At the beginning of the week, Twitter and YouTube were starting to show the usual hysteria that accompanies a big run up in Bitcoin.
Champagne corks were popping, Crypto Vloggers were calling for 1 million dollar targets and some traders were already wondering whether they should head down to the Lambo showroom.
So that very week, I was a bit sorry to spoil the party and put out the tweet below.
I highlighted a very clear supply zone on the weekly Bitcoin chart and suggested we may see the $9,000 level again. That tweet went out on 26th June at 6:21 pm (UK time).
Now, don’t get me wrong, I’m only a buyer in cryptos and not interested in shorting this market, but I’m always on the lookout for good pullback levels to buy.
4 hours after my initial tweet, Bitcoin plunged 2000 dollars from $13,870 to $11,650. That happened in just 10 minutes!
It was an incredible sight, hence the jokingly titled “masterpiece” tweet.
The next day Bitcoin plateaued around the 10,300 level. But did my tweet cause the Bitcoin mini flash crash? Of course it didn’t!
Can anything be learnt from this event? Well, a lot actually…
Weekly supply zones are very strong and you should expect a reaction there. If you’re thinking of FOMOing into Bitcoin, the very worst place to buy is weekly supply.
Here’s a larger view of that first Bitcoin chart:
The first thing to notice is the large weekly zone denoted by the yellow box. The zone starts from a fast move away from the candle bodies and ends at the candle wicks. See this article for the basics on drawing supply and demand zones: Supply And Demand Trading Strategy – Part 1.
The biggest danger for new traders is to see a big green candle and enter the market quickly for fear of missing out (FOMO). At this point accept you have either missed the move or 9 out of 10 times the market will come back to a demand zone or a support level.
Here’s another example with Tron (TRXUSD). Again, you should always expect a reaction at a clearly defined weekly zone such as this one:
The market fell very quickly from that zone, back into the center of the range below. Subsequent tests of the supply zone will gradually weaken it until the market eventually breaks through.
Once a zone is properly broken, we can use that as an important signal to look for bullish setups.
Finally, let’s take a look at a weekly Ripple chart (XRPUSD):
Again, the weekly supply zone caused a strong reaction when the market returned. Notice the zone starts at the candle bodies and ends at the wicks. The initial move away from the zone should be fast.
Subsequent tests of the zone should test deeper, gradually consuming all the orders at that level. If the zone eventually breaks, we can then look for a retest and continuation.
Conclusion
I hope you can see how powerful weekly supply and demand zones can be. Used correctly, they will help you time your investments in the crypto market and avoid getting caught out by FOMO.
Further Your Trading Knowledge
If you would like to learn more about my strategy including advanced supply & demand concepts, how the smart money manipulates the market, and how to apply these concepts to Forex, Stock Indices, Commodities and Crypto Currencies, then head on over to my course page here: Trading Education Page.
