Our Bitcoin swing trade signal appeared almost a week ago and reached it’s first target yesterday. It also came within 12 points of the second profit target at 12843. Why did we choose these profit targets? The answer can be found by understanding the tendencies of Elliott Wave and accepting what are the greater probabilities, NO MATTER how price actually behaves. This mindset is the antithesis of the mentality that drives the majority of participants in this game. MOST people hunger for action and profits, which is why they struggle. Probabilities, risk and capital preservation are the elements that offer long term stability in the short term market timing game, yet most do not recognize or appreciate their value. They would rather gamble on some oscillator on a two hour chart. Do you have an action addiction?

About two weeks ago, Bitcoin exhibited vertical price action almost reaching 14K. The internet “experts” were all trying to outdo each other trying to predict the next Bitcoin peak. 20K? 40K? No! 60K! The reality is price went to 9651 instead. You know what we were doing during that vertical price move? NOTHING.

Were you caught in the euphoria? Do you scour the internet for the answers that will help you rationalize your actions or help you feel better about a bad position that you may have gotten caught in? Did you know that markets cannot sustain vertical moves for long periods of time? The higher it goes, the greater the chance it will retrace, NO MATTER what your favorite internet guru or news source feeds you.

During these unusual situations, we are promptly criticized for standing aside or missing too many trades, yet our performance record is consistent. These trade hungry critics are often fooled by the phenomenon that anyone can make money in the vertical move. They do not have the experience to realize that such moves are outliers and that the easy profits will be donated back to the market as soon as it returns to a more balanced state. Kind of like the situation Bitcoin is in NOW.

Have you heard our podcast? We broadcast every Monday at 4:05 PM EDT. We cover everything from Bitcoin investing to trading stocks, forex and CFDs. Check out our library HERE.

Where Do The Probabilties Come From?

What made us WAIT for the pullback off of 14K and set our targets more conservatively? Elliott Wave. We point it out in our chat rooms on a regular basis. Once a 5 Wave sequence appears, the risk of a broader correction is elevated. That means the PROBABILITY of a larger pullback is GREATER than the probability of the vertical move continuing much further. Guess what Bitcoin was sporting two weeks ago? A distinct 5 Wave impulse structure.

Once such a structure completes (NO ONE can predict when or at what exact price that it will consistently), the next wave to follow is CORRECTIVE in nature. And since the 5 Waves complete a larger degree Wave 1, then most likely a larger degree Wave 2 is next.

This is what SHAPES our expectations. With this information, we are much better prepared to spot the next buying opportunity and gauge its potential. Since large corrective structures tend not to be simple, we know to assign more weight to lower support levels like the 10,600, 9500 and 8500 areas. These will not be apparent on your 1 hour chart.

When the setup that coincides with our strategy appeared off the 9651 low, and it was within the scope of our reward/risk parameters, we were PREPARED for the opportunity. NOT CHASING or reacting to it.

In this same regard, the expectations formed around a Wave 2 corrective sequence helps us set price targets that are REALISTIC. They are relative to the market, NOT some random pipe dream nonsense that is spread to capture attention. Again this information helped us determine the 12,220 and 12843 levels. Now that we are out of half of our position, we have the flexibility and luxury of watching a lower risk green position fluctuate toward the second target. No baby sitting required.

IF the market throws any curve balls from here, we can exit the rest of our position for a smaller profit, or break even if we must. Much better than watching a two hour RSI, right? We are risking house money at this point, not trading capital. See the difference in mindset?

Bitcoin: Do You Know The Tendencies Of Each Wave?
13K range is a high probability fake out zone.

People want the next trade signal (especially those who missed this move). Guess what? It develops when the market aligns with our strategy, NO SOONER. Whether price goes to 13K from here, or retraces back to 10K., we SIMPLY WAIT. It can take a week, or two.

What are the possibilities now? IF the current Wave 2 structure fails to break out (very typical), price can go back to the lower region of the range. The price on our radar is the 10,500 area. That is where structure will provide an attractive reward/risk situation.

As far as the next leg higher, since the current structure is likely to unfold as a price consolidation, any push above 13K has a high probability of faking out. What if we are wrong, and Bitcoin pushes to a new high? We simply adjust and evaluate the new price ranges for opportunities with attractive reward/risk. Did we lose anything? (Maybe some impatient followers). Again we go with the probabilities that are implied by price patterns and particular market conditions, NOT FEELINGS OR OPINIONS.

Whether a trade signal shows up at one of our predetermined levels is up to the market. All we do is WAIT, EVALUATE and ADJUST once the market provides new information. Eventually it aligns, and we have a swing trade opportunity that makes sense in terms of reward/risk. Our track record serves as evidence that you do not have to be in EVERY move to be consistently profitable.

Have An Action Addiction?

As Andrew has pointed out, proper trade signals are SPECIFIC. That means as much vagueness removed as possible. A specific entry price, stop price and target price(s). Buy and sell zones are VAGUE and often allow the provider wiggle room for more convenient reporting.

I am going to cover some of these mindset and technical details in my upcoming webinar conducted for our members. WAITING really does make more money than constantly trading. Did you know that WAITING does not erode investment or trading capital?

If you expect a trade every single day, guess what you are or what you should be? A day trader. That is not what we provide. If you are anxious, or get frustrated when a market is moving without you, then you most likely you are addicted to action. That psychological condition only makes you more susceptible to being part of the herd (which is the source of profits for people who know how to WAIT).

If you are in this game to put your capital to work effectively, it is NOT going to happen if you chase the money. The key is to let the market come to you while having an idea of what is REALISTIC based recent price history. The smaller time frames will give you the action that you hunger for, but the NOISE will rob you almost as quickly as you profit. Without the proper mindset and organization, you will not be able to keep any wins that you generate over time. Anyone can make money in a bull market, or vertical move. The real question is can you keep it?

Questions and comments welcome.

This is a Free Member article. To receive email notifications when new articles are available, click here.
3 Responses
  1. Adritrading

    Although this is not what we like to hear, that is definitely true, as this resume my trading experience since 2017 😛 !!

    The answer is : I couldn’t keep it lol XD !!

    1. Marc Principato

      Thank you for sharing your honesty. MOST people (especially beginners) do NOT want to hear about the HARSH REALITY of short term trading. It goes against our natural wiring to seek pleasure AND against the constant conditioning we are exposed to from predatory marketers (just read the nonsense on Tradingview or watch some ads on Youtube). Most people tend to overestimate their abilities and this false confidence may work in other occupations, but it will NOT work in this one. The best thing you can do is stop consuming the fluff, stop chasing moves and hype, and learn to focus on: identifying setups that are in line with your objectives, evaluating risk and WAITING. Hint: Oscillators will not help you with setups, especially if you have less experience.

  2. Mindaugas Gabalis

    Great article, a lot what to think about in a broader sense for all levels of traders. I made mistakes pointed out in this article and as probably most would agree pain of regret is much greater than pain of discipline. True trading wisdom, thank you.

Leave a Reply