Bitcoin: New Buy Signal Off 60K.

Bitcoin has found overall support just off the 56K level (on my chart) and has rallied back to the 64K resistance only to retest the 60K level (see illustration on chart). This is the scenario I described in my previous article and price is now in an ideal location for a swing trade long on this time frame. Interestingly enough, my Trade Scanner Pro system generated a long signal upon the close in the 64K area which I warned people against taking. Now is the time to be using the system to look for longs on smaller time frames such as the 1 hour. When using this system (or ANY system) CONTEXT is key.

Context comes in many forms, but when it comes to my trend following momentum reversal system, it is all about trend relative to support/resistance levels. These two components are ALL you need to identify higher probability signals vs. more random signals or noise. It is best to think of the signals as a form of confirmation. For example, the 60K area for Bitcoin is CLEARLY a major support level. While there is no guarantee long signals will produce an positive outcome from that level, there is a GREATER probability since price has reacted in this way MULTIPLE times over the previous few months. With or without a system, it is better to be looking for buying opportunities at such a level.

The more important question is how much to risk? Typically on this time frame you are looking at about 1500 pts. based on the recent candle stick pattern. The Trade Scanner is showing even greater risk, but also a greater potential reward (TP is near 72K). Again,CONTEXT carries more weight in these situations. While 72K is a possibility since the broader trend is still bullish, it is better to expect less in a consolidating environment. Using the 64K, and 68 to 70K resistance areas would be better choices in my opinion which puts reward/risk between 2.5:1 to greater than 4:1. Expecting LESS means IF price reaches the first resistance, TAKE something off the table.

It is very important to understand that markets are MOSTLY RANDOM (I repeat this A LOT). This means NO system or analyst can accurately forecast where price will be in the future consistently. Price is determined by the perception of the active market participants, which can be retail traders, institutions, algos, etc. And all of these participants buy and sell for numerous reasons. What drives prices one way or the other are when there are large imbalances in the order flow. This is why a piece of unexpected news can come out of nowhere and completely change the participants perception of the future. Just two months ago, Bitcoin was going to be at 100K by now based on what the internet gurus were forecasting. No one was calling for a test of 56K when price was pushing 73K.

This game is about probability and risk, NOT about how "early investors will make billions". There is a misconception that investors outperform traders and if you comparing the average investor to the average trader this statement may hold true. The part they don't mention though is that investors ASSUME MORE RISK since they are always in the market. People who happen to buy at LOW prices will outperform, but what about the people who buy near the top? This is when the average investor typically buys because the market looks its greatest (and the internet hype is the loudest). To outperform the typical investor or trader, you still need to have a way to gauge context: how low is low? how high is too high? And these questions are ALL a function of how much RISK you are willing to take.

Profitability comes from good RISK management which is rooted in gauging opportunities that carry a greater potential relative to the associated risk. And this can be accomplished by knowing how to evaluate CONTEXT.

Thank you for considering my analysis and perspective.