I look for
first you need to identify whether the asset is parabolic or not, best way to do this for me is to use trendlines. if you get three drives breaking upper resistance trendlines you're usually nearing the end of a parabola
when we're up in this area is where you should be cautious, either start using trailing stops or start preparing a plan for what you'll do if we do get a deeper selloff. It's really easy to sell too early here and watch price keep going up because it can stay parabolic for awhile
another sign is when you see volatility increase & you get to look for these whipsaw like moves, another sign that a deeper pullback is coming soon
it's nearly impossible to sell the top of these moves in real time, but you almost always get a throwback close to where the asset sold off from, which is your opportunity to de-risk and get out. nobody knows at the time whether that'll be a local lower high or a macro top
If you sell this bounce & you're wrong, you know what your invalidation is to get back in and you don't miss a large % of the move
In December 2017, you didn't necessarily get a throwback all the way to the origin of the selloff, but you did get a retrace back to the last H12 supply block. I'm usually looking at the H6+ candles to see where to get out
TLDR: dont panic sell the dip, sell the following bounce and go from there π
β’ β’ β’
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there is two way to do pairs trading, if you are pure a spot trader which 99% of you should be
you can swap the weaker coin for the one you expect to be stronger, i.e. if you think SOL/BTC pair is going to go up, you swap your bitcoin for solana
if you're playing it via perps, typically these pairs against majors outperform when alts have been beaten down significantly (trending hard in one direction), and they find a bottom while majors are still ranging
so intent should be to hedge majors via perps at range highs
reasoning is that if you hold spot alts at a discount, and majors range for multiple weeks, you still catch the upside of alts trending while majors aren't doing anything
also, if the ranges on majors do breakdown, you can cover your shorts and add to outperforming altcoin bags