Renowned technical analyst explains how to buy the Bitcoin dip

In a blog post, Sawcruhteez, a renowned financial analyst, explained that one of the most common mistakes that traders usually make when it comes to trading Bitcoin is missing out on “huge opportunities.” He pointed out that when this happens, it is very important to remain calm since “buying the bottom is often far less lucrative than it may seem.”

The analyst explained:

“When close to the top or the bottom of a major market cycle it is very important to be okay with missing out on opportunity. [During the bull rally of 2019,] many who bought [Bitcoin] sub $4,000 also bought when the price consolidated at $6,000 and took a stop loss when it broke down. Many did the same at $7,500, $10,000 and $12,500.”

Once the bottom is in and Bitcoin has already started surging, the best opportunity to get back into the market is to “buy the dip,” according to Sawcruhteez. However, buying the dip is not as easy as it sounds. This is the reason why the technical analyst has developed a strategy to increase exposure to the flagship cryptocurrency after it has entered a bull rally.

Buying the Bitcoin dip

Sawcruhteez maintains that one of the best ways to “scale into a dip” is by using the exponential moving averages (EMA). But, it is essential to first confirm that Bitcoin is in an uptrend before entering a long trade. This can be done by simply taking a look at the 50-week EMA. If this technical index is moving up and BTC is trading on top of it, then it is very likely that the trend is bullish.

Once the uptrend is confirmed, the swing trader uses the 50 and 200 EMA in the 1-day and 4-hour charts to time his entries. He usually dollar-cost averages his long position by distributing 10 percent of his buying power around the 50-four-hour EMA, 20 percent around the 200-four-hour EMA, 30 percent around the 50-day EMA, and 40 percent around the 200-day EMA.

The idea behind this plan of action is to increase exposure as the prices decrease while improving the cost basis.

Bitcoin US dollar price chart
BTC/USD by TradingView

Once the buy orders have been executed, Sawcruhteez looks for a sharp rebound off the daily EMA support before placing a stop-loss order. If Bitcoin fails to stay above the 50 and 200-day EMA, he would likely exit his position.

The host of the Sawcruhteez Streamz affirmed:

“I do not like having a set stop loss on the books, in the event of a spike low that would wipe me out right before the bounce. Instead I will use the death cross as my stop loss, as well as a potential area to flip my position and go short.”

Moving forward

It is very important to always confirm potential price entries with other indicators. Horizontal support levels that are in confluence with the EMAs, for instance, represent a “low risk [and] high probability opportunity to buy the dip,” according to the analyst.

Sawcruhteez concluded by stating that consistent dollar-cost averaging helps alleviate anxiety when the market appears to be “running away.” This is one of the most useful ways to remain patient while waiting to buy the dip.

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