Bitcoin: The Easiest Strategy Is Hardest To Employ?

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The Bitcoin rally is getting relentless again which usually invites extreme euphoria into the mix. And extreme euphoria is usually the best place to lock in some profits, NOT invest new money into. When a market looks its best, that is often the worst time to get in, but to what degree? Many traders and investors fail to understand one very important element of this game: different strategies must be considered relative to market conditions. This means in some scenarios, investing is the more effective choice, while in other scenarios swing trading or even day trading are more appropriate. How do you know which type of strategy is a good fit for the current conditions? It is all a function of the associated risk.

The Bitcoin rally is getting relentless again which usually invites extreme euphoria into the mix. And extreme euphoria is usually the best place to lock in some profits, NOT invest new money into. When a market looks its best, that is often the worst time to get in, but to what degree? Many traders and investors fail to understand one very important element of this game: different strategies must be considered relative to market conditions. This means in some scenarios, investing is the more effective choice, while in other scenarios swing trading or even day trading are more appropriate. How do you know which type of strategy is a good fit for the current conditions? It is all a function of the associated risk.

Bitcoin has been grinding higher since the breakout above the inside bar formation around 8K and through the minor resistance around the 8400 area. Some people enjoy criticizing our careful stance of not buying into highs while letting the market run away. “Where are your swing trade signals?” they ask. Here is the part that they fail to realize: it is better to be wrong and NOT lose, than it is to be wrong and lose.

At the moment, the 9500 area presents an extreme reversal zone boundary. Price is beginning to get hesitant with the appearance of a pin bar. This is a highly vulnerable area for swing trades, even MORE so than it was at the 8400 area. This means taking swing trades around current prices carries an elevated risk.

So if the swing trade strategy is too risky, what is a better alternative relative to this conditions?

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As I keep reiterating to Andrew: this is a day trading environment. Why? Day trading offers more frequent setups by utilizing smaller time frame information. The benefit is this: IF the market turns the wrong way, you get out relatively early and there is much less exposure to the elevated risk of retrace.

A NORMAL retrace for Bitcoin can easily take price back to 8500. If you bought much higher, you are exposed to a TON of risk IF your objective is to capture a good part of this relentless move. Swing trades require wider stops in order to provide enough room for the market to breath. IF your stop is anywhere above 8500, there is a greater chance of getting stopped out since closer support levels are minor.

This is where day trading comes in. Why? You can use much tighter stops because your objective is to capture SMALLER moves in the market. The only draw back is day trading is THE most difficult way to time a market. It requires the MOST discipline, patience and well defined process. It is not a good idea for new traders to attempt since it takes YEARS to become proficient.

So what is the solution? If you are in an environment that carries elevated risk (like lingering near resistance levels), simply step aside and WAIT for an opportunity with an attractive reward/risk on a larger time frame. For Bitcoin this means WAITING for a broader retrace to somewhere near 8500. This level is attractive for both swing trades and position trades.

In theory, this is an easy solution to implement because all you have to do is NOTHING. Your emotions on the other hand don’t allow such ease, especially for participants who aren’t yet aware that their emotions are the key driver for their decision making process.

Bitcoin: Grind Higher risk higher?

9500 major resistance to contend with.

The Cost Of Waiting?

If the fear of missing out was effective, most people would be profitable. Ever consider that? What will happen if you step aside and watch Bitcoin go to 12K? You lose NOTHING. What if instead, Bitcoin retraces back to 8500? Now you have an opportunity, while your account is still intact. It’s NOT about making opportunities like we are so conditioned to believe, it is about WAITING for them.

Bitcoin will offer better opportunities MAYBE even at higher prices. The key filter for an opportunity is the risk associated with the strategy you employ. Learn to measure risk, not chase reward and your long term performance will thank you for it.

Questions and comments welcome.

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