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Solid risk management is what usually backs a winning cryptocurrency trading strategy. Avoiding unnecessary risk exposure is key when speculating with the unpredictable, highly volatile, and fast-changing crypto market.
In general, traders can use different risk management strategies. Avoid trading overextended cryptocurrencies is one of them, proving useful to prevent exposure from possible trend shifts.
Specifically, the Relative Strength Index (RSI) is one of the most used metrics to spot overbought and oversold assets. The former could cause a bullish trend to pivot downwards, while the latter could suddenly pump a bearish cryptocurrency.
In particular, Finbold spotted three cryptocurrencies to avoid trading next week, considering CoinGlass’s RSI heatmap on January 5. Arbitrum (ARB), Sei Network (SEI), and Internet Computer Protocol (ICP) are showing signals of a possible short-term trend shift.
Arbitrum (ARB)
Arbitrum’s token is overbought in the daily and weekly RSI, with 75.85 and 79.68 points, respectively. Notably, The 4-hour time frame has already lost momentum, registering a neutral status after losing strength. ARB is trading at $1.94 at the time of publication, up 3,46 in the last 24 hours.
Sei Network (SEI)
Sei Network is another cryptocurrency to avoid trading next week, with an extremely overbought status of 92.24 weekly RSI. Its token SEI plummets 10.41%, trading at $0.72 by press time. Therefore, it already caused a loss of momentum with an RSI lower than 50 in the 4-hour chart.
Avoid trading the Internet Computer (ICP) token
In the meantime, the Internet Computer Protocol shows similar behavior to SEI, with 1 RSI less for each time frame. ICP has 48.65, 71.56, and 91.67 points at the 4-hour, 24-hour, and 1-week time frames, respectively. Additionally, the token is trading at $13.45, down 5.27% in the day.
Nevertheless, having an overbought status does not guarantee poor future performance. These cryptocurrencies may continue to surge in price despite the mentioned signals.
In conclusion, investors should avoid trading the three mentioned cryptocurrencies for a more conservative risk management strategy, avoiding unnecessary exposure. Traders must do their own research and understand how everything might impact their operations.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.