Cryptocurrency

Understanding ATH as a trading strategy

All-Time-high can be a good thing in crypto trading.  Understanding a coin’s ATH can help you in making profits. This article gives a brief of how this knowledge will help traders in making good trading decisions, especially beginner traders.

What is ATH?

ATH in cryptocurrency market/trading is the Acronym for “All-time high”. It is followed by the opposite which is an “All-time low” (ATL). These scenarios occur frequently in market movements. Although, ATH is more common than the low. It is a price movement in which a coin sets a new profit/yield record that is higher than its previous high. It usually follows an uptrend, and/or favourable market conditions.

Often, beginner traders make the mistake of jumping into a coin without doing their own research (DYOR) or knowing its price history or behaviour. It is important to understand the price history of any coin before trading it. This will save you time, and unnecessary losses. It will also boost your trading confidence and give you more leverage to perform well.

For day and short-term traders, it is advisable to check the price movement of the previous day, or previous week to help you make good trading decisions. One does not necessarily have to go all technical analysis if they trust their gut, and the coins ATH. All things being equal.

Many factors trigger ATH. A few of these factors include:

  • Celebrity endorsements.
  • Market predictions.
  • Technological upgrades.
  • Product launch.
  • A blockchain fork.
  • FOMO/FUD
  • Fear and greed index.
  • and other times – Whales.

Is it a good entry or exit point?

When a coin makes a new ATH. Two things happen:

  1. Exit point.

First, some traders cash out or take their profits. Thus exiting their position. This act removes funds from the coin’s ecosystem, sometimes creating a pump-and-dump price scenario. This happens to all coins. But for new coin listings, especially coins without a solid foundation, it can be critical. For example, this scenario can see a coin go from $10 to $2 within seconds, and may even flatten out below the zero lines, as is now prevalent in today’s market.

  1. Entry point. Some traders track the movement of a coin they are interested in. setting an alert at an expected ATH point, that if triggered can solidify their resolve to acquire the coins.

These decisions are usually based on:

  1. Evidence: To be sure the said coin has the potential to grow to a particular peak within a specific time frame. If it, however, maintains that behaviour over a long period, then it can be good for holding (HODL).
  2. FOMO: The fear of missing out. Many people are afraid a particular coin may not drop below a certain trend-line again, so they buy high irrespective of the price. This scenario also happens because of hype, or actual value.

Can ATH help?

Here is an example. Let’s say any coin’s (BTC, ETH, BNB) last ATH was $56,000. And then it dipped towards the downtrend of $48,000 at a 12% drop. Knowing the last ATH can boost your instinct to buy because the coin will rally back to that ATH and create a new high. All things being equal.

Furthermore, for scalping and scalpers, knowing the last ATH can help retain your confidence during irregular or volatile price movements, and also creates an opportunity for a good exit point.

A LITTLE Caveat: ATH can happen in seconds or minutes, 24hrs, a week, a month a year i.e. long or short term relative to market price movements.

Picture Credit- Data chat from Tradingview.

 

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