MarcPMarkets

BTCUSD: Don't Pick The Bottom, Let The Market.

BITFINEX:BTCUSD   Bitcoin / U.S. Dollar
BTCUSD update: Bearish momentum is driving price toward 6K support as this market pushes through the 6805 reversal zone boundary. Remember there is no way to pick a bottom in a situation like this. The best we can do is estimate where a reversal is likely and let the market prove itself. If the market continues to stay weak, it can go as low as 4559 before reversing. This is where risk management comes into play.

I keep getting questions about why I am not shorting this market. The quick answer is I refuse to trade these markets on margin so technically, I can't short these markets. Even if I wanted to, I would only look for opportunities on a day trade basis because the risk of a short squeeze is way too high to hold on at these levels. As I have written before, this situation is no different than when this market was pushing extreme highs. I don't buy highs and I don't short lows.

I have been writing about the 8171 to 4983 support zone (.618 of entire bullish structure) for weeks. As long as price stays within this broad zone, I am either looking for signals to add to my position, take shorter term swing trades long or just wait until bullish confirmation returns. I am not going to sell anything at these levels unless I am getting stopped out of a predetermined swing trade.

The more conservative thing to do is wait for a reversal to confirm and the scenario that will validate this for me is a close above the 7492 level (.382 of recent bearish swing). This event would indicate there are enough buyers to compromise the immediate bearish trend line . It does not mean this market will go straight up, it simply means momentum is beginning to change. The next step from there would be a higher low formation.

In summary, whether this market decides to bottom at the current level, or reverse at 6K, the conservative thing to do is wait it out and let it choose. The only way I would be buying at the current level, is if I had no position at all which is not the case. And that is where risk management comes in. I have enough of a position where if this market keeps going lower, it won't be pleasant, but I will not get shaken out. The only way I will add to this position trade is by waiting for conservative scenarios like closing above a bearish trend line . Overall, as ugly as it looks, 6K is still holding up and can be the bottoming formation that establishes a broad Wave 2 (find the weekly BTC chart on the S.C. site for more on that).

Questions and comments welcome.
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Comments

Great post. Thanks for sharing on a Sunday. Happy Easter.
+5 Reply
Technically, now that you have a long term position, you are able to take short swing without using margin. No need to continue to say that you won t short this market because of margin.
+2 Reply
@rudius, lol ouch...
+2 Reply
Emphase rudius
@rudius, selling to buy back lower isn't shorting.
Reply
rudius Emphase
@Emphase, yes it is. Different time frame is all.
Reply
@rudius, I think when he says shorting he means margin selling to buy back in lower where you actually profit in $, not just by obtaining more stock. I don't see how the time frames are any different however.
+2 Reply
rudius Hulksbits
@Hulksbits, @Emphase
Ok short explanation.
He takes a long term postion, meaning he bought some BTC for 2 or 3 years. Next halving is on 31 may 2020.
So say he has 10BTC. Price is at 8k and he want to short 3 BTC thinking to buy it back at 6k. So he shorts 3 BTC at 8k = 24000$ he buys back ( because he s good (?) analyst ) at 6k 3BTC = 18000.
At the end of the swing short he still have his long term position and he earns 6000$. If he wants to invest in BTC is up to him. Same processus if he loose. If he wants to keep the same long term position, he must have $ on the side in case he looses the swing trade.

In case that is still not clear (pardon my bad english) you could go online and look for how a short trade actually works.

Concerning the time frame, it s more the time period i guess. One trade is a position trade, meaning a long term trade. The other one is a swing trade, meaning on a few days, or day trade. They are not the same and shouldn t be put in the same bag.
+6 Reply
@rudius, Thanks so much for your detailed response! I'll do that now, I'll "go online and look for how a short trade actually works". Because I have never done it before.
Reply
@rudius, I just realised we are saying the same thing but in different ways...
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@Emphase, it's not technically a "(net) short position," but it still leads to the same effect as one w.r.t. its isolated effect on the portfolio, right? So, if you have no position and you take a net short position, and make $1k, that's $1k in your portfolio that you would not have made but for the trade. If you have a net long position, and sell some shares and subsequently buy them back for a net gain of $1k w.r.t. that round-trip trade in isolation, that's $1k in your portfolio that you would not have had but for the trade. I think the thread has devolved into semantics when I think rudius is simply trying to say that there's no point to saying that you won't execute trades that correspond to those that one would make if one believed there would be a decrease in price in the immediate/near future.
+2 Reply
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