Bitcoin continues to retrace lower and you need to know why! Actually, you don’t need to know why, because when it comes to short term market timing, it doesn’t matter why. What matters is: what’s next. Do not get caught up in the drama and nonsense that proliferates from such moves and instead focus on the probabilities. Bitcoin is NOT in any type of bear market, it is only in a corrective consolidation which we anticipate will eventually break higher. The key is to identify the levels that offer higher probabilities of a bullish reversal and then wait for confirmation. Yes, it is that simple. Think ahead of the herd, do NOT react along with it.
Focus On What's Developing, Not Why.
The intuitive reflex is to search the internet for reasons why. WHY will not help you, because whatever the reason, by the time you find out, the market has priced it in. Reacting to such information is the worst possible behavior you can express when it comes to your own trading and investing performance.
If you want to improve your decision making, you must STOP reacting to common and freely available information and instead look ahead toward the newly developing probabilities. In this article I will explain what levels we are anticipating, and what we need to see unfold before justifying a new swing trade.
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When They All React The Same, Consider The Opposite?
We focus on the bigger picture, and WAIT for infrequent but high probability opportunities to develop. We do not chase random chart patterns or noise on smaller time frame charts no matter how strong or weak it looks. The smaller the time frame you get caught up in, the more noise you will face and eventually it will lure you into a losing trade.
Most new traders and investors scour the internet, in hopes of finding trade ideas or examples that they can learn and from profit. The problem is you get what you pay for.
Most of the analysts who provide their trade ideas and opinions for free are not much more experienced than you. It is the randomness of the market that makes them appear to be right on occasion.
These more prominent members of the herd should be considered for contrarian ideas if anything. The reason I say this is because they ALL REACT THE SAME WAY when Bitcoin makes some kind of dramatic move.
Who calls for shorts, Bitcoin 5K or any other extreme bearish ideas while price is nearing support levels in a generally BULLISH market? People who lack perspective and experience.
Bitcoin: Sell Into A Low?
The MOST valuable clues come from previous movements, NOT news or the opinions of others. And right now the movement that offers relevant support levels is the recent swing from 9K to the 12,300 area. Proportionally speaking, the 50% retrace of that previous move happens to be around the 10,700 area which is also a former resistance.
And if no bullish reversal appears within this region, we have the 10,350 to 9800 support zone. This zone is even more compelling in terms of probability of reversal for two reasons: first, it is related to the .618 retrace of the 9K to 12,300 swing, and second, it almost overlaps the 9750 support region which is the largest degree .382 retrace relevant to the entire bullish move starting from 3150.
Even if you do not understand why these levels matter, by WAITING for a reversal around one of them provides a MUCH MORE ATTRACTIVE reward/risk compared to reacting to what is going on at the moment. Think about it, you would be looking for a long near a low, instead of selling or shorting into a low (a very ineffective behavior). This alone puts you ahead of the herd instead of reacting with it.
What If The Supports Break?
Always keep in mind: ANYTHING CAN HAPPEN. It is possible that price decisively breaks these support levels. THERE IS NO WAY TO KNOW IN ADVANCE. This is why waiting for confirmation in the form of a candle or chart pattern reversal is paramount.
Short term market timing is NOT about having some unique ability or magical way to predict the market. It is ALL ABOUT gauging probabilities and risk by interpreting and comparing historical price information to new information as it unfolds.
All KNOWN information in the world is baked into price RIGHT NOW. The participants who react to whatever stimulus exists in the moment only serve as potential sources of profit for those who can anticipate their irrational behavior. This is a game of psychology not formulas, facts or intellectual pursuits. Forex brokers built their entire business models on this concept.
I write from the perspective of a short term swing trader and NOT a long term investor. The two mindsets can be similar in some ways, but the investor should consider even broader factors such as the fundamentals behind the market and strategic sizing principles. An investment and a trade are TWO completely different strategies and should be treated as such.
Overall, in order to make effective decisions in any market, you must have a framework and process that you can repeat over and over accompanied by a specific objective. Otherwise your performance will be just as random as the ideas that got you into a trade or investment in the first place. Relying on free advice is hardly a process that qualifies.
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