Bitcoin: Continuation Long Setup Forming. Can You See It?

Bitcoin is hesitating at a minor resistance zone which is a tough spot of both longs and shorts. Our recent series of trades have been mixed. A stop out, followed by targets reached, followed by a stop out again. At first glance this sounds like a negative outcome, but we actually came out ahead in terms of profit and that is because of our particular money management rules. In this article I aim to 1. provide perspective on the current Bitcoin price structure in terms of probability and 2. share some insight about how consistent money is made in this game.

First let's talk about the technical position of Bitcoin. You will notice my chart has almost NOTHING on it, only projected support and resistance levels. This is enough information to draw conclusions about where price is more likely to go next. All this complication I see on analyst charts is just so unnecessary and time consuming, and it all sums up to the same conclusion anyway. Learn to work with less and you will gain more.

Our swing trade strategy evaluates location, levels and price patterns. From that we can generate a sense of probability about how order flow is more likely to react in the near future. So lets consider each element:

Location: 9750 is a major support level (retracement of 3150 to 14K).

Levels: overlapping this level is the 9800 to 10,300 minor support zone which is proportional to the bullish swing from July to August. Proportional resistance area is 11,600 to the 12,300 region.

Price patterns: a potential higher low forming now following a failed low formation off of a range low support.

All these variables sum up to: we are looking for a swing trade long. Price is gyrating around a larger magnitude support area. This area is also part of a broader consolidation which we have been writing about since the 14K peak. Probability still favors buying, but the location poses more risk (compared to 9K support) and although we prefer to buy, that does NOT mean we jump in. We take it a step further and wait for candle stick confirmation and let the market tap us into a trade, we do NOT initiate the trade by pressing the button (which is how WE define reactive). So at this point we have an order in place to buy which we shared with our followers. And our targets are based on the projected resistance which means they are located somewhere in the mid 11Ks.

To satisfy the second goal of this article, I want to mention something about money management, win rate, and why most of you will not make money over time. We follow RULES (which we are going to talk about in our next podcast). The rules produce the results, NOT our opinions, or any other irrelevant factors. The market either cooperates, or it doesn't. We remove ourselves as much from the equation as possible, otherwise there is a greater tendency to react. And reactive decision making is where randomness, erratic and INCONSISTENT results culminate in an uncertain environment such as a financial market.

Everyone is in this to generate a profit, but are focused on "more is better". That is why all these polluted charts are so popular. Profitability does NOT come from lines on a chart. The chart is a reference point for order flow and sentiment that can be used to gain a sense of how the crowd will react next. A high win rate is another misleading variable. We produce profitable results with a process that is right just over 50% of the time (our non aggressive setup). What generates the positive outcome is the fact that when we win, we make more than what we lose.

To summarize: The current elements on the chart that we place the most weight on still favor longs. A broad support area, followed by a failed low and potential higher low formation are in line with our rules but it is up to the market to trigger the trade. Although the particular setup we are watching is bullish, the probability is not as attractive compared to when price is in the 9K location. For that reason, we categorize the idea as aggressive (for us that means smaller size).

Our rules prevent us from considering shorts and that actually minimizes fake outs and errors even further. Like we always remind our followers, you do NOT need to be in every move to make money in this game. Bitcoin has been frustrating to many because they are reacting to every movement within a NON trending environment, or following others who are. If you want better results, you first have to get to the root of the problem and it is usually found in your personal process. You owe it to yourself to learn how timing actually works IF you are in this to generate a positive return, otherwise consider this just another expensive hobby.