MarcPMarkets

Bitcoin: Too Early To Buy Pull Back?

BITSTAMP:BTCUSD   Bitcoin / U.S. Dollar
Bitcoin clears 58K support and goes straight to the 51K area. If you read my recent articles on here, I warned over and over that the risk was too high in the 60Ks. One very simple rule kept me out of this: I don't buy highs. Now maybe you will better understand what I mean when I say RISK FIRST.

How many gurus steered you the wrong way with the typical hype and false sense of hope near those highs? I watched countless videos on Youtube that were so feverishly bullish , that it was very hard to ignore the painfully obvious contrarian signs. The herd mentality at its finest. No one emphasizes the risk, maybe because they aren't aware of the magnitude or maybe they know they won't get as many views if they speak of the R word: reality.

Next you may wonder, "is this the time to buy more?", "buy the pullback?", it's still a bull market right? All that really positive news, right? Here is the answer: while the location (between 51 and 55K) is much more attractive, it is still too early for swing trades at least.

There is now a failed high formation established off the low 60K area off of a high probability reversal zone (blue rectangle ). The pullback is sharp , and while the location has improved, I would not get involved until stability appears. Meaning price can test 50K again, or even slightly lower over the coming days. Or maybe it establishes a higher low, either way I want to see a bullish formation develop. The outcome from buying a level alone is HIGHLY random and that is not something I am interested in. Stability takes time, and a single candle is not enough to work with. Either Bitcoin aligns with my rules, or I don't assume any risk. Very simple.

This type of move is good for day trades (you need to stay on top of it) or position trades (investment). Since the retrace is dramatic, it offers an improved price to take a SMALL bite, relative to your allocation objective. Meaning if you have 1K to invest, this is an opportunity to buy $50 to $100 worth or 5 to 10% of whatever your full amount is.

Why such a small allocation? Because at this point, IF bearish momentum stays intact, it is possible to see a test of the 50 to 48K area.

Many of the "experts" will probably turn bearish on Bitcoin now, but it is still too early for that also. Until major supports are taken out, like 48K and 40K, the broader structure is still bullish . That means it still makes sense to look for swing trade longs at support levels upon a setup and confirmation.

In these situations it is easy to let emotions take control, especially if you were lured by the hype. If you are too big, the best thing to do is reduce risk while you have the opportunity. The smaller the loss you can take the better. It will be frustrating if Bitcoin reverses back to 60K, but the idea is to not be at the mercy of the market which is often the long term result of hope. Focus on risk FIRST.

Thank you for considering my analysis and perspective. I hope you find it helpful.
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Comments

This is all agreed , but why should one take losses on spot trades if you can keep the coins and trade them at the futures exchange with 1 x or higher leverage? It doesnt make sense to sell until you can create any type of bottom with your BIG accounts... This is my opinion. Explain me the RISK if iam wrong. ALL the market would have to go to 0 , but we also experienced when OIL futures went sub 0 and it was the greatest oportunity to make huge profits. SO why to sell your spot if you are not big enough to create a lower bottom and buy it back . HMMM
+12 Reply
Cyrus74 PedroRolles
@PedroRolles, if you sell the breakdown and dca around a temp bottom. You win, big losers are the diamond hands who hodl from bottom to top back to bottom. Its not a race, its a marathon.
+2 Reply
@Cyrus74, yes you are right , if you can create tops and bottoms. Otherwise you are lucky if you catch one. What i meant to say is that if you already bought something at the top , it is not always the good idea to sell it when it drops 20, 30, 40 % already coz it may be at the bottom. Anyways you are right in your perspective. I am a newbie but i regret i gave to market 3000 usd when i just waited a bit longer and it would pick up anyways if the instrument does not go bankrupt . But in that case i have only as much in it as i can loose .
Reply
ich1baN Cyrus74
@Cyrus74, long-term HODLers are the true winners. If you HEDLed BTC from 2009 to today you beat the fuck out of every trader in world history. This idea is true for anyone who HEDLed any fundamentally valuable stock as well over the long-run. If you HEDLed AMZN, MSFT, FB, GOOG, etc you again beat the fuck out of every trader in world history. Bitcoin is up 55 million percent - no one will ever come close to beating this kind of return.

The wisest thing is to have the genius to see what others don't see - such as having the vision in 2009 to see that this is a multi-trillion dollar asset class and buy and hold forever. The same can be said for any Warren Buffett / Charlie Munger fundamental value kind of person who can value a company and see the value that others don't see and buy and hold at significant discount to fair value.

There are many who have HEDLed .... HODLing through volatility is superior to timing tops and bottoms - a tool for true idiots who will eventually risk getting in demonstrably wrong one day. There are many traders who sold $20k top and were waiting to buy a $1k bottom in 2018/2019 - which never came and many of them to this day are still waiting and never bought back. The beauty of buying and HODLing is that you accrue and compound returns as a stock/reserve asset that only appreciates in price over the grand scale of time. Of course, my argument is one to be made if you have time - if you're 90 years old, obviously they are a different set of circumstances.
+8 Reply
@PedroRolles you are correct. The worst decision is buying the top, second worst decision is selling the bottom. You now hold and in time BTC will return to your entry position and beyond. If market dropped to 47k 1.) it will cost you a few hundred dollars. On $3k and it’s created a new low, signaling a overall bearish market and would be even higher risk of entry. This post is based on fear. Buying this correction at 20-30% is the law of trading. Do not sell. The odds are in your favor. Don’t look at the market for a few days and in the future after hitting ATH take profits, be patient, and BUY when the FEAR is high.
+3 Reply
@j_bones, cheers mate , tht's what i was talking about. Just do not scare the people. It is their hard earned money of everyday life. They have time and if in the SPOT market , no need to panic. This is all created by derivatives , so let them do their trades , once their mistakes come. but mine is smaller theirs will be huge.
Reply
Cyrus74 j_bones
@j_bones, patience and experience are everything. I always refused to buy high, it can go higher, but i prefer to buy when i see that sell spike that outnumbers all other sell spikes, need to feel the pain of retail their money thats burning. I always traded like this, and in the game for over a decade. This fella went all in with his 3k this high due to inexperience, and will give about 2000-2500$ of that money to institutions. By that time i will ALL IN :D
Reply
visoris j_bones
@j_bones, totally agree ! Have in mind: it will be an unrealized "loss" ; as long as you hold, no loss is in your accountancy! The question is: where is Bitcoin in 10 years. Look at what happens 10 years in the past: those who held are the big winners today the last ones won't worry about the price of 58, 60 or even 50 000 $
Reply
Risk Management is what distinguishes boy and man.
+9 Reply
Early? You never stop entertaining me.
+7 Reply
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