Let’s face it. It sucks thinking you just bought the dip, only for it to dip again.
This post is about how you can spot a reversal in the market when it dips.
To trade on reversals, you need several strategies. DON’T rely on only one strategy unless you want to get wrecked.
I watch trading videos from the TradingChannel on regular basis. I love his strategies and implementation. This is not financial advice.
Several indicators should be looked upon and when they line up, however, you can STILL get wrecked. Keep that in mind.
How to buy the DIP 101
1. Use different timeframes. I use timeframes recommended by the TradingChannel: 1 D, 4 Hours, 1 Hour, 15 Min, 5 min. If you are trading on the 4 hour, go up 1 timeframe which is Daily, and look for structure levels. If you trade on the 1 hour, go to 4 hr and look for structure levels. Always go up 1 timeframe from where you are trading to look for structure levels.
2. Look for important level of structure at a higher timeframe. Use 1 day if trading on the 4 hr. Important level of structure is the next level of support a price will hit for a bullish trade (if you try and buy the dip).
3. An important level of structure becomes an Optimum Trading Zone when tested multiple times and shown to be a major level of support and resistance.
4. While you are in the area of Optimum Trading Zone, you also want the RSI indicator to go below 30 which means it is oversold.
5. Look for RSI Divergence. RSI divergence is when the price is making lower lows, but the indicator is making higher highs.
6. Look for a Double Bottom to prepare for your entry. A Double Bottom is a retest of a level of resistance and is a Bullish indicator. Check out Chart Patterns 101 for more information about Double Bottom.
7. After Double Bottom, look for buying pressure. A long green candle, long-wicked green candle, or engulfing green candle are examples of buying pressure. Check out my Candlestick post for more information.
8. Set your stop loss and target and you are ready to go. 🙂
How to Not get Wrecked in Crypto
Having a somewhat conservative approach can help. Learning TA is a must. I enjoy watching the TradingChannel. I am NOT affiliated with the TradingChannel and I DO NOT make a profit from recommending his channel. The TradingChannel is in MY PERSONAL OPINION the best trading channel out there. Click here to check it out for yourself.