Bitcoin’s price going vertical was the bull run of all bull runs (so far), where Bitcoin added hundreds of billions to its market cap in a matter of months. People were making money hand over fist, and cryptocurrencies were the talk of news channels and popular media across the board. The thing is, it’s really easy to make money in a market like that. What you need to know is that cryptocurrencies have had many bull runs and will likely have many more.
These bull runs can last months, days, or even hours at a time, and they’re important to understand. Everyone wants to come out on top during these runs, and the most informed come away with the biggest gains. Consequently, brief bull runs are a beginner’s worst nightmare. You see the price going up and up and up and you convince yourself that this is it, Bitcoin is going to the moon! So you buy, and the price begins to pull back soon after you got in. What’s going on here, and how can you use these market moves to your advantage?
Trading Pullbacks: Your New Best Friend
Every bull run is a battle between buyers and sellers. There’s usually a flow in the relationship between these two parties as prices increase. Trading pullbacks are an easy way to capitalize on this back-and-forth, and the pattern is simple to spot once you know what to look for.
Whether there’s good news coming out of one of the world’s major crypto hubs or institutional traders are driving up the tempo, the price starts climbing. Savvy early buyers recognize this, enter the market, and beat out sellers. This causes short sellers to exit their positions, resulting in the cryptocurrency spiking up even more. New buyers see the spike and give in to FOMO, pushing up the price even higher. This is when the bulls and savvy early buyers start taking profit, causing a price dip. Those same newbies who just bought in are now panicking, thinking they could see their value go to zero. The price continues to fall until it seems to bounce off of something and rebound. This floor is called a support line, and it’s critical to timing your trades.
Understand Resistance and Support Lines
The terms “resistance” and “support” come from the world of technical analysis, for which there are great guides such as this one from CryptoPotato. Cryptocurrencies tend to have certain price points that historically slow down or reverse the current direction. These are often psychological, such as when Bitcoin breaks from $9,001 to $8,999 (hypothetically). When this happens, there’s usually a wall of buyers who previously decided to buy when the price hits nine thousand even. This is what causes the price to “bounce” off the floor, which can then be used to time your trades.
While these patterns are easy to spot, they’re difficult to master. The experts at Bulls on Crypto Street can help guide everyone from novice to experienced traders. And even the most seasoned traders can still get caught in the wrong position during trading pullbacks. Additionally, for all the benefits that technical analysis provides, it’s an inexact science at best. Take everyone’s guidance with a grain of salt and don’t expose yourself to more risk than you can handle. Arm yourself with knowledge and chaotic market swings can become golden trading opportunities. Opinions expressed here by Contributors are their own.