We bought Bitcoin for a swing trade off of a setup that appeared around the 10400 area just a few days ago. And only now is the herd mentality beginning to kick in. The question continues to be: is this the rally that will lead to a new swing high and eventually to the 20K historical level? Although many internet experts will be coming out and cheer leading the market while competing for the most outrageous target, reality suggests there is NO evidence that 20K is within reason, YET. This article will explain what expectations are reasonable and what needs to happen in order to make 20K a realistic possibility within a short time horizon.

Hating To Wait?

Although people understand the word “patience”, it seems to go in one eye and out the other. New traders continue to ask us, “where are all the trade signals?”. It took 10 days for the signal that got us into our current trade to develop. That is 10 DAYS of WAITING.

I realize your emotions are stronger than the words I write, but here is some food for thought. Timing markets effectively over the short term is NOT an active exercise. In other words, it is NOT about taking whatever information is available and shaping it into a trade idea. Timing is a PASSIVE process.

Passive means the market dictates opportunities. This is NOT a sales job where you “make things happen”. As a participant, there is only ONE thing that we can completely control and that is RISK. So we “listen” for opportunities and measure risk on the market’s schedule, NOT ON OURS. And the market does not operate like a commuter bus company, it’s schedule changes CONSTANTLY.

This is why it is so important to develop a set of criteria, and have a process that the market must adhere to in order to justify risk. This is how we filter noise and uncover high probability opportunities which are INFREQUENT. That means they appear every so often, NOT EVERY HOUR, DAY OR WEEK.

You may wonder, well how come other signal providers are constantly calling trades? Short time frame strategies like day trades generate more opportunities, but not all opportunities are equal. Day trades do not offer the same broad potential as swing trades, they also require a great deal more attention, generate a lot more noise, and of course stress.

They too require patience, because without it, you are more likely to over trade. More trades do not lead to more quality opportunities or greater returns, it is usually the opposite. Especially when you are competing with transaction costs.

Hear our podcast? We cover everything from Bitcoin trades, investing in stocks, along with options, forex and CFD ideas. Check out our library HERE.

Some environments contain greater activity than others and that is a big factor when it comes to the frequency of swing trades that we take. Right now, we are averaging 2 trades per MONTH, while during other periods we were seeing 1 to 2 trades per week in this space alone.

If you are anxious and eager for action, you are not of the mindset that will benefit you in the long run. You must be honest with yourself and answer: are you in this to put your capital to work effectively over time, OR are you in this for entertainment?

If it is fun you seek, you are in the wrong place. Knowing when to be out of the market waiting, is JUST AS VALUABLE as being in a position.

Bitcoin: Price Structure Provides Real Clues For Rally Potential?
No evidence of broader rally in play, YET.

Our swing trade triggered at 10,435 (we share specific order details with members). This came after a swift price reversal off the 9750 support ZONE. We have been writing about this and have taken two previous trades off this area since June.

Basically, any price action that tests below 10K offers a high probability of a bullish reversal. This has expressed itself as bullish pin bars, and a clear double bottom formation. Even though the extreme low points ranged between 9K and 9400.

KNOW YOUR AREA. Why would anyone go short or sell in such a potentially bullish area? Participants who have no organization or process or who are easily distracted by all of the nonsense being shared on the internet are the ones likely to get caught in such low probability activity.

Again the key is to WAIT and let the MARKET prove itself. That process took 10 Days  before we finally saw enough confirmation to JUSTIFY a clear and predetermined RISK. It came in the form of the bullish pin bar that rallied off the 9400 low. Our criteria required that we WAIT until near the close of that candle which was around the 10,440 area.

Why would we miss a 1000 points? It took a 1000 point move to confirm there were enough buyers in the area for us to justify taking on a new risk. Confirmation has a cost, but we would rather give up that movement for a greater probability that our trade reaches its targets. You will NEVER buy the precise bottom or sell the precise top consistently.

But 20K Sounds So Sexy?

After getting back in, we set our targets proportionally higher, but NO WHERE NEAR 20K. How come?

This is all about understanding the bigger picture and this is where we turn to Elliott Wave for perspective. In order for 20K to become realistic over a short period of time (a few weeks, to a month), Bitcoin needs to provide evidence.

This evidence must come in the form of a decisive break out above 14K. Such an event will signal that Bitcoin is more likely in a Wave 3, and no longer in a corrective consolidation (Wave 2). THERE IS NO WAY to gauge a reasonable probability based on the structure that is present at the moment.

For this reason, we choose conservative targets that have a greater chance of being reached, WAY BEFORE 14K is even tested. We have found it is better to expect the current wave structure to continue, UNTIL THE MARKET proves otherwise. This mindset has allowed us to exit both of our previous swing trades for significant profits, while many expected Bitcoin to just magically continue higher.

Greed is NOT good. It leads to bad habits, hope and shrinking accounts. WE DO NOT CARE if Bitcoin continues higher once we are out. Our swing trade objective is simple: generate a return that is greater than the risk we had to take. THAT’S IT. We can always get back in upon the appearance of a trend continuation pattern if Bitcoin is going to continue higher. There is NOTHING to miss.

It is amazing to see all the criticism we get after generating a profit, while the market continues slightly higher. This is about generating a consistent return, NOT maximize EVERY TRADE. I hope you comprehend the distinction, otherwise be prepared to experience some painful and expensive lessons from a much harder teacher, the market.

So Informed! Or Are You?

Many who are new to trading Bitcoin or market timing in general still seek answers through news reports and fundamentals. This is great if you are trying to impress others with how “informed” you are, but it will not help you generate consistent returns.

Unless you are the CEO of Coinbase, who has access to inside sources, by the time whatever news reaches you, it carries little to no value in terms of timing. All the major players have most likely acted on it, way ahead of you.

I know plenty of people who are way more informed as far as events and fundamentals go in this space than me, yet they continue to struggle to show any type of consistency in their decision making performance. What does that tell you about the value of the enormous volume of information available to us all? All I need to see is a chart.

In conclusion this is a game of psychology, and until you comprehend what that actually means, you will continue serve as a potential opportunity for those who do understand how markets operate in REALITY. Want to separate yourself? Stop searching for “why” a market is reacting, and learn to interpret how patterns of human emotion express themselves through price action. Learn to extract the valuable information offered by a chart.

Questions and comments welcome.

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3 Responses
  1. Bill HERNANDEZ

    Thanks Marc for your concise insight and instruction.My wife and I have learned so much from you and Andrew. We are now getting to where we can read the charts for ourselves with some consistency and make decisions with less emotion involved. Still a heck of a learning curve.
    Thanks again.
    Bill

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