Purpose

This is the first in what will hopefully be a series of little strategies that I use when trading.

Note that this is for educational purposes only, and not trading advice. Do your due diligence, only you are responsible for your actions.

The Stretch Limit

I call this tip "the Stretch Limit" because it's essentially just a limit order at a price that would generally be considered a bit of a stretch.. Since cryptocurrency never sleeps, I will sometimes place Stretch Limit high sells and low buys when I'm going to be away from the computer for a period of several hours. These orders are most successful for catching large whale sells that instantaneously drive the price significantly lower than the average market price. They can happen in 1 sell, or during a series of large red 1 and 5 minute candles. This means that Stretch Limits are a short-term strategy, not something to set and forget.

Below is a chart where we can see two opportunities where this works.

GDAX 15 min candle for June 1, 2017

This seems really risky. Aren't you asking to sell high or buy low in the event that the market trend changes drastically?

It certainly can be risky. If a buy at 11am was just the beginning of a retracement that send the price down to $180, it wouldn't be a very amazing buy. It's extremely important to take into account a few things to make Stretch Limits useful:

The overall market trend Last major support and resistance prices Any previous patterns the market is still in Any news that is causing large market changes

Market retracements don't happen over a period of 15 minutes or an hour. They may begin, but large movements will almost always have people buying cheap or taking profits, and that will smooth the trend over several hours or days. Knowing about these 4 things above helps determine whether stretch buys or stretch sells are doable.

GDAX 6 hour candle for June 1, 2017

GDAX 6 hour candle for June 1, 2017

These two pictures help explain the conditions that I found to be safe for setting my recent Stretch Limit Buys. On top, we can see the last major resistance was around $218. This price marked the point where the "swell" pattern I'd been watching ended, as shown in the second picture. Over May 28, the market recovered and started trending upward again (partially due to news about Chinese exchanges). Overall, Ethereum is in a pretty bull market.

My conclusion was that:

Since it's a bull market, sharp declines will be quickly bought back up, smoothing any trends

Since we are dancing around new all-time high (ATH) prices, sharp whale sells and panic are likely

The general trend is upwards, so trying to make Stretch Limit sells is much more risky than buys

Trying to do 10-15% deviation from the average market price can work, but I find doing more frequent 3-7% bets easier and more profitable. I picked my price by seeing that there was a good amount of sideways movement around $230, and the last support was around $218-220. That means I'm looking for something that drops significantly below the support so that I can buy and hopefully sell once support catches up. I settled on $207.77, and the low was right around $206.

This time, I got lucky and got a very good price. I waited a few hours until I saw a hard resistance at $228, and managed to get out at $222.22 for a ~6.5% gain.