Stop Buy Orders and buying on Confirmation

One of the things i’ve been reading a fair bit about in the last few days is technical analysis (TA). Obviously this is a massive subject with 100+ years of techniques and strategies to get your head around. However one of the things that has really stood out to me recently is the need to be more certain about when to enter and exit the market.

The basic concept here is that you should be looking to TA to figure out when the price is most likely to move in a certain direction. It seems that there are a handful of indicators that people mostly use in this regard. In no particular order:

  • Volume
  • RSI
  • MACD
  • Fibonacci
  • Various Flags, Pennants, and Wedges!
  • Patterns like Head and Shoulders
  • Elliot Waves

At the moment, I am getting the hang of the general shapes, in particular things like the Flags and Pennants make a lot of sense and are clearly visible. More info here:

I’m also pretty comfortable with the Fibonacci series and how that can be used to look at likely support and resistance points. I’ve still got learning to do around tracking volume, RSI and MACD.

Anyhow, with regards the main point of the post, Stop buy orders and buying on confirmation. The concept is, that actually you don’t always want to buy at the lowest possible point, because you are trying to manage risk. For example if you look at something like Cardano (ADA) which has been gradually moving downwards in a wedge shape for the last few days, it is in this falling wedge but the movements are getting ever smaller. In addition it’s hovering around the major support level presented at the 3124 satoshi mark which is the top of previous highs in mid to late December. Therefore what we’re looking for is a breakout above the falling channel.

To my mind then, if ADA breaks out above 3350 sats there is a good chance with enough volume, that it will have broken the bear market and is heading higher again.

With all that in mind, you could therefore argue that waiting to buy in at somewhere in the 3500 mark or would be a good plan.

I believe that this is possible on various exchanges. Some times it is called a Stop Buy order. I think that it’s possible to execute on Bittrex with a conditional buy order as shown in the shots below:

First we start with the buy settings.

We need to select a Conditional order

Then we need to set the condition, which is in this case greater than or equal to

Then we end up with this, which to my mind means that if ADA goes above 4000 satoshi we will buy.

I’m going to test this out and see where things go. Obviously it would be great to also be able to put in your limit sell order at the same time. I think on Bitfinex more of that is possible, i.e. stacking orders, but I’ve not signed up yet so will keep researching.

Lots more to learn!

Maybe we hit the bottom… and some great FUN action

A few things today:

  1. BTC is making a great effort to break out of the downward trend. It’s not clear that it’s made it yet, but it has gone up over $2000 today, so some significant progress. It’s now a case of wait and see if it can make it up over the $8500 mark and then over $9000. I think if that holds then there is a good chance we’re on the up again.
  2. FUN has seen a massive rally today… which I actually caught :). The whole concept of waiting out the dips and having faith in the stuff you buy paid off, literally. I managed to cash out my FUN at the 895 and then 860 mark which made me 0.03 profit on my trade. All in all, a huge success as I didn’t blow it by getting greedy. FUN then dipped all the way back to 700 so I’m very happy to have timed things right.
  3. Lastly I’ve now found another app (actually loads) but this one seems pretty good so far, that does alerts. I’ve set them so that my phone will alert me when FUN hits 625 and 750 as these are interesting areas to buy in or at the least to start watching carefully. Here is a link to the app:

Using Stop Loss orders

One of the things the recent crash has made me think through is the concept of Stop Loss orders (essentially an order put lower than your buy price to get you out with a minimal loss if the market drops). Most of my trades in the past have been longer term… i.e. I’m buying into something which I’m invested in for the long term (by which I mean 1-3 years). These are projects that I believe are well run and will grow over time. Whilst that doesn’t mean I don’t care what happens in the short term, it does mean I’m less worried about a temporary drop. Thus I’ve not really got into the habit of using a Stop Loss order. However, I’ve recently moved back to try more short term trading, i.e. trading within the period of a few days or a max few weeks. My aim as discussed was to get to a point of making a few 0.01s a month.

Unfortunately I’ve been somewhat caught out, by the recent price drops. So much so that the coins I held have turned into somewhat longer term holds!

Partly that’s OK, because I followed my earlier advice not to invest where I wasn’t reasonably confident, however it has meant that I’m holding a bigger position than I would have liked and ultimately right now the amount of BTC I hold is lower than it was before.

This got me thinking about the Stop Loss order and how to use them effectively. It seems that the best option would be to allow some room for the market to fall a little below your buy in price. After all, it’s hard to judge the perfect point to enter, however, you should aim not to lose more than say 5% of your trade value. That minimises risk and lets you live to fight another day! So my suggestion would be to calculate the value below buy price that minimises your loss to 5%, unless the coin seems to swing wildly in which case look at recent troughs and consider setting just below that level. That way you allow for a “normal” drop so that doesn’t trigger the sell, but if it drops further you can get out.

If you’re interested to know about how to put these orders in, below are a couple of examples:

Here is a useful article on Steemit about setting Conditional order (Stop Loss orders) on Bittrex.

Here is a useful video covering the functionality of the Binance exchange