BTCUSD: More No Go? Waiting For These Scenarios.

13 בנוב׳ 2018

BTCUSD update: The hard money continues. We got stopped out of another swing trade long recently which comes with the territory. And we were making every effort to be selective with our entry criteria. Our strategy is not flawed, it is just not the best one for this type of environment. So what is the more effective way to trade the hard money?

Before I answer that, there is one bad habit that develops in these environments that can ruin your account. And that is not respecting the stop. It begins with getting stopped out a few times in a row and then watching the market recover right after getting stopped out. The typical reaction is: remove the stops because they keep generating losses.

That's the wrong thing to do because at some point the market is going to break one way or the other. If you are on the wrong side, without a stop, that is where when a small loss becomes a huge loss. You may get away with it a few times, but all it takes is one time to get caught on the wrong side.

This bad habit is particular to short term trading strategies. This is why we keep our short term and long term strategies completely separate. We don't use stops for our inventory strategies, instead we depend on careful position sizing and other risk controls.

Stops are your best friend in this environment for short term strategies like swing trading. If you are getting stopped out often, it is a matter of questioning and adjusting to the environment. Not jumping to another strategy simply because what worked before is not working now. That is reactive and ineffective.

Hard money is another way of describing consolidating markets. Bitcoin is NOT going anywhere right now. These chart gurus who keep making outrageous calls are only looking for attention for marketing purposes and degrading the integrity of this community. Stop taking the bait.

Our plan is simple but unpopular: wait for Bitcoin to choose a direction. We are long term bullish so if price breaks below the 5800 area support, we will continue to be defensive and only consider long term inventory strategies. Those that have been following our trades and analysis know that we have always been very clear about not shorting these markets. (There are plenty of other instruments to short).

There are two bullish scenarios that we will consider. A clear reversal pattern and setup around the 6250 area (bullish trend line). Or bullish continuation patterns AFTER a decisive close above the 6550 resistance. Otherwise we stay flat in terms of swing trades.

The more effective way to trade the current conditions is to wait for longer term levels to be reached and look for inventory. For our inventory, one of the levels we are watching for is 6100. Any extreme range lows will also serve as areas that we will consider for careful accumulation. These types of trades are very infrequent, require tons of patience and a well thought out game plan as far as scenarios go. Consistent reward is the product of taking well thought out risks.

In summary, projecting where Bitcoin will be a year from now is nothing more than a call for attention. As the space evolves, the players and motivations change. The best thing you can do is let the market provide evidence.

This is a professional's market. The easy money has dried up because easy money comes from the ignorance of the herd, and the herd likes trends. When there is a break out, especially a bullish one, it will attract the less experienced participants and that is when trade setups and momentum are more likely to follow through.

Either wait for the most attractive levels (extremes at this point) or wait for the recovery to confirm. There is no missing out because when there is a broad move, attractive reward/risk opportunities are much more plentiful.