Sticking to our investment plan, and strategy to execute, we trimmed out 10% of our inventory at 36k and change. We also started a new plan and strategy of DCA a little bit every day for the next 90 days with limits. Taking the guess work out of when to buy, we figured by a little here, buy a little there and look for the broader move.
Well the broader move may be developing, but not so fast just quite yet. First some levels of interest from the broader perspective so we start with the weekly chart.
According to EW and in my opinion, we are entering the 5th wave of a broader 3rd wave cycle. Like everything else this is subjective to the analyst and there are other counts that are valid, but taking away the sell-off last March, reasonable that we are still in the 3rd wave of a multi year cycle.
We have all the characteristics of a 3rd wave, strong impulse swing, nearly parabolic, mush stronger than the initial leg of the cycle. As the market unfolds we adapt and change, so where I was once looking at 65k as a top, now I am in the mindset that 85 or higher can trade from here.
Over the past month I have been getting phone calls and messages from friends, even friends of friends that are inquiring about getting into Bitcoin . This is the period where we get a lot of fresh money jumping into the market and easily can push us into the mid 50's.
Looking at the cycle off 6k (ignoring the March selloff) leg 1 in the cycle rallied about 91% from the start. IMO the March selloff was a catalyst and probably would not have happen if it wasn't for Covid.
It is typical that wave 1's and 5's are proportional, though they don't have to be, they often are. They also overlap with a couple Fibb extensions adding weight to this area. So reasonable to see the mid 50's trade from here before we go into the broader wave 4 which may play out over several months or only a few weeks. I expect a decent pullback off this area back into wave 4 which is typical for wave 5 completions.
So I want to be trimming into this area, no matter how good it looks. "But wait Goldie, didn't you just trim at 36k and change also a position down at 16k and change, your an idiot!"
Having A Plan and Strategy to Execute
When we started our crypto portfolio in 2018, down over 20% as most our followers were in the red, our goal was to get our portfolio back into the green, remove our risk capital, and have a nice stack of inventory for free. Most have no plan, they trade on a whim, they trade with the herd and like the herd they eventually become dinner for the Lions and Wolves.
We stick to our plan and selling 20% of our inventory has given us some capital to add to our swing trading account. Now with swing trading, we seldom risk more than 1-2% per trade, so if we have 20k in cash for trading we are risking $200-$400 max.
In sticking to our plan, our risk capital can be used to increase our inventory by swing trading and keeping half the profits or so in Bitcoin . IF the market goes to hell in a handbasket, we are stopped out, our capital removed is preserved and we are looking to buy at lower levels.
However if it moves higher we can take small nibbles with this capital adding to our inventory or resuming our goal of removing our risk capital and still have an 80% position in the market. Whether winning at the poker table, stocks or in cryptos I do not like to give money back, but will take some risk when opportunity arises, and opportunity arose yesterday.
Bitcoin Daily Chart
Nothing has changed on my chart in weeks, the two key levels I was looking at were 32k to hold and 38k for a breakout. If 32k did not hold, or found offers (sellers) below, reasonable to see 24-27k trade. However if we could find bids (buyers) above 38k reasonable for a move to 45-50k from here.
On the 28th Marc issued a long signal off the outside candle, as there were multiple failed attempts of sellers to take out 32k. Of course the push to 38k failed immediately so I was a little suspect of taking the next setup on the 1st. Passed on that one, we already had one trade out there that hit T1, no point in taking the same trade where risk was still the same, offers below 32k.
But the market found buyers still active and pushed back to 38k where we had two days of consolidation at the former that sold so hard off back on the 29th. Order flow was telling that the market was not weak, but strong, so last night we took a trade on a break of 38k and change looking for a swing into the 45-50k area but we are not out of the woods yet!
What we want to see here is a close above 40k and the next candle or two take out the 42k level. IF we take out 42k, expecting a strong and swift move into the 45-50k area potentially higher. The risk here is buyers run out, sellers take over and 38k fails to hold, where we expect a push back into the 32-34k and wait for the next setup with only a 1% loss to our capital.
In short we still have not taken out 38k nor have we taken out 32k so reasonable that we are still in a consolidation here. Stops and risk management keep us in the game, not being right.
Navigating corrections is tough, we are not out of the woods yet, and like the two candles that closed below 32k, there was no follow through, the same can happen here. All we can do is let the trade play out, and manage our risk.
So many go all in on trades with no sense of risk management, and it is easy to take 2-3-4 losses in a row when markets are consolidating and they find themselves down 30-40-50% or more and come out of the correction with shredded lettuce. Taking even a 25% loss overall during a correction requires a 33% gain to get back to even.
However if you are taking 1% losses 4-5 times over, two winning trades easily make up for it. Risk management is the difference between eating steak and having an account full of shredded lettuce.
I can with certainty guarantee that more than 75% of those reading this post, do not know how calculate position size, nor understand how to apply risk to a trade. This is why we focus constantly on risk management, reminders on how to calculate, what risk to take, and why it is important. Most just post here is a trade good luck!
As long as the stock market resumes its case on Monday, I assume Bitcoin will want to make a new high as well. Markets run on sentiment, not fundamentals, if the herd is comfortable and , looking for this to carry over into Bitcoin . However if we get a market sell on Monday, not so sure Bitcoin escapes the sentiment.
In closing: order flow dictates how and when we take a position, not our opinions. My opinion last week was a little , but the market and order flow proved otherwise so I adjust to what the market was saying, not what I thought. Waited for a setup and took it, now we are long Bitcoin , it is up to the market to determine where it goes from here, but I can guarantee I will be sleeping well tonight because of risk management and not waking up tomorrow to Shredded Lettuce.
Bucs 45 Chiefs 41
Key moments from post :
Most just post here is a trade good luck!
Stops and risk management keep us in the game, not being right.
Markets run on sentiment, not fundamentals
if we get a market sell on Monday, not so sure Bitcoin escapes the bearish sentiment.