FREEGAME Friday: Catching technical waves

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Building technical conviction

Building technical conviction involves several key elements:

• Strength: Look for strength in the charts, which can manifest in various ways, not just through price increases. Strength can also be shown in pullback periods, indicating resilience in comparison to the rest of the asset class.
• Undervalued assets: It's essential to identify if an asset is undervalued, especially in the current market environment where we are looking for buying opportunities. Technicals can point towards this through deviations around key levels or specific pullbacks.
• Clear direction/trend: Focus on the long-term trend to position correctly for potential reversals. The aim is to fade the short-term trend in the direction of the long-term trend.
• Technical framework: Use a few key factors to justify a high-quality setup. This involves ticking off certain criteria that make a setup viable.

Market context

Understanding the market context is crucial for successful trading:

• Macro and fundamental catalysts: These factors provide the overall direction or tide, pushing the market. Before trading, ensure the tide is favourable, akin to a surfer knowing when the tide will be in.
• Conditions: Perfect conditions don’t guarantee success. Losses are inevitable, and maintaining a balanced mindset is crucial. Even seasoned pros will lose trades.
• Mindset: Stay active, keep learning, and refine skills for better chances. Persistence leads to success. Losses should be seen as learning opportunities.

Key aspects of the technical framework

A robust technical framework includes several critical components:

• Higher timeframe key levels: Identify key levels on the monthly, weekly, or daily time frames. These are more significant than lower time frame levels and are often used by big players and institutions.
• Spot bullish structures in undervalued markets: Recognize bullish environments and identify undervalued assets.
• Recognize key reversal signs: Use additional tools like Fibonacci retracement to identify potential reversal points.

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Practical example: Ethereum trade

Using Ethereum as a recent successful trade example, we demonstrate the application of our technical framework:

1. Market context: Starting with the weekly time frame, we identified the overall market context. Ethereum was in a recovery period after a significant sell-off.
2. Key levels: Historical key levels were identified, such as the 2900 level, which had been a significant support and resistance point.
3. Bullish tone: A significant drive upwards and bullish price action indicated a change in the market tone.
4. Fibonacci retracement: The 61.8% Fibonacci retracement level provided additional confirmation of an undervalued asset.
5. Entry points: On the daily and 4-hour time frames, specific entry points were identified based on demand confirmation and bullish engulfing candlesticks.

By staying in tune with the market and using historical data to validate our decisions, we were able to confidently take a trade with a favourable risk-to-reward ratio.

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Cryptonary's take

This episode highlights the importance of a structured technical framework in making informed trading decisions. By understanding the market context, identifying key levels, and recognizing bullish structures, traders can build a solid technical case. Persistence and continual learning are crucial for long-term success in trading.

We hope you found this episode insightful and encourage you to watch the full video or engage with our community for further learning and discussion