Bitcoin: In A State Of Wait. Back To 3600?
Bitcoin update: Since my recent report on here, this market continues to linger at the 4K resistance level. We have written a number of articles and posted numerous charts in our chatrooms, reiterating over and over as to why the best trade right now is no trade at all. It may be common sense to some, but many are still getting caught up in the noise, especially when looking at smaller time frames. An important lesson that is often overlooked is being able to judge the quality of your trading environment. Not all environments are created equal. Some are better for position trades, while others are more conducive for short term strategies. And for those who do not carry any Bitcoin inventory, the current environment does not offer attractive reward/risk for putting any new money to work.
Since we do not day trade Bitcoin, or short it, the environment needs to fit very particular constraints in order for it to be worthy of taking on additional risk. This is a range bound market, clear and simple. The low 4K area is still the range resistance, while the lower 3K area is the range support. While we do hold inventory (position trade), it has been weeks since we have shared a swing trade. If you can't understand why, I have highlighted how we visualize the reward vs. risk within this environment. The green box is how we view potential reward, while the red box represents the potential risk. Why would we put on any new swing trades at range highs when chances are price is more likely to test much lower levels in the short term?
Evaluating probabilities is what drives our decision making process. and many elements are considered, not just a simple candlestick or RSI signal. The fact that price is beginning to show signs of structural weakness confirms our reasoning that staying out of any new swing trades near the range highs is the best choice for now. Support levels begin around the high 3600s and continue through to the 3450 level. We don't pretend to know where price is going because we are not marketers. We do know where the support is and IF the market offers an opportunity to buy in those areas, then we are prepared. That is the best we can do as outsiders (working with public information). We exercise things that we can control like the amount of risk we take, and WAITING for the best possibilities. Sticking to these best practices is why our performance record is green.
In summary, Bitcoin along with the entire space may be in the process of building a broader recovery over the long term, but the short term is just not in a position that offers attractive reward/risk. Although supply may be slowly removed from the market (Andrew wrote a recent article detailing his observations), it will take some time before the effects play out. So we will continue to WAIT for two particlar scenarios: price retraces toward the lower part of the range for a reversal to go long OR price breaks beyond 4150 and provides a momentum continuation pattern for a long. Since WAITING does not cost anything, we can WAIT for as long as it takes. Meanwhile, there are plenty of opportunities in the Forex and Stock markets. What would you rather do? WAIT for a high probabilitiy setup while losing nothing or take every setup and erode your account while getting caught up in noise?
Since we do not day trade Bitcoin, or short it, the environment needs to fit very particular constraints in order for it to be worthy of taking on additional risk. This is a range bound market, clear and simple. The low 4K area is still the range resistance, while the lower 3K area is the range support. While we do hold inventory (position trade), it has been weeks since we have shared a swing trade. If you can't understand why, I have highlighted how we visualize the reward vs. risk within this environment. The green box is how we view potential reward, while the red box represents the potential risk. Why would we put on any new swing trades at range highs when chances are price is more likely to test much lower levels in the short term?
Evaluating probabilities is what drives our decision making process. and many elements are considered, not just a simple candlestick or RSI signal. The fact that price is beginning to show signs of structural weakness confirms our reasoning that staying out of any new swing trades near the range highs is the best choice for now. Support levels begin around the high 3600s and continue through to the 3450 level. We don't pretend to know where price is going because we are not marketers. We do know where the support is and IF the market offers an opportunity to buy in those areas, then we are prepared. That is the best we can do as outsiders (working with public information). We exercise things that we can control like the amount of risk we take, and WAITING for the best possibilities. Sticking to these best practices is why our performance record is green.
In summary, Bitcoin along with the entire space may be in the process of building a broader recovery over the long term, but the short term is just not in a position that offers attractive reward/risk. Although supply may be slowly removed from the market (Andrew wrote a recent article detailing his observations), it will take some time before the effects play out. So we will continue to WAIT for two particlar scenarios: price retraces toward the lower part of the range for a reversal to go long OR price breaks beyond 4150 and provides a momentum continuation pattern for a long. Since WAITING does not cost anything, we can WAIT for as long as it takes. Meanwhile, there are plenty of opportunities in the Forex and Stock markets. What would you rather do? WAIT for a high probabilitiy setup while losing nothing or take every setup and erode your account while getting caught up in noise?
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