BTC - Shorting BTC in the Wild West!
Updated
We have time and time again warned against margin shorting BTC'. This is highly dangerous. Yes you can put stop orders in place to HOPEFULLY protect yourself, but this is no guarantee that your stop will be filled at this level. In thinly traded markets this is a recipe for disaster. In addition there are fundamental changes due with BTC' as well such as the release of Segwitt2x. Now whether you believe this is good or not is insignificant to a trader. But as a trader we must not ignore fundamental changes in an equity. This is one reason we would not short here even though the charts say short. There is one chart that provides a better look into how shorting the market has played out and this is the short futures market.
I love shorting, as more money is made in shorting equities than going long in the short term. But there are some rules I follow so I do not get burned.
#1 - I never short an equity I can buy puts or sell vertical calls. This provides a clear level of protection from a potential disastrous margin call. And yes they do happen!
#2 - I never short on margin period unless I own outright the number of shares I'm shorting. This is also a critical level of protection and the proper use of margins.
#3 - I never naked short anything! I always want to be hedged.
Clearly I love shorting but over the years I have learned an expensive lesson. Never Ever short into a crowded short trade! We warned about this a couple days ago. And we even provided a chart that showed how crowded of a trade it was. Just using a basic analysis we estimated a short squeeze could hit $6200. Well It went to almost $6400 on a few exchanges. Those are just devastating margin calls and not one you want to experience. To hear someone say ohhh I had protection at $6100 means nothing. If there are 1000 market orders (due to margin) at $6100, well guess what, your stop may not be filled until $6350. Beware of the small print and this happens all the time especially in thinly traded markets.
Moreover these exchanges are not regulated nor protected! What does this mean. Well the exchange you are shorting on knows where your stops are as well as where everyone else's are, so they can use this information to buy into a crowded short and make money for them or their fat whale friends. Why not, there are no regulations and this is the wild west of trading where the sheriff is paid by the richest man in town. So do you think your going to get a fair shake? No. And there is no John Wayne or Clint Eastwood going to ride into town and save your butt!
So let's look at the short chart. Very interesting after just about every short dump the equity continued higher. All but once, and one time it was a short lived dip!. What's this telling me. Stay away! I'm not even thinking about it at this point due to not only this chart, but the B2x' upcoming fork and we labeled $6250 as a critical level. Why would we short at an inflection point where many others had similar levels marked. So it's best to just be patient and see how this plays out. Trying to market time can be devastating.
Below is a chart of the futures market. Now it's not much of one but it is what we have to work with. you can see the 1 & 2 week are priced about $6150. The 3 months is around $5900. Not a very good risk to reward trade if I'm shorting now and the futures is $100 lower than the current price. Just yesterday the 3M was priced at $5300.
In addition $6250 was critical to hold for another leg up. I want to see if we get support here which may launch us towards $7100. Why risk shorting when we are $50 away from this level. Sometimes we lose sight of our long term charts and critical levels for a pattern we see. This is why I have it pegged on my board. I want to see what we do at $6250 because I may 180 and go long for $7100. Let's see until then it's patience my friend and know your place at the table. You are not the large stack here do NOT play like it!
I love shorting, as more money is made in shorting equities than going long in the short term. But there are some rules I follow so I do not get burned.
#1 - I never short an equity I can buy puts or sell vertical calls. This provides a clear level of protection from a potential disastrous margin call. And yes they do happen!
#2 - I never short on margin period unless I own outright the number of shares I'm shorting. This is also a critical level of protection and the proper use of margins.
#3 - I never naked short anything! I always want to be hedged.
Clearly I love shorting but over the years I have learned an expensive lesson. Never Ever short into a crowded short trade! We warned about this a couple days ago. And we even provided a chart that showed how crowded of a trade it was. Just using a basic analysis we estimated a short squeeze could hit $6200. Well It went to almost $6400 on a few exchanges. Those are just devastating margin calls and not one you want to experience. To hear someone say ohhh I had protection at $6100 means nothing. If there are 1000 market orders (due to margin) at $6100, well guess what, your stop may not be filled until $6350. Beware of the small print and this happens all the time especially in thinly traded markets.
Moreover these exchanges are not regulated nor protected! What does this mean. Well the exchange you are shorting on knows where your stops are as well as where everyone else's are, so they can use this information to buy into a crowded short and make money for them or their fat whale friends. Why not, there are no regulations and this is the wild west of trading where the sheriff is paid by the richest man in town. So do you think your going to get a fair shake? No. And there is no John Wayne or Clint Eastwood going to ride into town and save your butt!
So let's look at the short chart. Very interesting after just about every short dump the equity continued higher. All but once, and one time it was a short lived dip!. What's this telling me. Stay away! I'm not even thinking about it at this point due to not only this chart, but the B2x' upcoming fork and we labeled $6250 as a critical level. Why would we short at an inflection point where many others had similar levels marked. So it's best to just be patient and see how this plays out. Trying to market time can be devastating.
Below is a chart of the futures market. Now it's not much of one but it is what we have to work with. you can see the 1 & 2 week are priced about $6150. The 3 months is around $5900. Not a very good risk to reward trade if I'm shorting now and the futures is $100 lower than the current price. Just yesterday the 3M was priced at $5300.
In addition $6250 was critical to hold for another leg up. I want to see if we get support here which may launch us towards $7100. Why risk shorting when we are $50 away from this level. Sometimes we lose sight of our long term charts and critical levels for a pattern we see. This is why I have it pegged on my board. I want to see what we do at $6250 because I may 180 and go long for $7100. Let's see until then it's patience my friend and know your place at the table. You are not the large stack here do NOT play like it!
Note
Note
Normally you could call this a bullish flag pattern no?Note
Great article and insight by MarcPmarkets! Someone that has been trading professionally on wallstreet since the 90's and holds multiple licenses! A true professional and I couldn't agree more with his take on BTC. If he is not on your following list he should be. 
Note
Many are realizing this morning the risks of trading on margins without a hedge. This is why I personally never do. This type of margin call can be disastrous especially when you keep moving it up in HOPE it will turn. And we can still go higher. I pray non of you were caught in this short hype. Believe me I wanted to short here too, and I mentioned that, but RISK MANAGEMENT is crucial if you want to be a successful trader and investor in the long haul. Here is why 90% of traders lose 90% of their money in 90 days or less.Note
Not one time on the chart above did shorts win when they were trying to "TIME" the market, this is why it's critical to look for signals like a breakdown of the RSI 60 on the daily and ride the trend. QUIT TRYING TO TIME THE TREND!
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