BTC - Market Corrections and Portfolio Erosion

COINBASE:BTCUSD   Bitcoin / U.S. Dollar
Its important during corrections to remain calm and not over react and let emotions direct you. Regardless of the fear you hear and read about in the news, the overall market remains bullish . This is evident in how many alts recently made new all time highs, how the calls for $5000-$8000 Bitcoin are starting to subside, and your hearing long calls now. In addition Ethereum picked up out of no where and is crushing it. Even Jamie Dimon yesterday did a 180 apologizing for calling Bitcoin' a scam! Bottom line the dips are quickly being bought up as evident from the long lower wicks. This is clearly a sign that there is a lot of money sitting and waiting to buy on pullbacks. Corrections are part of any healthy market. This is where a new investor can get caught in what is called "Portfolio Erosion". Large investors do not buy all in. They buy in increments and buy dips. This is what is likely happening as larger investors look to accumulate a longer term position.

Portfolio Erosion happens when you get caught up in the "moment" and start buying and selling on swings and emotional impulses. "Ohhh Lord its going down SELL!, wait, there it is going back up, BUY!" and at the end of the day, the market is back to where it was and you have less money and less shares then you did before it started. PORTFOLIO EROSION! Your loss their gain!

Portfolio Erosion is why I use the 70/30 portfolio. It has saved me personally from "market erosion" over many years. It literally keeps me out of these moments as I pretty much have nothing I can panic sell here. I have been down to my core holdings since Dec 20th and only doing small limited trading. By nature of this strategy, I have limited my risk, as only a few coins Bitcoin' XRP' XLM' and Litecoin' are getting close to where I want to add for the longer term.

Looking at the chart from yesterday we almost hit the $13,500. Of course not only is this a retracement level, its a key support level as well going back to December (not shown but you can pull it up), so it is no wonder it was bought up quickly. There is also a valid 5 wave count on the daily as shown. Now this can be misleading, so be careful counting waves here, but it helps bring some perspective to the chart. I am looking to enter closer to $13,000 area for a longer term trade. Now this will only be a 1/3 position, as we can always dip more and I want some money on the sides to take advantage of a panic selloff. In addition I want to see how the market reacts at $13,000.

Longterm: We are still in a bull market
Midterm: Bear market
Shorterm: Bear market

Long Term Investors
If I had no Bitcoin and was looking to add for the longterm there would be no reason for me not to add a small position here. We can still head lower and its never wise to come into a market long term in one move.

Bottom Line: Corrections are difficult to trade and very risky. Patience and money management should be the primary focus. Trades should be short term with tight stops out of consolidation. This is not the time, after doing everything right, to expose yourself to "PORTFOLIO EROSION"!

If I do not respond to messages or to comments it is due to a project we are in the final stages of releasing for Saturday. So I apologize. I always try to respond to everyone's comments, questions and messages, but we have been trying to get this finished up for some time now. Good luck and keep calm! There is always a better trade tomorrow do not try and force one today!

Comment: The battle for the market appears to be favoring the bears. But it does not matter as we have been prepared. Regardless of what anyone "feels" you position yourself to benefit either way and we have done our best to do that by going down to our core positions and having cash ready to buy dips. Shorting this market with a margin account is a recipe for disaster. Maybe you win this time, but one loss can wipe out 2 years of gains quickly. Its boring being an investor here, but boring is good for your pocketbook in the long run.
Comment: I think many misunderstand the strategy from the comments.
#1 - We clearly stated in the short and mid term this is a bear market which would imply we can go down. The boxes are levels we want to watch price action for a reversal.
#2 - I do NOT have a buy on Bitcoin or any other coin here. I have stated we need to let the market run its course and look for levels where we can add positional trades.
#3 - Since we are in a short and midterm bear market we have gone to the 30% cash position. Again this is a strategy where in the LONG TERM we anticipate the market moving higher, but in the short and midterm understand we are likely to go lower.
#4 - The target boxes are LOWER than the current price. I do not see anywhere we have posted BUY for the RALLY. We have had the same or similar levels for over a week now. other than the short term trade we bought just under 14k and sold at $16k
#4 - Market sentiment can change on a dime. This is why we do not completely exit the market. I do NOT care how good you THINK you are, unless your returns in a 100% trading portfolio are greater than 400% over the past 4 months you have NOT outperformed this strategy. PERIOD!
#5 - If you just started with 10k across the board in BTC ETH LTC last year evenly weighted. You would be sitting on over 600k! So if you are that good of a trader where your calling dips and blips you would not be making calls on trading view, and I would be in the caribean tightening up for a tsunami not tightening up my portfolio.

Bottom line, I only know one group of people that consistently call market tops and bottoms, and you would not be posting trades or making calls on trading view.
The TRUTH HURTS - traders almost ALWAYS under-perform buy and hold. I've been investing for 30 years, I've seen the the bio and the housing bubbles. I can tell you with certainty that market timing traders are the first to the unemployment line!!!
Comment: Yesterday we drew a level around $12,500 which in my opinion was critical to hold for the bulls. We tested the level several times since then and in lieu of showing weakness it showed buyers quickly buying bitcoin up quickly from weak hands. This is a show of strength not weakness. A breakout of $14,200 would confirm sellers and weak hands have been exhausted, and I will be looking to add a trade for a target of 18k. Note the higher high and the higher lows where we have consolidated. This does not mean we can not go lower, we can, but the trend is showing dips towards the 13k level are being quickly bought up. I have not initiated a position yet but I am looking to initiate a trade position if we show strength through the consolidation box or we show buying on another dip. This market has been resilient and the inflow of new money is providing some resiliency to the market. I was looking across my holdings and seeing the same picture. This is far from a weak market, but we must be cautious as sentiment can turn quickly and we are still in an overall corrective pullback.
Comment: I've entered a 1/2 position at $13,400 with a 17k target price. Please keep in mind that I may exit it and may not be in a position to announce it. I am still looking for another entry level, but do not have an issue buying around $13k or a breakout of $14k. Each of you must do your own due dilligence and way the risk reward. I am comfortable with this as we sold recently at $16450. This is the 2nd trade so we have some room to play with and your situation may be different.
You are a damn wizard
Goldbug, thank you very much for your frequent updates and extensive explanations. I have followed for some time now and have modeled my portfolio after your 70/30 strategy with some of the coins you've mentioned in recent posts.

I was wondering, when you talk about 1/2 position, how much of your 30 % trading portfolio does that take up? Is that then 15 % of your total portfolio, or do you have a special quota you plan for each currency?
+3 Reply
goldbug1 Iluvatar
@Iluvatar, Thanks lluvatar, when I mention 1/4-1/3-1/2 position what I mean is, If I want to place a $5000 trade on coin, I more often then not enter in positions. Say I have 30k in my 100k portfolio for trading. (this is just an example here). I personally never want to risk more than 5% of my portfolio (5k) on one trade. So lets say I allocate $5000 for this specific trade (5% of my portfolio 18% of my trading cash). The less I am sure about the direction the more positions I use to come in. This limits risk. I'm pretty confident here so I came in with a 50% position, which in this example would be $2500. The reason is, if the trade goes south say 20% lower and I cut my losses, I only lost 10% on the trade and 0.5% of my overall portfolio. Where most new traders make the mistake is coming in all at once with a significant position say 20k, then lose 20% or 4% of their portfolio. OUCH.

So if I allocate $4500 for a trade, then I may buy three positions all at $1500 each. The more it goes in my direction the more I add. This provides a safety cushion in the event it turns out I have a chance at getting out even or better, or with a minimal loss.

Money and risk management is critical in trading!
+5 Reply
Iluvatar goldbug1
@goldbug1, Excellent, that clears it up. How do you see trailing stops in this context?
Thanks for being clear and thorough in explaining your thoughts. I think your 70/30 strategy is wise in an unpredicatable rollercoaster-market with such an overall bullish tendency like this. Now that there are a whole load of other cryptocurrencies performing well, and less coupled to BTC fluctuations, that provides even more oportunity for trades. I noticed you have a lot of diversity in your portfolio. To me BTC is fundamentally stronger than most other cryptocurrencies. Others have certainly performed well lately, but I wonder how much due dilligence people are actually doing before buying atm.?
+2 Reply
Thank you Gb1 for your work and updates. You make a great deal of sense.
+1 Reply
There was a lot of talk about bubbles in here so I will post my chart showing the MANY differences between btc now and the dotcom bubble:

(sadly I listed the charts in chronological order so it shows in the nasdaq section and not btc)
+3 Reply
tviewcrau tviewcrau
@tviewcrau, @bigdogg taggin you my friend, don't miss out on any long trades.
EN English
EN English (UK)
EN English (IN)
DE Deutsch
FR Français
ES Español
IT Italiano
PL Polski
SV Svenska
TR Türkçe
RU Русский
PT Português
ID Bahasa Indonesia
MS Bahasa Melayu
TH ภาษาไทย
VI Tiếng Việt
JA 日本語
KO 한국어
ZH 简体中文
ZH 繁體中文
AR العربية
HE עברית
Home Stock Screener Forex Screener Crypto Screener Economic Calendar How It Works Chart Features House Rules Moderators Website & Broker Solutions Widgets Stock Charting Library Feature Request Blog & News FAQ Help & Wiki Twitter
Profile Profile Settings Account and Billing Get Help Ideas Published Followers Following Private Messages Chat Sign Out