BTCUSD Zoom Out, See Reality
Top of the morning traders. Let’s take Sunday to put things into perspective. Lots of ideas out there based on previous price action, fractals, patterns, etc. Let’s use one indicator – just a plain old stochastic oscillator. I’m not saying to take trade entries or exits on this. Just consider your position – are you heavy on cash or crypto? Are you trading with or against the major trend? Are you waking up and checking TV or CoinMarketCap to see what your net worth is looking like? I wish someone would’ve asked me these questions a couple years ago. It’s never too late to start doing what we know we should have done all along. All my old ideas, including wrong ones, are still posted for all to see the learning journey I've been on.
Here’s a naked weekly chart with a stochastic oscillator underneath. Not stoch/RSI, just stochastic. I changed the levels from 80/20 to 55/45 to create a transition zone in the middle. What I’ve studied the past year has talked me out of the overbought/oversold theory. Check out the 3 June 19 line – fast (blue) crossed downward over slow (orange) well above the ‘overbought’ level (80) and was followed by price rallying 50% to the top. How could price possibly go higher if the market was so severely overbought? I think a better use of this and the RSI is for momentum direction.
We’ll start from the left side since that’s the side we wish we could trade. Notice the stochastic crosses were followed by strong rallies in the direction the fast average crossed the slow average. Then after a downward cross of the transition zone we had multiple high profit short opportunities after rallies that never made it out of the bottom side of the oscillator.
Mid-chart – beginning of 2019. After the stochastic averages meandered around the bottom for several months we got our first cross. Dangerous area to go long until confirmation of crossing upward through the transition zone to signal momentum was picking up. I count two zones where the cycle was up where we could’ve dropped to a lower timeframe and found some great long entries. When the cycle turned downward in early June, savvy traders could have trailed a stop loss and maximized profits.
Now for the right side, where are we now? We can see that toward the end of August the stochastic lines were transitioning downward after a cross earlier that month. Should you have gone short on the weekly chart? Probably not. Maybe a good spot to hedge or trim your position if you’re HODLing. Even better would be to get on the 4h and daily charts to look for high probability short setups. I’ll admit that even back then I was still holding my breath for a rally higher since we’d seen a 30% correction earlier in the summer. I was wrong then and it won’t be the last time. For now, that giant gap between averages and their downward trajectory indicate there is more downside to come. It would take some massive green candles to change that outlook. Not impossible, but not probable either.
So....
-If you’re sitting 100% long crypto as a trader, the odds appear to be against you. If you want to be in position for a huge rally, cool. Just keep a reasonable stop in place in case you're wrong so you'll live to trade another day.
-If you’re HODLing, quit checking your balance until 2020-2021. Quit pitching crypto to everyone around you who isn't in it. Not saying it isn't good to own, but the more people whose first experience is a 10-20-30% loss, the more people we'll have calling it a Ponzi scheme. More importantly, don't share your goals or ideas with people who aren't going the same direction. They'll drain your energy that you need to get to where you're going.
-There will be rallies higher since markets don’t go straight up or straight down, but just come to terms with them being capped by momentum until we get an indication that the market wants to trade at higher levels
I am 100% cash in my crypto trading account since the low 10k area and in the hunt for another short entry after my BTCUSD trade last week. I fully recognize the market can explode higher whenever it wants to, which is why I have predetermined prices and indications where I'll get back on the train. Separate from that is my long term investment crypto held in cold storage that represents an inconsequential piece of my family’s net worth. I’m a fan of and believer in crypto, but usurping the world monetary system is a distant second place to ensuring my family doesn’t feel cold wind and rain drops on their backs.
Also consider competing investments out there. Most major currencies are circling the drain and pushing USD higher. Not bragging on my own currency, but it appears to be the cleanest turd in the toilet for now. Precious metals, especially silver, are very cheap relative to the money supply. Mining stocks are said to be at century lows relative to the S&P, money supply, or just about anything else against which you can measure them.
Dig deep, figure out what you want, and make a plan. If you aren’t substantially wealthier in five years, it’s your own fault!!!
Here’s a naked weekly chart with a stochastic oscillator underneath. Not stoch/RSI, just stochastic. I changed the levels from 80/20 to 55/45 to create a transition zone in the middle. What I’ve studied the past year has talked me out of the overbought/oversold theory. Check out the 3 June 19 line – fast (blue) crossed downward over slow (orange) well above the ‘overbought’ level (80) and was followed by price rallying 50% to the top. How could price possibly go higher if the market was so severely overbought? I think a better use of this and the RSI is for momentum direction.
We’ll start from the left side since that’s the side we wish we could trade. Notice the stochastic crosses were followed by strong rallies in the direction the fast average crossed the slow average. Then after a downward cross of the transition zone we had multiple high profit short opportunities after rallies that never made it out of the bottom side of the oscillator.
Mid-chart – beginning of 2019. After the stochastic averages meandered around the bottom for several months we got our first cross. Dangerous area to go long until confirmation of crossing upward through the transition zone to signal momentum was picking up. I count two zones where the cycle was up where we could’ve dropped to a lower timeframe and found some great long entries. When the cycle turned downward in early June, savvy traders could have trailed a stop loss and maximized profits.
Now for the right side, where are we now? We can see that toward the end of August the stochastic lines were transitioning downward after a cross earlier that month. Should you have gone short on the weekly chart? Probably not. Maybe a good spot to hedge or trim your position if you’re HODLing. Even better would be to get on the 4h and daily charts to look for high probability short setups. I’ll admit that even back then I was still holding my breath for a rally higher since we’d seen a 30% correction earlier in the summer. I was wrong then and it won’t be the last time. For now, that giant gap between averages and their downward trajectory indicate there is more downside to come. It would take some massive green candles to change that outlook. Not impossible, but not probable either.
So....
-If you’re sitting 100% long crypto as a trader, the odds appear to be against you. If you want to be in position for a huge rally, cool. Just keep a reasonable stop in place in case you're wrong so you'll live to trade another day.
-If you’re HODLing, quit checking your balance until 2020-2021. Quit pitching crypto to everyone around you who isn't in it. Not saying it isn't good to own, but the more people whose first experience is a 10-20-30% loss, the more people we'll have calling it a Ponzi scheme. More importantly, don't share your goals or ideas with people who aren't going the same direction. They'll drain your energy that you need to get to where you're going.
-There will be rallies higher since markets don’t go straight up or straight down, but just come to terms with them being capped by momentum until we get an indication that the market wants to trade at higher levels
I am 100% cash in my crypto trading account since the low 10k area and in the hunt for another short entry after my BTCUSD trade last week. I fully recognize the market can explode higher whenever it wants to, which is why I have predetermined prices and indications where I'll get back on the train. Separate from that is my long term investment crypto held in cold storage that represents an inconsequential piece of my family’s net worth. I’m a fan of and believer in crypto, but usurping the world monetary system is a distant second place to ensuring my family doesn’t feel cold wind and rain drops on their backs.
Also consider competing investments out there. Most major currencies are circling the drain and pushing USD higher. Not bragging on my own currency, but it appears to be the cleanest turd in the toilet for now. Precious metals, especially silver, are very cheap relative to the money supply. Mining stocks are said to be at century lows relative to the S&P, money supply, or just about anything else against which you can measure them.
Dig deep, figure out what you want, and make a plan. If you aren’t substantially wealthier in five years, it’s your own fault!!!
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