How To Trade - The Triangle Breakout Method - Example: Trading Lisk (LSK)
"Trading is an Art" people tell me.
"Trading requires Patience" I'm hearing often.
"Successful traders know when to Bail Out" maybe the most wise statement I heard so far.
Trading with Care
Last week or two I started to trade with more care, following the advises given by others. I also started to adopt the Breakout Trading Method (see my previous post for an explanation here).
Before I was trading mostly on emotions and realtime, ie when buying a coin, I would not leave my screens until I sold it. Although it brought profits, it simple costs too much time. The emotions caused me dearly as well with several times big losses on a coin; When the coin would go down and down, I simply didn't took my losses, thinking "when not sold, I don't have the loss". But it happened regularly that a coin would not come up again for days, sometimes weeks, and then my trading money would be stuck while I could have bought me some other coins that is doing better.
The key things I adopted and brought me overall (moderate) success in an enormous unpredictable market with the enormous increase in value of BTC over the last weeks (my Alt coins portfolio suffered from this) and subsequently the crash of BTC yesterday (again, my Alt coins portfolio suffered from this), are:
- Looked for Triangle Breakout opportunities mostly: more about this below
- Trade Less Coins at the Same time: I increased my budget per coin trade, I was in 10 to 15 coins before, I reduced this to 5 to 8 coins
- Don't Wait Too Long for Breakout: I sold Alt coins when they didn't breakout for a couple of days
- Take Losses: When alt coins trended downwards after having them 1 to 2 days, I sold them
- Be Patient: When owning a coin bought based on solid indicators for breakout and when pulling back, I kept them much longer than before, ie believing in the breakout indicators more than anything else
- Ban Emotions: Reduced the number of times watching the current status of my portfolio (still learning, need to reduce much more still) and didn't act immediately when the coin would move the wrong direction.
Although an experienced trader may have done much better than I, in the up and down rides of the last weeks, I increased my trade budget with around 20%, ie an average of 20% gain on my entire trade budget. Some coins went bad and took my losses, some of them even up to 20% loss.
Triangle Breakout
Mostly I'm trying to find the coins with the so called 'Triangle Breakout" indicator.
The Triangle is one of the breakout method indicators; I explained breakout trading methods in a previous post (here). I do not only look for the triangles, but I also look to the historical values of the coin and what is happening with BTC (sometimes Alt coins are coming down when BTC drops hard loosing double, on BTC/US$ value as well as on Alt/BTC value). When coins are in their historical peaks, I try to avoid them. When they are quite a bit below historical peaks, I focus on them.
To illustrate the triangle breakout method I use LISK (LSK) coin as an example, I coin I bought yesterday. In the chart of about an hour ago (below), I draw some lines that I'll explain here:
- Breakout line: Yesterday around 10PM a new top was set which was tested again early this morning around 5AM.
- Breakout line: Another breakout possibility, this line was tested several times in a row
- Support line: This line shows the so called support line, the value at which the coin doesn't seem to go under
- Trend Line: This line shows the trend of the coin, together with line 2 this indicates the Triangle Breakout possibility
- Testing the Breakout: This point shows the test of the breakout line number 1; Such testing shows the breakout possibility, although in this case still not really clear indicator
- Testing the Breakout: These points shows testing of the breakout line number 2; In this case the breakout was tested 4 to 5 times with an almost perfect triangle shape
My Trade on LISK (LSK)
I took a little bit of a gamble yesterday when buying the coin. About 1 hour after the top was set around 10PM (breakout line 1), and I saw the value increasing again after a little pull back (the second sub-top just after) and I decided to buy. As you see in the chart, the coin pulled back quite a bit afterwards. However when I was sleeping, you see the coin got its spirits helping and went up quite bit.
I initially set the gain I wanted to 10%, which was at a value just beyond what became the breakout line 2. When I saw the triangle breakout shape forming this morning, showing a strong willingness to breakout further, I decided to stay in position and not sell the coin for a value just under the breakout line. Selling below this breakout line would have given me 9% gain. I also decided to increase the wanted gain to 20% since the indicator are looking good for such gain possibility; It can be expected that the value of the coin will increase quite a bit when it will breakout since it tested the breakout line so many times and it was forming an almost perfect Triangle shape.
When trading with less gambling, it is always best to wait until the breakout line is tested multiple times. This would be at arrow number 5 for the first breakout possibility although this would still be kind of a gamble. Better indicators are at breakout line number 2. Here the almost perfect triangle is formed.
Continuation of LISK (LSK) Trade: Current Situation
Will writing this article, the coin lost its momentum as can be seen in the chart below.
First I describe the lines for you:
- 2: Breakout line: This is the same breakout line as before in the other chart above
- 7: Trend Line: This is the short term trend line forming the Triangle as seen before in the other chart above with the breakout line 2 and trend line 4
- 8: Current value: the coin is coming into the Triangle again
The chart shows the loss of momentum when the coin value dropped below the trend line number 7.
Since I wanted to leave my emotions out of the trade and did not want to react immediately when the indicators are not that positive anymore, I decided to stay in the trade. Mainly because the indicators looked good not so many hours ago; I believe in LISK as a coin; And today is a positive day for many coins.
I'm playing the "Be Patient" card!
Next
Since I'm still in the trade, I don't know how this will play out. The strong increase in value shown on the last chart above, came down a bit. I still have about 6% gain on the coin and keeping my cool. Still believing in the breakout; Still believing I can get a 20% return which is much better than to take a 6% return now.
When my trade is done, I'll update this post, or write the results into a comment to this post.
Looking forward to any comments, feedback and tips you may have.
NJOY trading
--- sources [1]
--- follow me @edje
Thanks a lot for sharing your insight in this detailed, play-by-play style. It's very helpful to get inside your head and see what your experience was like as you work through a trade.
I think it is the best way to learn from others, by knowing why you did when you did it and how the decisions progressed. At least, that is how I like to learn from others.
ho I got it early, good one :) at lest it looks good :) my post doesn't look as deep, well I have one part left so i might as well learn more :) I will read it later and probably feature it in my next week post :)
Thank you for the comments.
No probs :)
interesting, I would add in some news into the mix, I think @hilarski has a good sense, I saw the best trading advice video there, and it has helped me grasp the "trade"quickly, so buy on news and sell on the highs, sure you might miss the peak, still I think a long-term planned method is best, Golem did a 10x on price in 2 months, eth almost the same, bts did it in 1 day thanks to btcchina, and now we have some new market cap 6 coin :) ok market cap7 , but yeah catching the long term trends seems best, getting btc at 1800 and selling at 3000 then again once on 2200 and again yesterday. Identifying the trends seems like the best method.
Good advises. You essential say, investing is better than trading? Crypto is in a hype and had some amazing runs last 3 months. This will not continue like that. Investing, or mid/long term trading requires news indeed. But it also requires diversification, which basically means once you win once you loose and luckily a lower overall gain. Short term trading allows a small budget to great larger amounts of funds by circulating the budget. That last one is what I'm try to do. Trade times hopefully hours with peaks of day or two, instead of having the funds in coins for lets say 1 to 12 months or longer. I know short term traders who increased their trade budget with 10x over the last 8 weeks. Not all coins did that :)
I love those helpful articles! Ive been offline and its so sad when I miss your great articles. I gave up on trading BTW, for a while.
The good think about Steemit is that our articles will not be lost, so you can always check in when you like, even if that is a week later or even months later :)
I'm trying to learn the trade of trading, but it is not easy. BTW, am still in the LSK trade, takes to long, but in the mean time falling and climbing again and again; Still has the potential to breakout for 20% profit, so I leave it like it is for the next 12 hours or so, otherwise I check out and see what that brings me. Interesting 'profession' to say the least :)
I just can't find time for trading ....yet!
I need to set priorities but I am anxious to learn and enjoy your articles
Let me know when you are ready, I can give you some off-Steemit support as well :)
@edje, great post on the skills needed to trade. I suppose there is many techniques out there. As long as it earns you money, they are all good techniques. The Key for me which you also highlighted is to leave emotions out, cause the stock market is irrational due to emotions. So if we can leave emotions out, chances are we can profit in the long run. Nice article.
Thank you for your comment. Indeed, emotions can be a killer, but still look to much to the screens and getting emotional, but am able to manage them. Although LISK is not looking good anymore, going sideways. Lets see if I can stand this for the next hour or so. Otherwise I may step out when it keeps on going sideways.