BTCUSD: Retracing Into Resistance Makes Longs Less Attractive?

BITFINEX:BTCUSD   Bitcoin / U.S. Dollar
BTCUSD update: Price is sitting at the old support/new resistance level of 9225 after an attempt to retrace higher. Even though price is still above the bullish trend line , it is not the best scenario for a swing trade long because there is no clearly defined setup.

Setups are important because not only do they indicate an increased probability of a particular outcome, but they also clearly define risk. In the current situation, there is no meaningful setup even though it is possible to define a level of risk. 8652 is the newly printed swing low that the bullish trend line has shifted to, but the bullish candle off of this level is nothing more than a random candle.

This condition does not mean a long trade will not work, the problem is there is no distinct advantage. The whole point of using particular trading criteria is to help filter out randomness. The structure in place right now can go either way but has a slight bias to the bullish side since it is above the higher sloping trend line . For us to issue a trade signal, it has to have a higher probability of following through the way we anticipate, and that is why we wait for particular setups, not random formations.

Even though price may push higher (with no particular setup) it is going back into a reversal zone that is defined by the 9861 high. This is an area that is attractive for selling, not buying in general (there are exceptions, like our recent long signal, but that comes with a very well defined setup). Longs in this area particularly carry more risk for this reason.

The level that I am waiting for is the 8514 support (.382 of recent bullish swing). This is below the trend line , but still within an acceptable location for trend continuation to occur. IF price can retrace back to this area and show a reversal pattern, that is the higher probability area of a swing trade long at this point.

In summary, bullish momentum is clearly in control. A higher high is likely, but risk remains high at this level, especially with no setup. If anything, this price action offers a light profit taking opportunity for those traders who didn't reduce their risk the first time price pushed into this area. Let the market find a level that offers more in terms of probability and reward/risk. Random price action offers no distinct advantage which often reinforces ineffective behavior over the long run when the outcome of a trade happens to be positive. Profitable trades for the wrong reasons lead to bad habits which is one of the reasons why it is so difficult to achieve consistency as a short term trader. Be patient, and let the market meet your criteria rather than react to the perceived possibility of a profit. Check out our performance spread sheet at S.C. to see the most recent trade that reached our predetermined target during the peak of this recent move.

Questions and comments welcome.
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Hi @MarcPMarkets, I've been following you for a while and have always appreciated your work. Your calm, calculated demeanor and precise setups always provide solid insight into how to manage these markets. I was amazed when price was moving euphoricly in December, how you didn't make any trades, and ended up making out better than many when the market crashed.

"Random price action offers no distinct advantage which often reinforces ineffective behavior over the long run when the outcome of a trade happens to be positive. Profitable trades for the wrong reasons lead to bad habits which is one of the reasons why it is so difficult to achieve consistency as a short term trader."

I think that quote resonates true with many people who read your articles, regardless of whether or not they're willing to admit it. Thanks a lot for the keen insights and keep up the great work. You are an asset to this site.
+6 Reply
rudius lumpytrader
@lumpytrader, How did it make out better than many? He didn t take any position during the whole bull run and is position trading since 13500 from memory. he s at loss.
@rudius, he never took losses, simply begun building a position at above current market prices. Additionally, when BTC returns to above $13k, he will be in profits because he didn't sell. Many people sold low with the hopes of buying lower, or shorted the bottom and ended up losing significantly. Not every trade has to be a winner - even winning trades often start in the negative.
+2 Reply
rudius lumpytrader
@lumpytrader, That s one way to see that... He bought at least 2 times just below resistance, that s not a thing to do, and he told it multiple times, but nevertheless he did take the trade...
Deppstein lumpytrader
@MarcPMarkets thanks for that quote, @lumpytrader, thanks for pulling it, brilliant.
ErsozSozer lumpytrader
@lumpytrader, the most valuable asset :))
Thanks for sharing indeed. You seem to have much trading experience in contrast to many others on this website. You can tell by the concise and to the point analysis. Those who are in it for the popularity contest seem to create a lot of "noise" rather than facts. Noise is dangerous.
+2 Reply
Hey Marc, I agree that we are in a no trade zone, but what do you think of the bullishness of the price bounce off the daily 200 EMA? Historically this level has held as the bottom for many retraces, indicating this to be one of them.
+1 Reply
wow, I'm curious to see that performance spread sheet at S.C.!!!
Nice Marc, after more than a year following you I just began to understand the logic behind the trade set ups.. It takes quite some while but I honstly own part of my experience to these blogs...

Cheers from Brazil!
+1 Reply
For those more experienced traders who prefer to actually trade Bitcoin this weekend...
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