Bitcoin: Adjusting To The 28K Support Break.
Bitcoin news takes everyone by surprise and breaks 28K support. My swing trade from 29,600 got stopped out at 28,300. While stop outs are never expected, they SAVE money in the long run. This is a very valuable lesson for short term traders who don't respect stops. My max exposure was 1300 points, while price went lower by 5K points. I can only imagine all those who were liquidated as a result of following numerous instances of extremely optimistic analysis.
First, understand that there is NO WAY to see something like this coming in terms of technical analysis. The only way to know is to know the news in advance. The only clues on the chart were the fact that we had a failed breakout at 31K and a couple of buy signals that lacked the follow through. During this time of consolidation, the broader structure still maintained a bullish bias (price staying above the 28K key support).
When there are dramatic moves in the market, I don't REACT and instead ADJUST to the new information. THAT is the BEST We can do as traders/investors from a technical perspective.
Here are the adjustments I am making:
1) Short term trend is now BEARISH (Trade Scanner is now looking for short setups). This means bullish signals carry a lower probability. It will be tempting to buy the bounce, especially off the 25K support, but probability of follow through is LOW. If taking longs, expectations must be small.
2) Key support is NOW 25K AREA. I am using the June low of 24,700 AREA as a key level to further shape mid term expectations. If that level is decisively compromised again, I will consider the mid term trend bearish.
3) Key resistance is now 28K. This is the metric I will use to measure potential for new swing trade longs IF the ideal scenario presents itself. Keep in mind at this point, the mid term trend can be going into a consolidation (similar to the multi year range in Gold).
4) A new bearish continuation signal will be in play if the low of the previous inside bar is taken out.
5) While it is tempting to go long in this situation, the bearish momentum must NOT be overlooked. In these situations I prefer to wait for the ideal setup (which may never appear). That is the failed low or double bottom off the 25K support (blue lines on chart). This type of setup would be considered for a swing trade long only.
Keep in mind, if you were expecting BTC 50K or anything nonsensical like that, you really need to question the information you are consuming. The bond market has been warning for WEEKS that potential in these markets is very limited.
While losing trades will always be a factor in this game, they can be MINIMIZED in terms of RISK and FREQUENCY. This is especially important in the type of market environment we are in. Instead of looking outward for the answers or to be "informed", it actually has to come from how YOU interpret information relative to the risk you are willing to take. This process begins with a set of SPECIFIC rules that define the type of setup, trade and risk that you are comfortable with. Then you WAIT for the market to meet the criteria, do NOT force or make up trades.
WAITING is the hardest part for most beginners and that is why I developed a tool like the trade scanner. And now we can automatically track its results.
As I explain to people often, most traders come to this game with the absolute WRONG expectations and beliefs. This is NOT a game of reward, it is a game of RISK. If you don't look at it purely from that perspective, you will simply get fleeced like everyone else.
Thank you for considering my analysis and perspective.
First, understand that there is NO WAY to see something like this coming in terms of technical analysis. The only way to know is to know the news in advance. The only clues on the chart were the fact that we had a failed breakout at 31K and a couple of buy signals that lacked the follow through. During this time of consolidation, the broader structure still maintained a bullish bias (price staying above the 28K key support).
When there are dramatic moves in the market, I don't REACT and instead ADJUST to the new information. THAT is the BEST We can do as traders/investors from a technical perspective.
Here are the adjustments I am making:
1) Short term trend is now BEARISH (Trade Scanner is now looking for short setups). This means bullish signals carry a lower probability. It will be tempting to buy the bounce, especially off the 25K support, but probability of follow through is LOW. If taking longs, expectations must be small.
2) Key support is NOW 25K AREA. I am using the June low of 24,700 AREA as a key level to further shape mid term expectations. If that level is decisively compromised again, I will consider the mid term trend bearish.
3) Key resistance is now 28K. This is the metric I will use to measure potential for new swing trade longs IF the ideal scenario presents itself. Keep in mind at this point, the mid term trend can be going into a consolidation (similar to the multi year range in Gold).
4) A new bearish continuation signal will be in play if the low of the previous inside bar is taken out.
5) While it is tempting to go long in this situation, the bearish momentum must NOT be overlooked. In these situations I prefer to wait for the ideal setup (which may never appear). That is the failed low or double bottom off the 25K support (blue lines on chart). This type of setup would be considered for a swing trade long only.
Keep in mind, if you were expecting BTC 50K or anything nonsensical like that, you really need to question the information you are consuming. The bond market has been warning for WEEKS that potential in these markets is very limited.
While losing trades will always be a factor in this game, they can be MINIMIZED in terms of RISK and FREQUENCY. This is especially important in the type of market environment we are in. Instead of looking outward for the answers or to be "informed", it actually has to come from how YOU interpret information relative to the risk you are willing to take. This process begins with a set of SPECIFIC rules that define the type of setup, trade and risk that you are comfortable with. Then you WAIT for the market to meet the criteria, do NOT force or make up trades.
WAITING is the hardest part for most beginners and that is why I developed a tool like the trade scanner. And now we can automatically track its results.
As I explain to people often, most traders come to this game with the absolute WRONG expectations and beliefs. This is NOT a game of reward, it is a game of RISK. If you don't look at it purely from that perspective, you will simply get fleeced like everyone else.
Thank you for considering my analysis and perspective.
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