The Wolf Den #88 - Tips, Trades, Chart Requests And More
Tip: Take a 3% on Every Trade for a Month
This is a lesson that I have shared before, but think is REALLY important! I did this for a while and it made a huge difference in my trading. You need to learn to SELL - it's far harder than figuring out when to buy.
Taking losses is difficult. One of the hardest things to learn as a trader is how to set a stop loss and accept the hit to their portfolio when it fires. We have all experienced it.
What few traders talk about is how difficult it is to SELL. I would argue that taking profit is far more difficult than taking a loss. How many times have you watched an asset’s price rise, failed to take profit, and then been paralyzed as price dropped and turned into a realized loss. Should you have sold before your target and locked in profit? Should you have moved your stop loss up to breakeven? And how many times have you seen price reach your target – but you decide that price can go even higher and choose not to sell, only to see price drop once again.
Selling is hard. My mentor Christopher Inks once taught me a valuable tactic – he told me to teach our students to take profit at a 3% gain on every trade (when possible) for an entire month, no matter what. I thought he was absolutely crazy considering the opportunities in the crypto market at the time. However, I vowed to test it myself and found it to be an extremely valuable exercise. First, consistent small gains compound very quickly and can result in tremendous profit over a relatively short period of time. More importantly, this exercise teaches traders the value and importance of taking profit, regardless of FUTURE PRICE ACTION. It kills FOMO (fear of missing out) and eliminates the greed that is inherent in the human psyche – the urge to squeeze a bit more profit out of an already successful trade.
Try it and let me know how it goes!
The Onion King
By Sahil Bloom.
In 1955, an onion farmer from New York made a fortune cornering the market for onions in the United States. By the time he was done, there were literally onions flowing through the streets. Who's up for a story?
Vince Kosuga fancied himself as more than just your average onion farmer. He had a productive 5,000-acre onion farm in Pine Island, NY. But it was his side hustle, trading in futures markets, that would make him (in)famous.
Futures markets offered a way for farmers to hedge their risk. They could execute a contract to sell their crop at a fixed price at a later date, removing the risk of price fluctuations. But Vince was more interested in using futures for speculation. He wanted to get rich!
After some unsuccessful episodes trading in wheat futures, Vince Kosuga had a (seemingly obvious) revelation. He knew all there was to know about onions, so he should be trading in onions! He would pull off the greatest onion trade of all time.
The idea was simple. He would corner the entire US market for onions. Executing against it was not. To pull it off, he would need to own the vast majority of all harvested or in-ground onions in the country. But Vince thought big. He and his partners began buying onions.
They built secret warehouses across the country, buying and storing millions of onions. But this only covered harvested onions, which was just one piece of the market. So they began buying up futures contracts, essentially taking ownership of all future US onion harvests.
By the fall of 1955, Vince Kosuga had a stranglehold on the entire market for onions in the United States. Most importantly, no one knew it. With this control, Vince Kosuga could move onion prices as he pleased. Now, it was time to get rich.
He called a meeting with the VIPs of the onion market, essentially telling them, "I own you." He could spike or collapse the market on a whim. They had to comply. They agreed to purchase 9 million lbs of onions at a price he liked. But Vince had one more trick up his sleeve.
He flipped and began making secret bets against the price of onions, shorting futures. By spring 1956, he had built a massive short position against onion prices. The trap was set. He emptied the onion warehouses, loaded up trucks, and flooded the entire market with onions.
With massive truckloads of onions arriving at the futures exchange all at once, the price of onions began to plummet. No one wanted to get stuck with all of those onions. The trucks dumped their loads. There were literally onions flowing through the streets.
The price of onions collapsed, falling to 10 cents per 50lb bag, less than the price of the plastic bag they were in! Vince Kosuga cleaned up. His big short on the onion market had netted him $8.5 million, the equivalent of $82 million today! Not bad for an onion farmer.
The outcry against Vince Kosuga was massive. A lot of people had been hurt by his market manipulation, but it was unclear that he had done anything illegal. He had his trading license suspended for 10 months and was forced to pay a small fine. But his legacy would live on.
Top Signals From TMZ
I am somewhat joking by calling this a "top signal," but this is the kind of ridiculous thing that you see when markets enter a bubble and irrational FOMO kicks in. We all know that DAY TRADING IS REALLY HARD! IT's wildly irresponsible to imply otherwise, and the very fact that we are starting to see things like this gives me tremendous pause. I fear for the people that read these stories and believe them - they're likely going to lose a lot of money.
The Fed Has The Audacity To Blame Amateurs
Inexperienced retail traders have taken to investing this year.
"We just printed trillions of dollars and pumped it into the markets, but it's the amateurs that are creating bubbles, we swear!"
I literally had to sit down when I read this, the shock and disbelief were so strong. My friend Sahil sent me this article and we shared amazement at the audacity of the Fed to claim that amateur traders are creating a bubble. Pot, meet kettle!
Everyone with half of a brain knows that the market has risen on infinite QE and money printing - not because a few gamblers at home have decided to try their hand at the market.
Russia's Blockchain-Based Voting Brings Legitimacy
Russia pilots national blockchain e-voting
Russia is currently preparing for an e-voting blockchain-powered election this coming September. If successfully executed, this would be the first time blockchain technology has powered an election process. Russia’s last attempt to implement blockchain tech into the voting process failed and resulted in a hack, this time is already appearing more secure.
If the election concludes without voter corruption or a hack, this will help substantially prove that blockchain technology can provide both real-world adoption and viable use. Hundreds of thousands of voters will test the new technology and if properly executed, other countries may follow suit. If regulators are slow to adopt blockchain technology on the cryptocurrency front, they may be quicker to adopt blockchain technology that promises fairness to their own electoral process.
You can see that Russia has chosen WAVES as the platform for the election - huge news for them.
Fyooz Launch Tomorrow
I invested in the private sale of Fyooz recently, which is launching tomorrow on Bibox and Uniswap. This is in now way a recommendation that you buy it or even an endorsement - it's a platform that I find very interesting (as a musician and DJ, really) that I was given an opportunity to invest in. DYOR, as always.
Fyooz is a marketplace where investors can expose themselves to the success or failure of celebrities, professionals, brands, companies, individuals, and more. They can invest in what they believe and gain financial exposure to the brands they cherish most. Fyooz bridges the worlds of entertainment and DeFi. As brands and individuals accrue value, token holders benefit. Fyooz belongs to a new generation of DeFi projects focusing on usability and massively simplifying access for users.
Hollywood director Marc Forster sees Fyooz as the first real opportunity for fans to participate in the success of their favourite stars. “Some novel fundraising concepts will spring up as actors tokenize themselves and filmmakers tokenize costumes, props and who knows what else. The platform is so open, and accessible to anyone with a smartphone, Fyooz revolutionizes the bond between star and fan, whether in entertainment or sport.”
The Fyooz coin (FYZ) is the currency of the Fyooz marketplace. FYZ allows market participation and ensures liquidity. FYZ can be exchanged for both fiat and other crypto currencies. FYZ is a regulated payment token that meets KYC/AML requirements.
Fyooz will list the FYZ token for public sale on Bibox and UniSwap on August 21st, 1 PM UTC. We are looking for more updates from the project and recommend to subscribe to Fyooz social channels not to miss important news.
The Wolf Of All Streets Podcast Ft. Didi Taihuttu
Didi Taihuttu was a workaholic business owner in need of change. After a series of life-altering events, he sold everything he owned including his house, cars, shoes, and childrens' toys to go all-in on Bitcoin in 2017. Dubbed the “Bitcoin Family,” all 5 members set out to travel the world becoming an internet sensation along the way. Having broken free of harmful old financial systems, the Bitcoin Family lives minimally rather than materialistically, accumulating happiness over wealth.
Didi and I further discuss what sparked Didi’s radical transformation, telling his wife that they were going all-in on Bitcoin, selling everything he owned, watching the price of Bitcoin when it is all you have, living with 4 women in a van, buying everything with Bitcoin, beingstuck on a tropical island during Covid, giving to charity, zooming out on Bitcoin and in on life, and so much more.
Huge thanks to Voyager and Kingdom Trust for sponsoring!
Bitcoin Thoughts And Analysis
I stopped out of my Bitcoin long from Tuesday. I had the opportunity to move my stop up as price rose, but chose not to and ended up taking the loss. It was a small position, no big deal. But we all manage positions incorrectly at times, it happens. That said, I am long once again from $11,650 and have more than made up for the loss thus far.
Price bounced perfectly off of the bottom of the red ascending wedge that I discussed on Tuesday. It could still easily break down, but Bitcoin has a tendency to break these to the upside in a bull trend. It has happened many times. I am still concerned with the daily bear div we discussed, and the bearish SFPs circled. I am not convinced of anything at this point.
That said, we have a potential hidden bull div forming, as you can see. That would invalidate the bear div, in my eyes. We need to see a clear elbow up in RSI to end the day.
I took my most recent long on the hourly bullish divergence shown - publicly on Twitter, since people tend to question positions. This has since broken the descending channel here on the hourly and is still moving well. Since this is the hourly, I view it as a scalp. We will see what happens from here.
Altcoin Charts
As good as Dominance looks at the moment for more alt action, I am not seeing that many charts (I can't look at them all!) that are jumping out.
Take a look at QTUM in the chart requests, looks quite bullish. So does XAMP on Uniswap, in my opinion.
ALGO made a great move on the trade from Tuesday. ENG may be dropping down to the proposed entry, and ERD is breaking up as anticipated.
BITCOIN DOMINANCE
Crazy. This once again followed technical analysis perfectly, breaking support and then, as predicted, pumping back up to resistance. Really insane how perfectly this has moved. Alt season should continue.
You can see the entire thread I have posted on twitter tracking this below. It's pretty epic!
ARPA/BTC
I am already in this, having bought in between the red lines. At this point, we have a clear bull flag, so I would be looking for a break of the top of that channel as an entry. This would target the top of the channel at minimum, around 490. That's what I am looking for first with this trade. Stops for me are a few percent below the bottom red line.
MATIC/BTC
We had a nice trade on this the other day before alts imploded. It's back at my favorite red line, where I have bought this repeatedly. It seems to be bouncing from that support. I am looking for a move up to 245 then 304 as my initial targets. If this can flip 304, sky is the limit.
VET/BTC
VET looks potentially ready to make a bullish move. You could enter here around 158 if it holds as support, but the better entry is a break of the big bull flag. The target of this breakout, depending where it happens, is in the low 300s. That's a 2X move if it happens. So that is the way I intend to approach this.
Legacy Markets
I have not really been trading stocks. After my trailing stops hit (in great profit) on most of the trades that I have shared here, I have taken a breather to reevaluate. Very hard to find alpha in the stock market at the moment, a sentiment shared by most traders that I have talked to. It feels very over inflated, but also impossible to short with conviction. I only trade when the market conditions are ideal (for me).
1.1 million people in the US filed for unemployment this week, which was the first uptick week over week in a while. 28M people still are on some sort of unemployment. The economy is NOT doing well.
But let's take a look at the dollar and SPY.
DXY (Dollar Index)
You know that I believe that the movement of the dollar has had a major effect on Bitcoin, with clear inverse price action. That can be seen by the naked eye looking at a chart with both assets. Check it out. Peaks oppose valleys.
We can see that the dollar is POTENTIALLY breaking down from the channel it has been trading in since the 2008 recession. The monthly candle has not closed, and it could very easily close back inside the channel. If it bounces here and continues up, that "could" be bad for Bitcoin. All eyes are on the dollar in this regard.
Zooming into the daily, we can see that there's clear bullish divergence with oversold RSI. We expect a bounce, which we have seen. Now we need to figure out if that's a reversal or just some relief. You can see that there is potential hidden bearish divergence, which, if confirmed, would indicate that the bullish divergence is "finished" and that continuation down is likely. Regardless, until it breaks the descending black line, it's trending down.
SPY (SPDR S&P 500 ETF TRUST)
Trading the SPY is arguably the best way to trade the movement of the market as a whole. Looking at this chart, you can see that price tapped the all time high this week - insane in context of the global economy. Bulls want to see a weekly candle close ABOVE that line. At present, we have a wick above and candle body below, which would be an epic bearish SFP if it closed that way. Clearly there is a lot of selling interest at these levels, and it could be topped out. We also have potential bearish divergence all over the charts (not shown), but that rarely has much effect here.
Look at volume. It has dropped for the entirety of the market rise. That's not a bullish sign. That's why I am now watching and waiting. This is THE MOMENT for the stock market. If it blows through and tests these levels as support, then it should continue up. If it fails, we are likely to see quite a retrace.
My Recommended Platforms And Tools
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Bitcoin Thoughts And Analysis
BlockFI is where I personally store part of my long holdings. They offer up to 8.6% annually, compounding, depending on the asset (BTC, ETH or GUSD), which is much better than any legacy savings account or investment.
Follow me on Twitter at @scottmelker. This is where I am constantly updating my trades and sharing ideas.
Chart Requests
AYRO (AYRO INC.)
This has very little price history and is difficult to chart. I also know nothing about the company. That said, it's in a clear down trend and has broken support. At this point, I would only be interested with a clean break of the descending blue line. That would be a nice signal for starters that this is likely to head back up.
BAT/BTC
This is the kind of chart that I am looking for and watching closely. It has a major drop, broke support and has been ranging and in accumulation for months. That said, I would only buy this if it breaks out of the range, the top being at 3455. Flipping that to support would be mega bullish after accumulation and bottoming for this long. That's my macro view.
COST (COSTCO)
It is hard to fade Costco during a global pandemic! It has never really been in a downtrend. That said, if you believe Covid is likely to come to an end, Costco could suffer. Also, you can see that it's been building bear divs with overbought RSI for months, as well as has continued to rise on decreasing volume. Both of those are clear signs of exhaustion, from a technical perspective. This "should" retrace, but hard to guess when.
HOTH (HOTH THERAPEUTICS INC.)
I chose not to draw any lines or patterns on this chart, because I can't really find any good areas or a reason. I know nothing about this company fundamentally, but price has only fallen from the moment it started trading. This is the definition of a falling knife. Also, look at the dead volume - the only spikes are MASSIVE candles of selling. That's not good. Probably insiders or the company itself. There's only been 1 day in history where it showed any real buying demand, and that was sold into hard, with a huge wick up. If you know something about the fundamentals, you can look at this, but no chart is going to help much.
KAI/BTC
Bullish chart. Clearly consolidating after massive movement up in a descending wedge. It's presently testing a key level of support, would be nice to see that hold. The trade trigger here would be a break of the top blue line, in my opinion. Key levels are marked. A break of that line should take it to at least the top black line, if not into price discovery beyond. This could give a lower entry if it keeps dropping in the wedge.
QNT/BTC
I really don't know. I find this chart very hard to read. The levels are marked. I do not like how hard it is struggling at 92153 - lots of wick through that level and no closes above. So I would really want to see a close above that line to indicate this is likely to continue up. Otherwise, I would look for lower entries.
QTUM/BTC
I lost track of this one - too bad! Because I drew that inverse head and shoulders before, and boy did that play out nicely! Not only has that played out, but we have a golden cross between the 50 and 200 MAs, and a break of the range top on nice volume after consolidating there. We want to see today's candle confirm that breakout. If that happens, this could really go far.
POA/USD
This is really hard to chart on the USD pair. Almost no volume, not trading happening here. That said, there are the best levels I could come up with. RSI is EXTREMELY overbought on the daily, so I would expect a retrace sooner than later. For now, very bullish movement.
RSR/BTC
Basically impossible to chart. Completely parabolic. Levels are marked, but hard to tell if they are meaningful. Last time I charted this for someone I showed the bear div and said it was likely to drop - it did. We have another daily bear div, overbought. This could fall far if it breaks down, but hard to predict when it's going up this fast.
SLGG (SUPER LEAGUE GAMING INC.)
This is trading below the 50 and 200 MAs and seems to still be trending down. I would look for a break of the blue descending line before being interested. Or a flip of the MAs.
SMCI (SUPER MICRO COMPUTER INC.)
Weekly chart, kind of a tough read for me. Clearly broke the long term down trend and is traveling up in a channel. That's good. There was a golden cross between the weekly 50 and 200 MA, that's generally good. I would like to see that 50 MA (blue) hold as support - that could be a sweet entry if this drops further. Otherwise. I want price back in the top half of the ascending channel.
XAMP/ETH
Charting this is a bit of a meme, but here we go. Looks good on both the ETH and USDC pairs, and I personally bought this yesterday. Just a screenshot, not an active chart. Looks like it held support and broke descending resistance. Also retested.
The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor.