Crytpo Charting 101: Head and Shoulders Pattern (and why 90% of trading is psychology and emotion)
I'm going to teach you a chart pattern, but more importantly show that emotion and psychology are the two most important things in investing success.
Head and Shoulders Pattern
Looking at the the daily chart of Reddcoin (RDD) we see a classic example of what is called a head and shoulders pattern.
This pattern is NOT bullish and puts the odds towards a downward move in price. You can see I noted each shoulder and then head with blue arcs.
Disclosure
Let me be clear. I am long RDD. I have been long since .18 cents. It was testing an uptrend channel when I purchase it and has obviously broken down after bouncing and then failing to go higher.
So why am I still in it?
And here my friends is the lesson...
Learning how to read charts and set targets and exits is actually the easy part. It's just knowledge that can be acquired by studying and practicing.
Executing while you emotions are part of the equation is a different story.
Look at the chart below - do you see how I talked myself into holding onto this?
I drew a line pointing out RDD making higher lows, which can be viewed as positive. Despite recognizing the clear head and shoulders pattern.
You find evidence to support the case you want
For some reason I did not want to sell RDD, maybe it's because it's only at .10 cents per coin now, how much more can I lose?
Maybe it's because I bought at .18 cents and was it even worth bothering to sell and buy lower since it's not a large amount of money?
It could be any of those things.
Bottom Line:
Even Good Traders Do Dumb Things When Emotion and Psychology Come In.
Learn to Invest Like The Cat
Best Regards,
Specifically, because I am a 99.98% emotional human being, I cannot trade in cryptos. I compensate for my unfortunate handicap by buying and holding a little bit of everything. Then I refuse to think about it. I am never disappointed because I have a low expectation threshold. But when the news is good, I get a boost. I am not recommending my investing style at all. Just spitting it out. Thanks for the shout out to the human side of cryptos. Be safe and well.
I buy $20 of everything that makes it into the Top 10 and then forget about it. I will look at them again in a few years and see where I am at. Total invested in alt coins = $500. Total invested in Steem /SBD is $0. Total invested in Bitcoin, Ethereum and Litecoin is about $1,000.... so far Steem /SBD has been my best investment.
Same here, only I'm almost all-in with STEEM.
Thanks for the tip,much appreciated.
This is exactly what has always confused me with Technical Analysis... when I watch someone else do it, it all makes perfect sense, but when I look at a naked chart I feel like I could draw lines absolutely anywhere...
This is why I like to hold things super long term... sure I'll never profit as much as a good day trader, but I shouldn't lose as much as a bad day trader either...
Be careful about what you hold though. Like I never second guess my ethereum position but a lot of this market goes up purely on hype so you might as well sell and take your profit unless you truly believe in the long term utility of the token. For instance, even if you diehard love Raiblocks you still should have sold nd waited to jump back in at a better price.
Could not have send it better myself. There are coins to hold and coins to trade. RDD was a trading one for me and basically have turned it into a hold, wanted to use this example to show people how easy it is stray from a plan. :-)
Nothing wrong with buy and hold, especially when you are getting in the early stages of a new technology.
"You find evidence to support the case you want"
Exactly!
All people in crypto who have never had market experience are better off not even playing the market, but researching into solid projects and holding them long term. I have been extremely successful in crypto, as I have seen 50 x returns on my initial investment. In hindsight, if I knew exactly what the market was going to do and when, I would have much more than I do right now forsure. I have had great trades followed by trades that have erased my profits, but the coins that I got good position in early ( I was in Lisk at .80 cents, Ripple at 3 cents), and just held, I have the mentality that I can't lose even when it drops.
Exactly! Any of my friends that want to get involved and don't have investing experience or time to check it often I have take that approach. Decide how much you are willing to risk. Find a project you like and buy it with a plan to hold atleast a year.
thanks for the info
I was hoping for a video. lol
Hehe....I will keep that in mind :-)
I did the same thing in Tron. I bought at 4 cents and watched it climb irrationally to 35 cents and for some reason held. It was mainly because Ripple was also going up well beyond any sane level at the time but yes greed got the better of me. I thought if Ripple could go up for no apparent reason, why not Tron too. Lesson learned. I still managed to sell at a profit since I got in so low though.
very interesting, something I did not know, I started to investigate more, thanks for the information.
Thank you. I wish I had interest in my profile too!