On the prospects of jumping into Litecoin for a long term investment – 13th June 2017

I thought I ought to put this post up to also benefit those who are interested to know about the recent price development of Litecoin (LTC). This is a short analysis and a note to a friend written on the 13th June 2017, so try to read from that perspective.

Usually, if you want to have a long-term trade setup, the ideal entry point is either: 1) the turning point of a counter-trend on the shorter time-frame. This means a declining short-term trend or 2) a sideways consolidation trend in a long-term uptrend. Assuming these two setups (short term downtrend or sideways), the coin should be neutral or oversold, ready for a short-term bounce, while the long-term trend will also be there to maintain a healthy increase in the price.

With regards to the low volume and the chart not showing any decent indication of it moving, this is the typical characteristic of a consolidation/trading sideways. So I do not know why you are expecting anything different than this. If it is, then it is no longer a consolidation, it would probably be a short-term reversal, head-and-shoulder pattern, double-bottom, etc. Again, if a long consolidation with consistently downsized trade volume, as well as a few signs showing strong support level does not interest you for a long term setup, then that leaves only one other way of entering the market, which is method No.1.

In view of a long term investment, turning points and sideway consolidation are relatively indifferent, unless you are talking about short term trading. That said, the possible profits mean that even if you purchased Litecoin at a more expensive price-point (compared to your turning-point method), the expected value projection of Litecoin over your long-term period (blue box below) is more than enough to outweigh the possible downside (red box).

In the instance where you do a long-term trade, especially in crypto, you don’t have to bother with targets and stop losses, as your target is based on value analysis, not trading set-ups, while stop-losses are not useful (at least from my past experience, more on this in another topic on teh volatility of crypto). Trade as if you are confident in your investment analysis, and you might actually buy more if the price further falls.

Had you mentioned from the beginning that you wanted to trade short-term, I would have been perfectly fine with that and would have totally agreed with you, as you will have to proceed to planning on limiting your risk and be more peculiar on the specific entry point to optimise your trade volume.

Based on my own understanding of how you trade, it seems that on your book, you only accept method No.1 as the viable solution to your long term strategy. That is in contradiction to what you also mentioned “use whatever works is always my motto”. When you give me the impression that only method No.1 is accepted in your book, and method No.2 is discounted (here I quote what you said “at the moment, the answer is clearly no”), that outright sounded arrogant. That was when I warned you about not being arrogant. Now, let us take a step back and pause for a moment, I don’t have problems with accepting disagreements, but if you want me to accept something that is against trading textbook logic (especially from you who taught me trading), then I would have a hard time digesting it. When you fail to acknowledge that both methods can be a way of entering a long position, then I would be wary about someone jumping into crypto, hence I made the remark “maybe crypto isn’t for you” not because I wanted to attack you.

I hope my analysis above, coupled with my past knowledge on crypto dynamics merit your agreement on the basic technical analysis. I am not convincing you into buying Litecoin, but if you cannot agree with my analysis, then there is a problem. Coercing you into buying Litecoin and getting you to acknowledge my analysis are two different things. I do not know why you would claim that I had presented a false dichotomy.

• KW