Many cryptocurrency traders have felt the recent market decline and predict more losses in the coming days. If a trader is near the bottom of their short-term trend, they should consider waiting patiently until things get better. However, if this isn’t an option, it is best to trade small amounts while you’re at your lowest point in order to buy back in when there are signs of a recovery. To make trading decisions easier on day one after the crash happened, we’ve created a simple triangle graphic to show you how long it takes before things start looking up again.
Triangle Point 1: The Triangle Bottom
After a 90%+ drop, it can be difficult to determine where to begin trading. I recommend you take your lowest point and use the Fibonacci retracement tool (shown below) to draw a line across that low. This gives you a beginner’s line for the time being, which is subject to change as more prices are pushed down from their highs. After all, we don’t know how far the market will plummet or when it will stop declining at new lows each day. Consider adding this trendline to your plans for when things start rebounding and move on to the next stage of trading.
Triangle Point 2: Triangle Inflation
When the market recovers from a major crash, it tends to be more violent than normal. As I’ve explained in our previous article, it is possible for the market to go from being stagnant at low prices to extreme volatility. Depending on the specific cryptocurrency you’re trading and what caused the crash, you may see this pattern at different points during the recovery process. Some cryptocurrencies that have been known for their volatility have been known to have a long period of time before they start pricing up again after a significant drop. This period is known as “inflation” and it is where you want to be if you’re trying to get your trade orders in at the bottom. With this in mind, we’ve marked a new triangle point about 30% higher than the first triangle point that we just discussed.
Triangle Point 3: Confluence
It’s easy to see how low prices can drop in relation to each other because one side of the triangle has been so steeply declining for so long. But how does this relate to price? Imagine taking two sides of a regular triangle and connecting them. You’ll end up with a scalloped or inverted triangle, which is called a “confluence” or “confluent” triangle. The confluence is where the two angles will meet to form one long line without a gap in between. As you can see in the chart above, the price of Decentraland MANA ended up right on the confluence at $0.053 (the retracement) and $0.092 (the next projection point.) For this reason, I’d recommend looking at this confluence as a place where prices are likely to bounce from rather than simply stay at their current levels.
Triangle Point 4: Triangle Out
The final stages of the recovery from a crash will be dictated by how far the market can go before it starts popping back up. If you look at the projections above, $0.053 is still higher than where the market currently trades and I don’t think it’s all that far off from where the market will eventually go to get back to its highs. This means that most people who are in this spot right now have probably made some profits and have been at their lowest point since.
The triangle out can be a great way to trade and end up back at your previous highs without having to wait long for the market to recover. Feel free to draw your own lines and look at other cryptocurrencies’ price histories against these levels to determine if they’re ideal for trading while you’re in this position.
