The Position Trade in Major Alts- Ones for Sitting on Relative to the Shorter-term Swing Trades
Given that my previous two articles focused on the shorter-term/ hedging swing trade, I thought it time to review the longer-term position trade. Whereas the swing trades [in the more volatile alts] tend to get a lot more attention due both to the shorter time-frame on which they operate, and the sheer number of them, the heavier position trades [in the major alts] are always sitting there quietly in the background doing their work. As they receive less attention, we can easily forget that in the aggregate they [ideally] outweigh the swing trades taken in the aggregate. You could say that the positions should be considered the substantial bread and butter of your trades, with the swings the spicy filling.
Where [ideally] you sit on the position trade, this is not a complete hodl [as per the strategy ]. Notice the gradations involved here: the swing trade can be multiples of months, the position trade multiples of years, and the hodl/ investment [can be] multiples of decades.
Here are a few examples of position trades I have on the table, with entries from both multiple years ago and recently.
Given the principle that position trades should ideally be in the more major alts and accordingly a lot weightier than swing trades [with more options to trade with more volatile coins], this trade did very well. What enabled [psychologically] the sell at the top was continued exposure to core Bitcoin and other Crypto positions/ trades. The astute reader may ask why this position was not held… but the sell is consistent with a three year [multiple year] sit - by this time I’d become increasingly convinced of a heavily correcting market as per my LGC Bitcoin charts. Also the exit of this heavy position easily enabled me to restore a counter-balancing USD fund in the trading account [the hedge] with a single transaction. Of course as a major alt, there was also every intention to re-establish the trade, which was secured at a 50% discount.
Also of interest is the shorter term chart, where price has broken the shorter-term diagonal of resistance to claw back half of the losses since the peak. If this kind of dynamic continued to play out, we may well see a break out toward the end of the year back to the previous all time highs… as per the fib extension.
Another example of the longer-term position trade is ADA.
Noticeable here is the early sell [though even after a two year sit] to secure profits. More than that, this sell was to secure a rural property [with real assets always trumping financial assets in my book… or at least counter-balancing them]. Once again, a reasonably solid position was re-established in what I consider a more major alt at a 50% discount. Ideally [and in future], the lesson from the market here is to average out in a few tranches, over a period of time, as price can always go higher than you can conceive at the time.
A last example of the position trade is BNB, which I consider a more major coin [a classification based primarily on the long-term price action of the chart].
While there are of course no certainties, what encouraged this entry on the technicals was the 50% macro retracement of the previous massive move up… and as something we see repeated on the long-term chart. Zooming in on the shorter-term, also of interest is the possible formation of a reverse head and shoulders, which, if it played out, would see this coin pushing its highs towards the end of the year.
As far as the position trades go, I tend to allow more tolerance to the downside than I would with the lighter swing trade. ADA has held its range so far while both ETH and BNB are still up on the entry. Much of course relies on the king-pin of BTC with its price action being largely the driver of the wider market. Here also, on the macro charts [as opposed to the micro of daily volatility], I lean towards a bullish view where I consider this extended correction as having largely played out.
As the introductory picture of the fat Buddha suggests, the position trades are ideally your most stress-free trades. Of course, there is no such thing as a completely stress-free trade - the entry and again the exit levels will no doubt be a little trying. But most of that trade, where you are sitting for a year or two or three, will ideally be a relatively smooth ride. Just as your core Bitcoin position [preferably bought at lower levels] becomes a long term sit - where the volatility bites less as the general multi-year trend raises all levels - so too, your multi-year positions in the major alts should be relatively plain sailing as they’re able to absorb more easily shorter-term volatility [take advantage of this short-term volatility with countering swing trades]. And of course, these heavy position trades in the major alts may in the end be the most significant ones, for these are to be resolutely sold and converted into real assets/ wealth should we see another manic market. Remember, it is the aim of the trader to realize profit in the real world as opposed to just ever accumulating [or losing] digits on a screen in the ‘metaverse’. As the sub-title suggests, everything is relative…. including the length of the sit. Relativity also applies more generally to the uncertainty principle on which all trades and investments in turn sit…. and hence are fully hedged. The taking of profit with a chunk of that converted into real assets is a large part of this hedge.
Until next time,
Stay [relatively] safe out there,
Dave the Wave.