I have been building a position in BTC in this environment, positioning for the broader reversal process which has not materialized yet. The reason why I do not get shaken out is because I was careful enough to keep my sizing manageable. This is why I kept emphasizing avoiding buying on margin.
Overreaction is commonplace for all of these markets, and depending on the time frame you chose to participate, you have to stick to the plan. I chose to buy into to the bigger picture which looks to capitalize on broad moves, but you run the risk of situations like this.
Right now, in terms of formations, this is the only market showing any signs of a reversal formation within a major . I want to highlight it because this is the look that you want to see in the other markets before a broad reversal in momentum is more likely.
In this case, you have the low established by the , followed by the sharp candle and now the retest of the low all happening within the 186 to 138 (.618 area of broad structure) . On top of that, the low rejected the 118 reversal zone boundary which is what happens more often than not in these extreme price areas.
IF this market is going to prove that momentum is changing back to and the next leg higher is in play, it needs to establish a higher low formation, like it is trying to do at the moment or retest the 118 low and form a (failed low). The more conservative play is to wait for the confirmation of price pushing back above the 186 upper boundary of the .
The mistake you want to avoid is to become on lows. Keep in mind even if there is range bound price action above the 100 level, this entire formation is still one broad higher low compared to where price was months ago. It is very easy to be consumed by hype and exaggeration.
In summary, there are plenty of good prices to buy across all of these markets. The key is not to buy too much or if you want to be more conservative, wait for confirmation of momentum change which means you will give up the better prices for a more favorable environment. Since my broader outlook has not changed, I look to capitalize on both situations. I made some aggressive purchases of BTC , and before I continue to buy any other coin, I will wait for the momentum confirmations. This way, if the market continues to correct, my loss is controlled and manageable. Choosing to be conservative or aggressive is a function of your personality, risk tolerance and experience. I tell people, these markets are not like stocks, they are risky and if you cannot embrace the risk, then you are in the wrong markets.
Questions and comments welcome.
* Manage your risk by position size
* Look at the big picture (months)
* Take this situation as opportunity (aggressive) or wait until the rain is gone and sun is up again and accept that you may have to pay a higher price.
+ Don't invest what you can't lose.
The faster you learn from the few people who give consistently sound advice like Marc the less money you'll need to part with.