Example for an Accumulation / Distribution Trade on SIA ($SC)
We recently wrote an article about how to use the accumulation / distribution trading methodology in an example and we are currently practicing this on SIA. This is a nice example we quickly wanted to use in order to demonstrate how we recently traded SIA, using technical analysis with SiaCoin in order to increase my profits.
SIA is right now in ranging mode, this means it bounces between the Bollinger bands up and down. We swing trade it to accumulate more BTC to be able to purchase a larger position for the final run, the news-driven moon mission, which we probably will see with the upcoming hard fork news in January. Despite the likeliness of an increase in value due to that news, we have to be aware that Bitcoin could crush the partby any time and make use of generous a stop-loss of 10% below the lower Bollinger band, taking profit on the upper band manually (See our Bittrex Guide how to make use of conditional orders). The recent McAfee tweet was surely helpful in the matter of gaining some extra sats.
So let's take a look step by step.
- SIA dropped into a short-term downtrend, caused by the BTC moves. We waited for the downward trendline to be broken, and for the candle to reach the upper Bollinger band. You can see at this time, that the Bollinger bands transform their direction slowly from a downward slope to a sideways direction, which increases the likeliness of having the price bounce of it a few times until it decides in which direction to go further.
- You can see above the price bounced of the upper Bollinger band and moves into the direction of the lower band. As the price is created by many factors, it doesn't bounce exactly the bands, sometimes a bit higher or lower. One must know that we use the standard values of a length of 2o and a deviation of 2 here, if you change this configuration, the channel might be broader (to stay more conservative) or more narrow (to trade it more often, but also riskier). As we can see the price has decided to trade sideways for a while now and to achieve more BTC for the final run, we know the trade the bounces a few times. Here is how we would have traded it:
- Our plan is to stay in this trade until the hard fork nears, so we only do this to increase our stake that we will hold until the fundamentals kick in. So let's do the math, what we could have achieved by doing this. Let's say we use 1 BTC for this trade.
a) We purchased our position near the lower band, marked with BUY on the above screenshot.
1 BTC at 165 gives us roughly 604545 SC
b) We sell now near the upper band around 200
604545 SIA return now roughly 1.2 BTC
(if you are not sure about the best entry /exit points, it would have been as well to take profit with the prior candle near the upper band. With more advanced knowledge in technical analysis you might refine better to spot the best entry/exit points.)
c) Now you have to decide if you want to keep the advantage of your first low entry for the long-running trade and buy again only with the archived profits of 0.085 BTC or if you go the same route again with the total funds you allocated for this trade. This depends on your mindset – high risk / high reward or low risk / low reward. Let's use the riskier variant for this example, just for the fun of it.
We would wait now for the arrival at the lower Bollinger band and purchase again at 175
1.2 BTC will give us now 687428 SC
d) Ok now here it comes the fun, as McAfee's account tweeted about $SC and the price skyrocketed to 265, but it can be difficult to get your order filled on such a pump, so let's ignore it and take profit again at the upper band.
687428 SC returns us now 1.37 BTC
e) Price moves down to the lower band again and we purchase with
1.37 BTC a total of 785387 SC
- Now at this point of time, we stop this cycle as it became possible to see a breakout:
Our defined goal has it been to increase our stakes in $SC as we suspect increasing demand for the upcoming hard fork news. We started with 1 BTC and held an initial stake of 604545 SC. After the active accumulation cycle, we stopped with a stake of 785387 SC, which is an almost 30% increase in our initial SC funds.