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Whale psychology
🕑 Added 2021-04-20 12:59:23 +0000 UTCThe crypto market is risky and it can dump unexpectedly.
No one can 100% time the market.
I follow (and pay too) for well recognised influencers with a strong track of being spot on for "reading the market". None of them has been able to tell precisely and consistently what's going to happen exactly when.
Many times they say things will turn ugly just to see the market then pump another 20%.
But the good news is that we don't need to know the precise time the market is going to crash. We can take extra precautions to reduce the risk during very risky times.
In order to understand how to protect better ourselves we need to understand a bit of "whale psychology".
So let's go with some facts:
- A whale wants to profit big.
- A whale is searching for the best conditions to collapse a market with the less effort and risk possible.
- For a whale it is far more easy to collapse an overextended market compared to an already oversold market. The second one is already oversold, so they would need to convince a way larger number of small fishes to sell to push the price even lower.
- The impact of dumping a market when extremely overextended is far larger than on normal or already oversold conditions. In an overextended market there's always a huge amount of players using leverage and stop loss. This is something that whales love and consider the perfect scenario to go and grab a big bite from them market. All they need to do is drop the market just enough for the stop losses to trigger and then see how the market plummets in a cascade of stop losses automatically triggering. They wait for it to get to oversold levels and then they buy it back cheaper. This allows whales to buy at discounts from 10%, 30% or even more!
- To collapse a market whales want to use the less volume possible to reduce their exposure to getting wrecked to almost 0%. The best risk reward for a whale is to sell when overextended as this has higher chances to dump the market and re buy immediately at discount. If they sell high volume and then the market doesn't end up dropping then that would turn into a big loss for the whale.
- FUD helps whales. Whenever a whale sells, there's a chain reaction of FUD and fake bad news. Further whales dump too. Right before the sell-off we are currently experiencing started, around 15th April, a whale transferred big volume of BTC from a cold storage into Binance. Hours later we started hearing a list of FUD news of fraud, SEC, all at the same time. Notice the pattern on each of the 4 sales we had since early 2021: 10th of Jan, 20th of February, 10th of March and 16th of April. Each individual bear short term period had quite a bit of FUD and fake news associated all aiming at the newbies and baby hands.
- Bull runs spend most of the time in green and corrections last much shorter than pumps. For as long as we are in a long term bull market, corrections should last shorter compared to short-term bull rallies.
And that's why when markets are overextended we should take extreme precautions with bots. This doesn't mean that they can't dump a market at any time but it is far more likely that this happens when we are very overextended.
So what can we do to mitigate the risks of whales dumping the market?
We need to think like a whale :) We need to use their psychology to spot great whale-opportunities and keep our bots safe when those are evident.
Do we mean switching off all bots?
Yes, and no. First, let's get to know our bots. Some bots are pretty sensitive to whales, they make a huge mess when a whale is manipulating the market.
You can learn how your bot would react by inspecting the following "risks aspects" in a bot.
- Leverage - if the bot uses leverage it is high likely it will have a big impact on a market drop of 10% or higher.
- Deviation - if the bot trades with deviation below 10% then it will be pretty exposed too.
- Low-cap tokens. The lower the market cap of a token the higher the price will collapse when bitcoin drops in price. 10% drop in BTC can cause many of the low caps to drop massively.
- Buy the top bots. Buts trading using TV strong buy/buy or any AT presets set to lower time frames like 1 min, 5 min or even 1 hour tend to buy the top. They are one of the most exposed to the whales.
- Bots with stop loss. A bot that uses stop loss is pretty much VERY exposed to whales.
A bot might have a combination of the above aspects above increasing the risk.
When conditions turn into moderate risk we can start pulling out some of the riskier bots first.
We can reduce the funds of some bots too.
When conditions turn into high risk I will probably switch off most of the bots and leave bearish bots on (bots with large deviation for example).
Does all this mean I'm going to stop trading with bots that use any of these "risk aspects"?
Trading with bots is risky but very rewarding if we can manage the risk properly.
Most people stare constantly at deals. This is of no use.
We need to shift that attention back into the charts and into knowing better the "risk aspects" of each of the bots we have: leverage, deviation, etc. (all mentioned above)
We need to learn - all my patreons - what constitutes a relatively safe timing to trade and what is pushing it too far.
We currently have most of our bots off due to the uncertainty in the market. There's a lot of FUD. I believe that we will resume our bull trend most likely after a dead cat bounce, further drop and then a bit of market sideways. But once we do it I'd want us all to be prepared for another whale to decide to wipe out our profits.
The whale killer plan
The plan consist in two steps:
- Identify the risk aspects of the bots. Which bots are you running with leverage, which ones have deviation lower than 10%, which ones use low cap tokens, etc? If you don't know this yet, check your bot settings and also the documentation in the bot dashboard. You don't need to know each parameter but the "risk aspects" mentioned above are a must.
- Have a plan to stop your bots based on the risk signals provided in the discord channel
We are going to start monitoring all these levels in the #indicator-signal channel on discord. I'm sending alerts currently for:
- BLX - START, STOP: POSSIBLE TOP and STOP MODERATE RISK. Learn more about this signal.
- TOTAL2 - STOP: HIGH RISK and STOP: MODERATE RISK
- SPX500 - STOP: HIGH RISK and STOP: MODERATE RISK
If you use any these signals and react by stoping some bots you should expect to miss out gains. In other words you might exit too early. If you ignore them you might exit too late.
It's your call.
Can we control automatically our bots with these signals?
I'm still considering adding these signals to the VIP signal repertoire. I'm working on it.
Comments
Great writeup. Thank you.
That is great, thank you for paying attention to our calls and needs, definitely appreciate all your efforts!
Can't thank you enough for all the valuable information you share. So awesome to be part of this community π
Great article. Also thank you to head us of what is important to take control of. ππΌππΌπ
