The safest strategy to trading altcoins

2021년 1월 23일

When it comes to altcoins, whales tend to own an overwhelming majority of the coins on the market. In these market situations if large holders stop selling their holdings, the supply can quickly dry up causing price to skyrocket.

We all know this phenomenon, its a pump and dump. But with "pump and dumps" there are key price movements that a vigilant trader can notice by eye. And if you can identify a pump before it happens you can hop on the rocket.

Above is a play I made on OmiseGo earlier this year. I have described the strategy below.

Part A
An accumulation zone. These occur at the bottom of price ranges, in these areas there is relatively low volatility. It may seem like a good idea to buy these areas but accumulation zones are not easy to spot without further technical assistance. Trying to "catch" an accumulation zone is a high risk play and not recommended.

Part B
The breakout. In this zone price rises higher than the accumulation area to test market conditions. In part B the price is very volatile. This means that current holders are still exiting position. Given that the general trend of crypto was bearish during this time this asset would be ignored and left to test lower.

Part C
Another accumulation zone. It is important to note that this zone is lower than Part A. This means that the BUYERS in Part A are either a. Out of their position, or b. holding at a loss. (for b. they are either long term holders or stupid) The price range in this zone become extremely flat and calm. From this we know that a fresh wave of whale accumulation is occurring and that a breakout may potentially be coming. Again I do not recommend trying to predict accumulation zones as they can punish stop losses or fail to hold completely.

Part D
The breakout. Everyone that now holds the asset is content on waiting for higher price and the sell orders dry up. The price surges and is quickly eaten by short term traders and some amount of profit taking. This is a good sign but is still not ideal for retail traders to meddle with.

Part E
The defense. In order for whales to sell large portions of their holdings to "the fools" the accumulation zone that they have bought at has to be defended. All new buyers have to purchase coins at higher price so that the whale positions cannot be undercut. For this reason whales will create a defensive zone where short term traders can exit to the "first in line." (The first in line is what we want to be) You can see this defensive price action in part E as the sharp upward price spikes where whales and day traders are accumulating fuel for the rocket. The first in line are traders are willing to buy at the higher zone as it provides a safe way to make money in the pump that is visibly about to occur. If you find an asset with parts C, D and E your are at your most safest point buying at point E. You have the power of whales behind you and empty order books above you.

Bonus
As an extra, we can see in OmiseGo that the price range in Part E was again "defended" showing that the original whales still hold the asset are still invested in protecting the integrity of the asset. This area would have been a fantastic place to re-enter... if only I have had looked at the chart in recent weeks.