In almost every post I have stated the MOST Important tool in any traders tool box is the TREND! I cannot emphasize this enough. I even posted an update yesterday on how you can trade the trend void of EW and Fibb. They are only add-ons, and not the main tool. I see there are more opinions on the direction of Bitcoin then there are charts on TV (ok i'm old school and someone pointed out this was Trading View and not my 52" samsung). This post is mainly to show how powerful reading trends are. I have been asked numerous questions on price points, what if we get to $4300, what if we get to $4600 does that mean we are going up. These are valid questions, and instead of just providing a yes or no answer I want to show how YOU yourself can determine this using simple trend lines! Yes the TREND IS YOUR FRIEND.
Ever wonder why relationships do not work out most of the time? Why we go through several in our early adult hood phase, and our true soul mate is many times right under our nose? Because you base your initial relationship on feelings, this feels good. Seldom do we look at how a relationship might work out at the beginning, and rush to get an apartment, have kids or get married, only for the relationship to fall apart. This is part of human psychology. Many times after years of failed relationships, we realize that our true soul mate was right there the whole time, and we ignored them because of the emotion called IMPULSE! Yes the impulsive emotion is one of, if not the most powerful emotion us humans feel, more importantly we must learn to control it. How many of you found your life long partner after many failed relationships and saying these words "I'm never getting in a relationship again". Hmmm What you were saying is "I will not let impulsive feelings choose my next partner". This is not only true in dating but in trading as well! But the outcome is the same. Impulsive emotions lead to money losses. Yes I've been divorced twice! So with this comparison let's see what is right under our nose and back to the question of what if.
Looking at the upper right chart if we draw a trend line, it is clearly going down. This is still a bearish overall trend regardless of the ups and downs throughout, much like a relationship. To the upper left, we have the what if scenario. If we get to $4500-$4600 and draw a trend line, it is still negative, this is like one great last vacation before the final divorce. Yes many of you know what I'm talking about. What would make me change my mind? When the trend continues up, or in simple words, make a new high. This means the equity has resumed it's uptrend. This is a very simple chart you yourself can draw and need to if you want to be better traders. But many are in denial that we could ever possibly get back to $2200, how can we as we have come so far. Let's take a look and see what the trend says.
The lower charts are a comparison of bitcoin and gold. hmmm, look pretty similar. Many in 2012 thought they would never see $1000 gold again. Well look at how that turned out by them thinking it couldn't happen! Look to the left, see a pattern with bitcoin. I even drew a box around gold and the pattern it made before the great pullback. Look at the upper left chart, see a pattern? Now keep in mind Bitcoin travels at 10x's the speed of gold as I posted before. What did the chart say on gold? Right back to the trend line, about $2200 on the bitcoin chart!
So bottom line, we can be blinded by emotions and trade on impulse and feelings, and continue to miss the obvious that is right under our nose. Is it going to happen? Nobody knows for sure, but the charts are clear that it can happen, and looking at the patterns, it is very likely. Once you remove the feelings from your trading you will become a better trader period! Whether a relationship works out nobody ever knows, but the more wise we become, we are able to spot the good ones by taking our emotions out of the game!
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How many of you were printing Atlanta "superbowl champ" T-Shirts at halftime this past year? How did that work out!
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Not sure who quoted this but we have all heard it.
Insanity - Doing the same thing over and over and expecting different results.
Now look at the gold and BTC chart one more time and ask yourself. Am I going to do the same thing and expect a different result, or come to a realization that others are, and the outcome will be the same? Yes they will blame China, Janet Yellen, Ronald Reagan and butterflies in venezuela, and not look in the mirror at themselves and say, I did the same thing over and expected a different result!
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OK I did not realize some do not understand market cycles and the difference between long term and short term trends. Markets cycle, but overall most markets are headed up long term. Case in point the dow jones started at 100 in 1908 or something and is now 25000. So long term the market is always headed up. If you do not understand this then you are not a trader you just need to buy some BTC, shut your computer off and in 5 -10 years open it up and you'll be wealthy. But I will provide one more attempt using MSFT as an example. I used the same color coded lines. Green = uptrend, Red = downtrend. Markets cycle, and you can have an equity in a multi year uptrend (like microsoft) yet have smaller time intervals where it is in a down trend. case in point look at 2000 and 2011. But even those down trends never went through the overall decade long uptrend. This is what I was trying to show above, and some even looked at the green lines and thought those were signaling down trends. NO Green is an uptrend on the chart above!!!
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This was an educational piece on how to trade the short term trends.
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Sometimes trends on a standard graph can look just way out of place. So when looking at long term trends, and the stock has appreciated greatly we want to look at it from a log scale. Below I show the difference in the two, and if you look at the log graph the trend looks more in line with what we see. So when someone hands you a graph like MSFT above where you see those exponential gains, you should always take a look at it from a log type scale. EXP-GROWTH = LOG SCALE. this provides a better idea of the trend.
I don't agree with your analysis, simply because people tend to over complicate the market with TA when there is a simple supply/demand metric at play. What I see is growing demand and acceptance on a highly limited asset and useful asset. People have their eyes fixed at 10k and we have more money entering the market and more people receptive to bitcoin (due to its 10-year history) that I don't see BTC dropping as far as $2200 without a catalyst. Not saying it's impossible, but a simple trend like that you drew from September (21 days? ...down thanks to China) isn't convincing. Your trend line at the bottom left makes no sense to me, you could have very well tilted the top green line way up to make it touch the two major bottoms and call that the trend line... that trend shows up.
I'm curious on what you are doing, if you are convinced the price is going to $2200 are you selling right now? From your other posts you seem to suggest that people don't sell their core holdings and only trade with 1-3% of their holdings, but at the same time you're calling us blinded by emotions for thinking the price isn't going down to $2200... if we are blinded and the trend says we are going to $2200 should we sell more than 1-3% of core holdings right now?
residentronpaul
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@devilninja777, if you bought above $2200 being late to the party, you are in a very different boat than others. It is all about your own exposure. People who bought sub $1000 have a much easier time. GoldBug doesn't cover the his but it is crucial to understand yourself before listening to others.
devilninja777
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@residentronpaul, My cost average is $580, I've been through the 2013 bear market and stubbornly held the entire way though while buying more. I have been a bull for the same reasons I'm a bull now, except I see an obvious change in sentiment and demand now vs 2013. I'm even more confident about the long-term bull then I've ever been before. I know what's possible, but I know the difference between possible and likely... I see a bigger case for the likeliness of going up vs down by next year.
jeremyalain
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@devilninja777, True indeed, but I think most of us on here came later to the party, and I think the analysis here is meant as a more short term idea than the timeframe you may be thinking.
goldbug1
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@jeremyalain, Bingo, thanks for clarifying. I listed it under educational and it'a an introduction to trends and how to spot them. It was not with the title. "GET THE HELL OUT OF BITCOIN THIS IS GOING DOWN AND YOU NEED TO RUN". I shocked how people take something way out of context, cannot even draw a trend line, but think they know where it's going because it's part of an inner spirtual feeling or something. LOL thanks
devilninja777
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@goldbug1, No offense but you are taking my critique out of context, either intentionally or not, implying that I'm stupid and can't read trend lines. What is your blue arrow and your entire analysis saying? It's saying BTC is going down to 50% of it's value... and all I'm saying is that you don't have enough information to say that it's going down. So don't get offend and resort to calling me stupid. TA becomes less relevant when you incorporate supply and demand dynamics of a new tech that is at the beginning of its hype cycle. You can't rely on the same linear trend line from 2012 when the market conditions, public perception and barriers to entry are completely different. BTC should have an exponential growth, your chart looks like it's saying the opposite
benklai
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@devilninja777, so you suggest us to start saving the 10k now for per 1 btc in future? or take the advantage to buy cheaper while the market uncertain?
goldbug1
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@benklai, I think 50k 100k is not out of the question! Personally that's why I bought for long term.