As I write this, Bitcoin has just hit $18,000 for the first time. Crazy right?! This is when I believe that the word “bubble” starts to become very relevant.
The office manager at your job, your neighbor and your hair stylist are now going to start talking about Bitcoin, if they aren't already.
….wait for it….wait for it…
We saw this in the dot com boom, the real estate boom and every other bubble in human history. If you don’t believe me, read the book Extraordinary Popular Delusions and the Madness of Crowds, which can be found here.
But isn’t this new blockchain technology here to stay?
SEE ALSO: The Trading Books That Changed My Life
However, just like the tech companies of the dot com bomb, a large majority of cryptocurrencies out there will not survive. A lot of them have no product and are just jumping on the bandwagon to make a quick buck on an ICO.
So how can you protect yourself and still try to maximize your profits?
I believe that one of the keys is to wait for the Baseball Cap chart pattern.
In this post, I’ll show you why it works, when it will probably stop working and I’ll share with you my own personal experience that has led me to use this pattern.
Table of Contents
The Baseball Cap Chart Pattern Explained
It’s called a Baseball Cap because it looks sort of like the top of a hat and a bill.
Like this example in Litecoin.
The pattern happens because of the nature of the cryptocurrency market right now. Here's a video that I did that explains the technical chart pattern.
Cryptocurrencies are not something that the general public understands very well yet.
Almost everyone understands how real estate and stocks work. But how can you create a new currency out of thin air?
…is a common question.
So the prices of cryptocurrencies are much more susceptible to pump and dumps.
When an uneducated public learns about a new feature that was added to a cryptocurrency, a rush of new buyers can come in and inflate the price very quickly. Once they find out that the currency wasn't as good as they thought, or they get bored, they will dump it and move on to the next “hot tip.”
A rapid rise can also be caused by a newly educated public that just figured out legitimate reasons why they should be buying a certain cryptocurrency.
But how can you tell the difference between the two?
Research and the Baseball Cap pattern are your best weapons in this emerging market. They won’t always be right, but they will greatly increase your odds of picking the currencies that will keep appreciating.
After all, that’s why they call it trading…and not easymoneymaking.
Before you go buying any ol’ crypto with this pattern, you first have to understand that this will only work with cryptocurrencies that actually have a solid use case and real world value.
So you need to do your research before you even look at a chart. Understand why the cryptocurrency is useful and if it solves a big problem.
It’s like buying a tech stock.
This research will also help you hang on to a currency if the price blasts off. It can be easy to take your profit too early if you don’t have a good reason to keep holding the currency.
Once you have a few cryptocurrencies that you have researched and believe in, then it’s time to look at the charts.
Yes, it can be tempting to buy when a chart is going parabolic, like this…
After you have done all that research, you will probably think that the currency is going to the moon and it doesn’t matter where you buy.
Hold on there tiger.
You need to optimize your entry by waiting for the Baseball Cap.
What goes straight up, must come down.
So wait for the market to pull back and stabilize at a defined level. This is where the market is catching its breath and could go on another run.
If price continues to drop and does not stabilize, then you know that there is nobody there to “catch” the price and it is not time to get into the market yet.
How long should the market stabilize? Based on past results, two months or more is ideal, but the minimum seems to be one month.
Here's an example of a long base that happened in EOS.
Understanding this one simple pattern can save you a ton of money and protect you from a world of hurt.
Of course, there are no guarantees in trading and price could continue to drop from a base. But that sure beats buying at the top and getting rocked.
FOMO is a bitch, avoid it at all costs.
Baseball Cap Examples
Now let's take a look at two charts. One where the pattern worked and one where it didn't.
This is a cryptocurrency that I believe won't make it. They have created a currency that allows video game players to do things like earn money and buy upgrades inside games.
Basically a universal game credits system. Players could earn money in one game and use them to buy upgrades in another game.
There is probably a need for it. But my question is: Why not just use another cryptocurrency like Bitcoin or Ripple? That would be a much better incentive for game players because people could spend that money in the real world.
When your local coffee shop starts accepting Ripple, of course.
Thus, while many cryptocurrencies have been taking off, GameCredits has languished. It is sill forming the Baseball Cap chart pattern, but the research side of the equation does not warrant a buy, in my opinion.
That could change of course. But this is an example where looking at the pattern alone won't make you any money. The fundamental analysis has to be solid too.
I actually started buying Ripple at a bad time. That was before I figured out this chart pattern. I was buying it on the first big push, at about $0.35.
After the first big drop, I got smart and looked for a basing level. That's when I was able to get some at about $0.24, a much better price.
We had to wait awhile for this pattern to play out, but it eventually did.
Ripple will probably be one of the cryptocurrencies that succeeds, in my opinion. Bloomberg just added it their terminal, along with Litecoin and Ethereum.
When the Baseball Cap Cryptocurrency Pattern Will Stop Working
I believe that there will be a point when this chart pattern will stop working.
Once cryptocurrencies become mainstream and more heavily traded like stocks, futures or Forex, then you will probably have to look to the more traditional technical chart patterns to make trading decisions, like support/resistance, head and shoulders, the pin bar and the outside bar.
In addition, if the cryptocurrency market ever goes through an extended bear market, then all bets are off and the Baseball Cap won't work. This pattern relies on the strong bullish bias of the cryptocurrency market right now.
You have to remember that there is a huge pool of potential cryptocurrency buyers who don't know anything about the market right now. Once they learn about cryptocurrencies and there are no more new buyers left, then we will stop having these huge price run ups.
Excessive government regulation could also slow down the growth of cryptocurrencies and kill the bullish bias.
Until then, keep an eye out for this chart pattern because it can be very profitable. This video will show you some examples.
Again, remember that past performance does not guarantee future results and you need to do your fundamental research on a cryptocurrency before you even look at a chart.
I recently met a guy who has literally multiplied his retirement account by purchasing Ether. His strategy was to buy when he started to see price come down, because he believed that it will eventually go back up.
That’s really dangerous.
It works well in very bullish markets, but you will get slaughtered in even a moderate bear market.
This guy has since pulled out his original investment capital and now only has his gains in the market. He even admits that he was lucky.
The moral of the story is to keep your risk low and don’t go “all-in.” Watch for the Baseball Cap chart pattern because it can help you find a good place to buy.
Luck is not a strategy.
Do your homework, be patient and stay safe in this wild and crazy market. Things will only get more volatile from here.