I have been cautious up to these highs and I am staying away from any new swing trades in this market at these levels. Yes, new all time highs are certainly a sign, but risk of retrace is way too high at the moment. Based on the current structure, the first reasonable level for a normal retracement is 4914 (.382 of current swing). Price can retrace to this level and this trend would still be intact.
And the 4914 is a minor support, because the structure measured is the most recent swing. IF this level is broken, 4437 is the next reasonable level for a retest (.382 of entire swing). This is the level is where I would like to see price stabilize and show reversal patterns for a possible swing trade opportunity. As long as price maintains this level, an attempt to retest the high would be within reason and worth taking the risk in my opinion (IF the market offers the opportunity).
The fact that price has gone up so quickly after working its way to the 5K level is a sign because often this is when the majority of the "active" crowd is long. To be more specific, "majority of the active crowd" means the current population of investors who are trading in and out of this market regularly (which is a relatively small market) and when this crowd is mostly long, momentum is likely to dry up. This is what I mean when I use the EXPRESSION "There is no one left to buy" which is not to be taken literally. The size of the candle on the larger time frames is what points to this condition.
People have been writing to me about being short, and this is a very tough market to outright short. One way to consider benefiting from a significant retrace would be to buy alt coins against BTC . In theory they should rise as BTC gets cheaper. This is an investment strategy which means buy and hold. I do not have any specific recommendations as far as which alt coins to choose, but I would say if you own alt coins, now would be a good time to add to your core positions since they will be cheap relative to BTC .
In summary, it will be interesting to see how investors behave after the forks are out of the way next week. As these markets mature, the coin relationships will change. Just like a month ago when BTC sold off, everything followed, and that relationship has slowly unwound, but that does not mean it won't come back. As traders we cannot expect anything (especially in these markets) to be fixed, or consistent when it comes to relationships. This is why is so helpful because no matter what happens, price will still find , it will still trend, and it will unfold in formations that offer some clues as to where price is more likely to go next. It is all a matter of evaluating new information and adjusting.
Comments and questions welcome.
After the gradual upward price creep, I was able to raise my stops to my entry price, and now the trade is risk-free. As the price increases further, I will continue to raise my stops.
Just to be clear, this is not a long order, but an attempt to ride a bit of the Euphoria wave before a necessary correction.
Thank-you Marc for the great lessons on risk management in many of your previous posts.
- if Bitcoin rises, alts suffer significantly against BTC and less against USD as people move to BTC, which obviously is a direct trading pair for almost all alts. That's what's happening right now.
- if Bitcoin is relatively stable, alts show major gains; Bitcoin retains its USD value in the process because the BTC/USD pair is hardly involved here, as all transactions happen within the crypto sphere. This is what's probably gonna happen next.
- it Bitcoin retraces significantly, alts suffer the hardest because people move to BTC and then fiat, which means alts lose value against BTC which again loses value against USD - absolute worst case. How hard it retraces depends on unpredictable external conditions, the minor retraces that happen all the time because people are trading by certain patterns or have a feeling of "this is too good to be true, time for a dip" are not worth the hassle of dealing with imo, so I usually just sit them out.