Hello together,
Enclosed I would like to take up a topic, which I consider very important and around which there are many different views.
The chart refers to an example that occurs in the text.
The chart is the only thing that counts for me, all information is visible in the chart.
Now there is certainly the one or other reader who thinks to himself
"Yes but if a very special news (eg ETH 2.0) is announced then it affects the price".
Yes that's right and I agree with that, but what should change for me? Now when news comes out that has a big impact on the coin/token there are usually 3 possible impacts:
1. the price explodes, many buy the coin/token because of the positive news.
2. the price drops drastically because of the bad news (see XRP and SEC)
3. the price does not make any unexpected moves (the information is already fed in).
So which of these points changes my course of action or has an impact on my trading? None in and of itself, but why?
I trade the chart, I trade what I can see, so for my part these are formations.
Now if a news like in case 1 appears, there are usually forever big green candles, these usually become so big because many unsystematic traders get FOMO and jump on the bandwagon.
After this phase, the price begins to settle this can take its time depending on the impact. So it consolidates. (You don't know what a consolidation is? I have written a tutorial about it here on Tradingview, just check my profile).
While it consolidates it usually forms a formation that I can trade again, so now I'm back at the point where I start to trade, so nothing has changed.
It can be of course that a formation has already formed or perhaps one is already in a trade, even better one profits so from this "Unforeseen strong movement", here it is important to apply the correct exit strategies.
The same applies to point 2 in a bear market.
However, if point 2 occurs in a bull market, nothing changes either, because I trade anyway only IN TREND DIRECTION and such a thing would be a short trade in the bull market. So everything remains the same.
And point 3 happens regularly without the trader notices it, there is a lot of news around various assets mostly daily or weekly but change nothing in the current price, because this information is already priced in. (This usually happens due to an expectation of the traders to a particular asset).
Enclosed an in the chart an example to Ripple, this example refers to case 2 we are in a bull market and bad news follows, XRP formed after the breakout from a very large flag another continuation formation more precisely a bullish pennant, so I as a systematic trade have an order above this pennant, this should now be triggered, super the trade runs the stop is below the formation.
The formation dissolved bearishly due to the news on the SEC indictment, the price began to fall. This is interesting but not an action signal as this does not happen in trend direction.
And from this point, in my opinion, speculators differ from traders:
I am NOT jumping on a SHORT trade here as I have no systematic that I am applying here. There is no reason chart-wise FOR ME to trade.
Notice:
I refer all statements to MY trading system in MY time units (H4,D1), there are more than enough who e.g. trade in a subordinate time unit and for which now a trend reversal took place, these traders can of course open short trades, since here for them also the trend direction has changed. Likewise, continuation formations formed in the subordinate time units.
Technical vs. Fundamental
The fundamental analysis may absolutely have its existence, however, in my opinion, it is only possible to trade this sustainably profitable if the information that is used for purchase decisions are absolutely first hand. If you or I read a news on an online portal or elsewhere, then this is already "old", but think for yourself what path such a news has behind it, until it arrives at you? An entrance due to a news would be for me FOMO and without systematics.
What if absolutely positive news appear for an asset that is currently in a clear strong and overriding downward trend? Can we now assume a sudden trend reversal? In my experience, a nice green candle is formed which is gradually sold off and the price continues to move in the direction of the trend (current example of the Wallstreetbets, look at the charts of GME, NAKD, AMC).
Also the factor time is a very important that many neglect in this comparison. Even if you only watch 5 coins/tokens, if you want to trade them fundamentally, you have to be up to date absolutely EVERY! Day to be up to date, in different languages and not only search the data, but also understand what exactly is happening with each project, this you now have to filter, process and make decisions based on it.
A technical analyst can scan these 5 coins/tokens within 20min for changes once a day ( I am starting from the daily chart) so the cost/benefit factor is much more profitable.
I don't want to say that fundamental analysis is bad and technical analysis is the best, because as I said if you know how and have the necessary resources and especially the time you can also follow a fundamental approach but I see clear advantages in technical analysis.
How do you see it ? Feedback, criticism and suggestions in the comments.
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Best regards and good luck
DCT-Trading