Bitcoin: Are You Still Overlooking These Bullish Signs?

15 Sep 2019

Bitcoin continues to consolidate but still offers helpful clues as to the near term direction of this market. The key to utilizing these clues is in the ability to understand how they fit into the broader market context. In this article, I will evaluate these clues in light of the current market conditions and further explain how this information guides our own swing trade decision process.

Context is an intangible element that most inexperienced traders and investors completely miss. The reason is usually being too caught up in small time frames, following others who are too caught up on small time frames or not being able to differentiate between market magnitudes. Think of context like a road map, but instead of using it to plan your road trip, you decide to ask for directions at local gas stations. I know it's senseless, but people behave exactly this way with their money (ESPECIALLY in this space).

Based on our evaluation, the technical situation for Bitcoin has NOT changed since July. After the 14K peak, the major support level of 9750 has been in play ever since. Even though price tested 9K, it did not stay there for long, which again emphasizes the 9750 REGION. For those who have been following our trades and analysis know that this area represents the .382 proportion of the entire bullish swing from 3150 to 14K. In other words, this general location (context) is a place where probability continues to favor longs.

Along with this broader context, there are further supportive developments. Like the higher low formation established off the of 9800 level. And the series of inside bars which provide a specific setup to evaluate buy signals from. None of these elements guarantee that a move to the 12K area will unfold, but they do further support the bullish premise presented by the location.

This is information that the market provides, and alone is NOT enough to justify a position. People who manually enter the market because "it feels right" or because "it's good enough" are REACTING, even to their own opinions. And reacting means you will most likely get caught in noise, force trades, over trade and generate more errors than you have to. Instead of reacting, we use this information as a guide, and from there identify specific entries, stops and targets for a swing trade (which is NOT to be confused with a day trade or position trade).

Once we have our setup criteria, all we do is place the orders and then let the MARKET decide the rest. If the market taps us into a trade, then we are in a trade. Like the one we shared on Thursday that got us long at 10,275. There have been many instances when we set up these orders and the market backs away WITHOUT touching the entry price. We have prevented countless errors and stop outs this way.

This same philosophy also determines our exit most of the time. We have targets in place (below the 12K resistance) and a stop loss order. Once we are in, it is up to the market to generate the outcome of the trade, win or lose. Again, reacting to noise often leads to second guessing the trade idea, especially in this indecisive environment. The less you interfere with the trade, the better usually.

There are occasional exceptions when a specific signal appears that negates the original trade premise (before reaching the stop loss order). For example, a price break below the 10,150 level will generate a new sell signal based on our criteria. There are times when we will opt to exit for a smaller loss, or at least share the information so that participants can decide what is better for their unique situation. Is this reacting? In a way, but it still requires the market to make the first move in the form of breaking a specific price. Another way to achieve this is by manually trailing the stop loss order.

Most people want to hear about what is going to clue them into the next big move, or what the secret is to being a profitable trader. If there was such a secret, it certainly would NOT be shared freely on a public forum such as this. Timing markets successfully is about letting the market do most of the work while you focus on defining, managing and minimizing risk. In other words, DEFENSE and capital preservation lead to consistent returns over time. The reason why most fail in this game is because they focus on the obvious.

I shared what our outlook is for Bitcoin, and how we are using this information to manage our current swing trade. Our objective from the start is to keep risk within a particular threshold, and minimize it IF the opportunity presents itself. The profit targets require no attention because these are totally out of our control and dependent on the choice of the market. The root of our process is passive. What is the root of your process? (a question for today's webinar). If you don't have an answer, then you still have a lot of work ahead of you.