Bitcoin Range: Filtering Noise And Sell Signals Around 10K?
Bitcoin continues to elude any decisive price action which keeps it contained within a developing higher low formation. Evaluated from a broader context, the higher low and the fact that the 9750 major support is still in play provides a bullish bias. In this article I will focus on how we navigate a consolidating market and why we ignore sell signals.
A trend is defined by progress which means higher lows followed by higher highs is bullish, while lower highs followed by lower lows is bearish. What throws off the new trader or investor is the time frame. Someone following a 30 minute chart can argue Bitcoin trends frequently, which is correct BUT ONLY on that time frame. Arguing that a trend or pattern on a small time frame is meaningful over the bigger picture is the recipe for losing money (anyone get lured into shorts at 9600?).
Small time frames are for short time horizon strategies, like day trading NOT swing trading. Since we swing trade ONLY, we define the trend by the daily chart. And based on this context, Bitcoin has NOT been in a trend since July. This piece of information alone determines our expectations and risk tolerance for any buy signals that appear and trigger.
Since the range high has been established at 14K and the range low at 9K, we have a better idea as to where to expect bullish reversals and where to anticipate short term targets. Expecting a TREND is a MISTAKE unless Bitcoin breaks OUT of this wide range. This means a close above 14K or below 9K will allow us to adjust our expectations to trending. UNLESS you are day trading, using trend following strategies in a non trending environment will lead to frequent fake outs and account erosion. It's like trying to force the wrong key into a lock, it may fit but you aren't opening any doors.
So we focus on the range levels. Range lows are high probability areas for buying, while range highs are for selling. Simple enough, but time frame mixers usually go short into the range lows, expecting a sell off back to some unjustifiable level like 5K (and then watch their account erode). Any buy signal that meets our criteria above 9750 is a swing trade long possibility and our targets proportionally placed somewhere below the 12K area. That is how we trade the range.
Since range lows are high probability locations for long setups, it also means they are a LOW probability location for sell signals. Just because a sell signal may appear on the daily time frame does not mean is has equal weight to a buy signal. It all depends on the probability of the location. Since 9750 is a MAJOR support, AND there is a higher low formation developing in this area at the moment (context), probability favors buying. The reward/risk does NOT favor getting short or selling inventory, which is why we do not put much weight into sell signals in this situation.
We only trade one side of this market and even though we have taken a couple of stops within our recent trades, our performance is still positive for the year. The main thing to avoid in this range bound environment is NOISE and having a long only swing trade strategy that uses stop orders to enter as well as exit the market has been immensely effective. We let the market make choices for us, rather than manually react to news, opinions or erratic price action.
Inexperienced traders and investors mostly lose because they focus on the obvious. They want big profits fast, and that only exists in the reality that marketers want you to believe. Is there such a thing as easy money? Perhaps in the presence of a very strong trend, that is usually when everyone is bragging about 600% profits in a month. Good habits and best practices are what will allow you to grow your capital CONSISTENTLY, NOT gambling behavior. Consistency is SLOW, uneventful, not glamorous, and does not make for an enticing marketing message. Those who happen to make big money fast often give it back just as fast when the market returns to REALITY. And the Bitcoin range right now is the typical market REALITY.
A trend is defined by progress which means higher lows followed by higher highs is bullish, while lower highs followed by lower lows is bearish. What throws off the new trader or investor is the time frame. Someone following a 30 minute chart can argue Bitcoin trends frequently, which is correct BUT ONLY on that time frame. Arguing that a trend or pattern on a small time frame is meaningful over the bigger picture is the recipe for losing money (anyone get lured into shorts at 9600?).
Small time frames are for short time horizon strategies, like day trading NOT swing trading. Since we swing trade ONLY, we define the trend by the daily chart. And based on this context, Bitcoin has NOT been in a trend since July. This piece of information alone determines our expectations and risk tolerance for any buy signals that appear and trigger.
Since the range high has been established at 14K and the range low at 9K, we have a better idea as to where to expect bullish reversals and where to anticipate short term targets. Expecting a TREND is a MISTAKE unless Bitcoin breaks OUT of this wide range. This means a close above 14K or below 9K will allow us to adjust our expectations to trending. UNLESS you are day trading, using trend following strategies in a non trending environment will lead to frequent fake outs and account erosion. It's like trying to force the wrong key into a lock, it may fit but you aren't opening any doors.
So we focus on the range levels. Range lows are high probability areas for buying, while range highs are for selling. Simple enough, but time frame mixers usually go short into the range lows, expecting a sell off back to some unjustifiable level like 5K (and then watch their account erode). Any buy signal that meets our criteria above 9750 is a swing trade long possibility and our targets proportionally placed somewhere below the 12K area. That is how we trade the range.
Since range lows are high probability locations for long setups, it also means they are a LOW probability location for sell signals. Just because a sell signal may appear on the daily time frame does not mean is has equal weight to a buy signal. It all depends on the probability of the location. Since 9750 is a MAJOR support, AND there is a higher low formation developing in this area at the moment (context), probability favors buying. The reward/risk does NOT favor getting short or selling inventory, which is why we do not put much weight into sell signals in this situation.
We only trade one side of this market and even though we have taken a couple of stops within our recent trades, our performance is still positive for the year. The main thing to avoid in this range bound environment is NOISE and having a long only swing trade strategy that uses stop orders to enter as well as exit the market has been immensely effective. We let the market make choices for us, rather than manually react to news, opinions or erratic price action.
Inexperienced traders and investors mostly lose because they focus on the obvious. They want big profits fast, and that only exists in the reality that marketers want you to believe. Is there such a thing as easy money? Perhaps in the presence of a very strong trend, that is usually when everyone is bragging about 600% profits in a month. Good habits and best practices are what will allow you to grow your capital CONSISTENTLY, NOT gambling behavior. Consistency is SLOW, uneventful, not glamorous, and does not make for an enticing marketing message. Those who happen to make big money fast often give it back just as fast when the market returns to REALITY. And the Bitcoin range right now is the typical market REALITY.
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