Bitcoin is gyrating toward the 9750 support region after attempting to take out 11K just a few days ago. Should you believe all of your favorite internet gurus who are calling for Bitcoin 5K and claiming to make 300% a day by shorting every movement? OR would it make more sense to let the market prove its intent by demonstrating that there are real buyers around an established support level? Perception of the future is what motivates the herd and since the majority of them are distracted by noise, they react instead of weighing probabilities and letting them play out. Price action may look ugly, BUT the location offers greater probability of bullish reversals. If this market holds the 9750 support, a new buy signal is more likely to appear.

Stop Searching For Precision. It Doesn't Exist.

It is common knowledge that the 9750 level is the .382 of the entire bullish swing that began off the 3150 low. Although this may be the case, MOST people have no idea what to do with this information. The herd wants absolutes, they only see what is in front of them at the moment.

9750 is NOT an exact level. It represents an area or range and along with that comes a wide margin of error or fluctuation. Our objective is to evaluate the price action as it unfolds within this region, NOT the 9750 level alone. Since price has found buyers in this AREA before, chances are, they will buy again.

Bitcoin: Are You Over Reacting To Noise?
This is NOT what real selling looks like.

We shared a swing trade idea a few days ago that triggered off the 10,150 area. Since then, price came within 40 points of our first target. While some of our members took profits off the table anyway, we are still in the position which is now in the red.

Why are we still in it? Shouldn’t we be over reacting, taking our loss and getting short like everyone else? If the majority of the internet thinks the market is going lower, isn’t that the “right” way to think? If you haven’t realized yet, most of the analysis and opinions on the internet come from the more vocal members of the herd. The herd is WRONG most of the time, especially at market turning points.

Being wrong has everything to do with emotional intelligence. Bitcoin has to be one of the most emotional financial markets out there. People seem to think this market operates differently than the others since it is based on a “different” technology.

The reality is, perceptions of the future are what drive order flow NOW. And those perceptions are shaped mostly by sentiment. The sooner you realize this, the sooner you will be better prepared to capitalize on the over reactions of the typical investor.

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

Order flow can provide clues as to when a turning point is likely to unfold. It begins with understanding how sentiment is expressed through price structure and chart patterns. That is why the 9750 REGION carries a lot of weight in this situation.

IF Bitcoin is truly strong, then it will prove that by holding around this area. If it can’t hold, then 8500 is the next area to consider. We don’t guess, we let the market tell us and then adjust. It is a passive mindset that most people do not understand or agree with because it goes against the natural urge to be in control of the environment.

Keep in mind, Wave 2 corrections do have the potential to be more dramatic and that is why we are open to the 8500 level as the next support. Technically, 3150 is possible as well, but not probable. Knowing that separates the chart enthusiasts from professional market timers. Timing goes beyond what you see on the surface of a chart and that is where context comes into play.

Most 1 HR chart gurus do not consider context. What is context? One example is being able to understand the tendencies of a Wave 2 sequence and its relationship to Wave 1 on the bigger picture. This provides a framework of expectations that are in line and reasonable to the market. This helps us figure out where to place our swing trade targets for instance.

A New Signal May Be On The Horizon?

As for our swing trade strategy, we simply take no action until the market provides a solid reason to exit. Meanwhile, a potential reversal is in the process of forming in our buy area. If the market produces a closed pin bar, that will prompt us to issue a new signal.

Short term timing and investing are TWO separate strategies and must be treated as such. This article has an emphasis on swing trading which is short term. In terms of investing, we managed to turn a portfolio that was -30% into one generating a return of 20% in about 1 year. We had to unload many under performing alts and reinvest that money back into Bitcoin.

To accomplish this, we had to add to our Bitcoin inventory a number of times when the market looked ugly. That is often the best time to buy at wholesale prices, but without a long term perspective, it will be hard for the typical investor to maneuver this way.

In summary, the fact that Bitcoin is holding is a sign of strength NOT weakness. Real selling takes out major support levels, not fluctuates around them. We constantly have to remind our members to avoid watching smaller time frames for this reason. If you are NOT a day trader, then the only purpose a 1 HR chart will serve is to confuse you.

We don’t react. We weigh probabilities, evaluate price action and adjust when necessary. We follow our strategy rules and adhere to best practices. And we hope to instill these same values and behaviors in the people that consider our point of view. If you want to change your results, the first thing to do is change the type of information you consume. Here is a simple guide: if it’s from the free internet, it is probably going to help you make the wrong decision.

Questions and comments welcome.

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1 Response
  1. onurerbas

    Well written, again.

    This time I’m in at 10.325 though I feel quite anxious about my decision. Let’s see how it will play out. Btw, could you please check your email regarding my subscription request.

    Kind regards,

    Onur

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