Bitcoin update: Price consolidation presents a tricky situation. It is sitting above an important psychological support which makes it more attractive to buy, but the structure itself qualifies as a bearish continuation pattern. This conflicting information is a perfect example of when avoid a market.
At S.C., we do not take trades for the sake of taking trades. We do not force trades, make up trades or issue trades to appease the impatience of our followers. We simply listen to the market and if it says "do not trade", we don't.
Making a couple of profitable trades only to give it all back and then some is not productive. And since conditions do not offer any distinct advantages, more trades increase the chances of more losses. This goes for both longs and shorts.
Speaking of shorts, we do not participate on the short side in a traditional sense. We do have a technique that allows us to increase our coin count during adverse movements without the additional risks such as leverage and exchange intervention. We recently demonstrated this for our members with our BCH inventory.
Looking ahead, in order for us to put any new capital to work, price needs to show improved structure. This can unfold in a number of ways that would be meaningful from our perspective. One way would be to probe below 6K followed by a bullish reversal candle. This is a typical bear trap that offers a high probability setup for a long swing trade.
In summary, we do not react to market information. We evaluate and anticipate, which is on the opposite side of the spectrum compared to the reactive trader. Our decisions are organized by probabilities and market structure, not overly complicated charts.
Price action and market structure serve as a traffic light for our operations. When it's green we go, yellow we start raising defenses and red we avoid. Right now the market is showing us the red light.
Inexperienced traders focus on profits, not risk. They want action, they feel they are losing when the market moves without them. They do not appreciate that the absence of losses is a big contributor to a profitable long term performance. During unfavorable periods, protecting capital is more important than putting it to work. There is a time to be aggressive, and there is also a time to play strong defense. Knowing the difference is what separates the true professionals. Which side are you on?
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Quick update: Price has taken out the minor consolidation trend line but has not proven anything from our perspective. Price can go as high as 6600 and fake out. Participating in the initial move in situations like this is often the most costly since the environment is still unfavorable. We are continuing to wait for the market to meet our criteria, until then we wait. We are only interested in high probability setups, not just any movement.
I really appreciate your defensive approach. But what about using a tight stop loss? Isn't it a kind of defense? If it bounces, you can earn big by buying low. And if stop-loss triggers, you only lose small. Doesn't 6.2k support worth to try? If not, why?
MarcPMarkets
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@protesto, if the probability is low, then its not worth a try. Why throw money out the window when you don't have to? Do not be fooled by random profits. They are no different than losses in the long run. If you don't understand that, the market will teach you if you can stay in the game long enough.
dalmazio
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@protesto, I've tried it over and over again. Doesn't work in this market. Stop hunters can easily move the price in these low volume markets precisely to trigger tight stops making it a losing proposition. Only chance to avoid this is having very wide stop-losses, but then that's very risky, and will most likely wipe out your account in the event of a squeeze. Margin trading just doesn't work in this low volume, low cap market. And for those who have had some success trading on margin in the last weeks and months, just wait a while. I'm fairly confident they will end up giving back all their profits, and then some. This market has taught me:
1) don't trade on margin/leverage,
2) ignore price action and structure on anything less than the daily time frame,
3) analyse and prepare for multiple scenarious (both bull and bear) waiting for confirmation of one or the other on larger time scales, and
4) avoid FOMO like the plague - it's usually a trap (anything that goes up/down too rapidly will reverse almost as quick, and is usually just a squeeze before continuing back in the direction of the underlying trend).
As Marc points out, not entering into a position IS a position that protects capital in these shark-infested waters.
SweeetCorn
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Beautiful write-up. Protecting hard earned capital is key.
MarcPMarkets
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@brahmastra, glad you can appreciate it. That is how you build an account.
jlhequities
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Bulls and bears on the same team, they short it down to us, we long it up to them. We both making money
GlennTarplett
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I think btc consolidation for 2 days approx then move to the upside... well see.. Thanks Marc and team..
@MarcPMarkets I wouldnt bet against a bear flag in a downtrend regardless of what the outcome maybe, the risk reward is awful. Even if it pops upwards it wont be worth it
MarcPMarkets
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@Fida4u, me neither. That's why I wrote that we are avoiding these markets for now. Thanks for sharing.