Bitcoin continues to fluctuate around the major support region of 10K. This is good news for those who are long, especially people who took our swing trade that triggered at 10,435. These slow periods of price action noise are filled with false signals, fake outs and tons of flip flopping from more vocal members of the analyst community. As we have been informing our followers, NOTHING has changed in the bigger picture since this broad corrective sequence began in June. No trend does not mean no opportunity, but it does require a specific mind set and awareness of how probabilities shift in such an environment. If anything, if you are unsure, the BEST thing you can do is WAIT this out on the sidelines.
Still Need To Know WHY?
Misinformation pollutes the internet. If you haven’t figured this out by now, then let me be the first to welcome you to reality. You will NOT find reliable, trustworthy or quality decision making sources. Anyone who has a proven track record will NOT give away detailed and actionable information away for nothing. Especially if they spent decades honing their skills. So what are you left with?
Marketers and amateurs competing for attention. The marketers are particularly good at telling the crowd what it wants to hear. And these participants serve as great examples of higher profile reflections of the herd mentality. What does this mean for you?
If you follow any of these false authorities, you are more likely to REACT to market information, especially when it is dramatic. You are doing your part as a member of the herd which provides NO BENEFIT other than entertainment.
So if you know this, why do you continue to scour the internet trying to find out “why” something is going on? Especially when the most valuable information that you can possibly get your hands on is no further than your chart?
Have you heard our podcast? We cover everything from Bitcoin trading and forex ideas to investing in stocks. Check out our library HERE.
Bitcoin: Still Lingering Around Support Zone.
We provide specific signals and ideas for our followers, while sharing our broad perspective and reasoning with everyone else. I bring this up because it still amazes me how much attention internet analysts generate, yet they provide little to no actual decision making value.
So here is some perspective on Bitcoin that you can actually use. 9750 is a major support level. It is the .382 of the entire bullish swing since the 3150 low. What that translates into is: this is a high probability location for buying activity. And so far, recent price action provides evidence of this premise holding true.
Since July, price has found support multiple times and has retested predetermined resistance levels around the 12K region. These are what HIGH probability opportunities look like. Notice there have only been 4 distinct reversal patterns since.
Too Much Balance?
The fact that price has been holding within this support area for some time is initially a positive for those in a swing trade long position. Don’t get too comfortable though because if price over stays its welcome, it can have an adverse effect.
As the support area becomes more and more obvious to the crowd, it will continue to attract a greater population of long positions. If this population gets too big, it creates a vulnerability. And that is if these longs are forced out of the market, the selling pressure can be dramatic.
This scenario occurred back in November of 2018 when price had been consolidating for months at the 6K support. Eventually a news catalyst sparked a sell off which lead to the eventual test of the 3150 low.
Keep in mind, this situation can work for the longs IF a bullish catalyst sparks the market the other way instead since there will be a large population of shorts as well. In essence, the vulnerability is rooted in the fact that when price equilibrium goes on for too long, any random catalyst can spark a run for the exits on either side.
This situation reduces favorable probabilities for long reversals around the 10K support region.
Not Performing? More Defense.
Our priority is NOT profit, it is capital preservation. At this point, we have given our long position PLENTY of time to perform and it hasn’t. We have two choices: respect the current stop loss order and let the market continue to linger until it chooses. OR reduce our risk by taking a small loss on HALF of our position.
IF we get out of half, and Bitcoin eventually rallies, will we be unhappy? Of course NOT, because we will still benefit, just not as much as having a full position. Unhappiness toward a smaller profit generated is PURE GREED. And those who view the lesser profit as a loss will NEVER win in this game.
On the same token, if the market chooses to go lower, we lose HALF of what we originally risked. For us, that is a WIN because we were still in line with our overall goal which is to PRESERVE CAPITAL.
Short term trading is more of a mental game than anything else. It is not only about anticipating the actions of the crowd, it is about resolving internal conflicts that often lead to ineffective behaviors in an uncertain environment.
Goals, objectives and rules are what protect our capital from the random nature of a financial market, NOT feelings, opinions or news. If you struggle with decisions, or can’t hold onto any profits you occasionally make, the root of the problem is not a flawed strategy. It is most likely a flawed mindset along with an incoherent decision making process.
Often these problems begin with a focus on profits. And no progress will be made until you learn how to focus on risk. Protecting capital effectively is the foundation for long term consistency. In other words a strong DEFENSE leads to stable returns over time, NOT big wins.
Questions and comments welcome.This is a Free Member article. To receive email notifications when new articles are available, click here.