I see so much misinformation on bitcoin forums and reddit about trading. I would like to offer some lessons to beginning cryptocurrency traders in hopes they will avoid the usual mistakes and have a chance to make a profit while learning the ropes. For this first lesson I will be using the recent Ether pump and dump as an illustration of how I enter and exit a trade.

When I learned to trade it was customary to apprentice to an experienced trader or learn on Wall Street. Now there is tons of information on the internet, the problem is separating the gems from the junk.

First Rules of Trading

  1. Never fall in love with an investment.
  2. Buy the rumour and sell the news.
  3. The trend is your friend.
  4. Bulls and Bears both make money but pigs get slaughtered.
  5. Always use sell stops to protect your open trades from large losses if the market goes against you.

Cryptocurrency is amenable to traditional technical analysis and a few specialized techniques that may be new to you but worth the effort to learn. I am talking especially about Elliott Wave analysis, Fibonacci levels and Point and Figure charting.

Ether Pump and Dump

Ether Pump and Dump

Ether price enjoyed a rather fast run up in price starting on February 17. The Ether pump coincided with a lot of hype in the media about Ether. A clear up trend was in progress so many traders took long positions. There was a slight sell off from March 5 to March 7 then the Ether pump resumed. I am sure some traders got stopped out but then reentered. I entered my long position right around .01.

When I see an altcoin in an uptrend that is exuberant I generally due not use sell stops, or very loose ones if at all. There is just too much day to day variation in price. What I do keep track of is how much exposure and hype the coin is getting in the bitcoin online news sources. Online magazines and forums are invaluable to judge sentiment.

Around March 13 I began to feel Ether price was beginning to top off. A lot of this comes from experience but I also noted more news articles about Ether (sell the news.) More important is that on March 13 on the 4 hour chart a Shooting Star showed up on the Candlestick chart. Shooting Starts are clear signs of an impending reversal shown by the high volume dump later in the day. At this time the Parabolic SAR dots changed from bullish support to bearish resistance.

Dumps are almost always followed by dead cat bounces and on March 14 the high was retested forming a double top and I sold all my Ether at the market. Over the following days Ether has been in a clear downtrend.

One of two things will happen. After some time has passed if Ether really has legs price will advance and form a new all time high. Be careful buying into any advances as they could be Bull traps. You really only want to buy Ether under two conditions:

  1. The all time high of .037 is taken out decisively on high volume.
  2. Ether prices decline to around .017 which would be a .786 Fibonacci retracement shown on the next chart.

Ether Fibonacci Analysis

Even at price of .017 price may continue to go down. Remember PayCoin? Now Ether is not a scam from the start like Paycoin but traders may lose interest. I already see money moving from Ether into Monero.


Ethereum is the number 2 coin behind bitcoin at CoinMarketCap so needs to be taken seriously. It has a good development team and financial backing. If you have been following bitcoin for any number of years you will have seen bitcoin make new highs, retreat (or crash) then make new highs after time has passed. Be aware that Ether may not be a good coin to buy if you expect long term appreciation like bitcoin. Here is a quote from BitcoinTalk:

The target price of Ether is to stay around $10 per coin. It is not a speculative device, it is a token for contracts.

If the token was as high as you wish ($200-$300), people would hoard it and not use it for contracts.
Butter-Boy knows this, so he will and can change the protocol whenever he wants to add more supply to drop price. Currently Ether supply is 80 million coins. That is already 5 times more than bitcoin’s supply in just 8 months.

You can speculate and buy some if you wish, but they are designed and programmed to be around $10.

Getting Started Learning Technical Analysis

Recommended books:

Technical Analysis of the Financial Markets by John Murphy

Japanese Candlestick Charting Techniques by Steve Nison

Technical Analysis For The Trading Professional by Connie Brown

I mentioned earlier that Point and Figure charts seem to work very well calling swings in price for bitcoin and altcoins. Here is an introductory video:

If all this information seems a bit overwhelming there are trading groups you can join for buy and sell signals while you are learning. You will also learn a lot from your fellow traders in the group. Trading groups that are worthwhile are not going to be free so expect to pay about $200 per year.

Because Point and Figure charting works so well with cryptocurrencies I recommend you consider joining the CryptXO trading group on Slack. It is run by a Point and Figure expert who goes by the handle klee and you can also find me on the Slack team as allegro. The advantage of joining a group is you will be getting good entry and exit points on bitcoin and other altcoin trades while you are still learning.