Bitcoin - Tooo Many Trades in Correlating Markets!
업데이트됨
So goes Bitcoin', so goes the market. Regardless of the coin, with very few exceptions, the market is trading as a sector and very much correlated to Bitcoin'. No different than how the NASDAQ is heavily correlated with Apple' Amazon' Microsoft' and Google'. Or how the semi conductor sector is pretty much correlated. Most of the charts look the same. So why in the heck would anyone have 4-6-10 different swing trades in crypto currencies at any one time? But before we get into that the chart!
It is still way to early to call a bottom or the potential for a bottom here, but I do like the "soft landing" in the charts with not only Bitcoin' but Ethereum' as well. There are a few projections and levels that overlap between 3k and 3250. So even if the bear market continues this is a likely area to see some resistance to the bearish trend. It is also an area we look for signs of a reversal. One sign we look for is the double bottom or double bottom alteration. We see some evidence that Bitcoin' is attempting to form one, but it again is still too early to call. We need to see buyers step in taking out 3300 consolidation and a swing up an through 3625. This increases the probability we have bottomed in the near term.
Contrarian Trade:
As I wrote about Saturday with Litecoin', there are a few items we look for a contrarian trade. I won't get into all of these here, but bottom line, sentiment is at a low, most are calling for further price depreciation, short interest is at a high, and the "pain trade" is being short here. However being a true contrarian requires having a stomach and the financial means to weather out further price depreciation, this is not for the pipsqueek trader. This is a perfect area for the contrarian trader, but keep in mind most do not have the emotional or capital requirements to be a true contrarian.
See it is easy to be a paper contrarian, but a true contrarian requires you to step into a declining market, hold on and cost average in even as the market goes against you, when everyone is shouting at you how wrong you are. The most important thing though is you have to be right eventually! This is why we say you "must be willing and able to hold to zero". Most do not get the third part! So you truly must believe in the long term viability of the space and in the long term we move higher. In the short term you have to be willing and able to voluntarily take the pain of being a contrarian.
Too Many Trades:
One mistake many new traders make is taking too many trades in one sector that is heavily correlated. In bull markets this may work out, as a rising tide raises all ships, but in a bear market, not so much. We currently are looking at some chip stocks, and for position trades, having two or three stocks in the hopper is not uncommon. However for swing trading, where you are looking for shorter time frame moves, this can cause capital erosion, and quickly.
We get asked why we do not take more trades with some of the smaller market cap coins right now. Quite simply, the market moves with Bitcoin, so whether it is XLM' XRP' ETH' LTC' or Dash' they are all correlating and trading with Bitcoin'. There are a few exceptions which we saw with waves but this is an exception not the general rule. The challenge with loading up on swing trades in correlating markets is being wrong can be devastating to your account. If you can not determine which chart is the best one, than maybe you are really not a chart analysts but a weather forecaster. I mean we are not always right regardless, but we can at least make a rational reason for choosing one instrument over another.
This is no different than Forex. Taking 5 trades vs the Dollar is no different than trading one dollar pair for the most part. Your either short or long the dollar, pick which pair has the most favorable chart, best risk/reward, and go with it. Five trades against the dollar, and being wrong makes those pips squeek out your capital, hence the term pipsqueek ;).
Recently I saw a trader get stopped out of 8 trades. All 8 of them were stopped out almost simultaneously, which is an account killer. I mean with 8 charts you couldn't pick one or maybe even two trades that had the highest potential for success? Was risk reward or the stop target spread even considered here? Often we see 3 or 4 setups and it comes down to looking at which one has the best risk to reward or which one has the tightest spread between the target and stop.
Take a coin like Omisego' for example vs trading Bitcoin'. Bitcoin is trading 3200, and a pullback to 3k would be a typical stop. 200 pts or around 7%. However with OMG' trading at 1.30 your stop would be likely around 1.00 which is a 23% loss. Sure if you are right, the gains are more, but it is not about being right it is about risk management. In addition this is not a bull market, at best we had a range bound market for a couple months. Not the time for higher risk trades. When I see swing trades with Pivx' Waves' and coins like XLM' that is at 10 cents it takes me back to those trying to get rich off daytrading penny stocks. Hey you believe in Waves' for the long term, nothing wrong with throwing a few bones in and seeing if you are right, but to swing trade Waves' you have to be reckless.
There is also the probability some hit their targets and some don't. How many times has a trade come within a few points and reverse, where another trade with a tighter spread hit the target. Having 4 or more of these trades simultaneously often results in profits from one trade being given back on another.
In simple words, if you take one swing trade, it either hits its target or gets stopped out if you allow the trade to run out. If you have two trades, both can hit the target, both can hit the stop, or one can hit the target, the other hit the stop. Simply, you can be right and end up with a neutral trade or in some cases even a small loss. Where markets move fast like in Forex or Cryptos it can be an account killer!
I know you will get out in time right? Just look at some of the moves made in the Pound' where 60-100 pips are hit in minutes just as a knee jerk reaction to news. Half the time it takes me 10 minutes just to log into my Forex account let alone a crypto exchange.
In the end more trades is not better, and introduces another variable to deal with including trying to close out numerous trades in the event the market starts going against you. In addition because of slippage you should choose your instruments wisely. Going long the Dollar against the Kiwi, is more prone to slippage than going long the dollar vs the Euro. Both are essentially long the dollar. Same with cryptos, going long Litecoin' is pretty much the same as going long XMR', BCH', or DASH' and even Bitcoin for that matter. Why go long all five at once?
To be TROLL clear this concerns swing or day trades, not position trades or investing. I hope I do not have to clarify this five times.
If you are going to Troll with your charts, or simply like the article, give me thumbs up!
It is still way to early to call a bottom or the potential for a bottom here, but I do like the "soft landing" in the charts with not only Bitcoin' but Ethereum' as well. There are a few projections and levels that overlap between 3k and 3250. So even if the bear market continues this is a likely area to see some resistance to the bearish trend. It is also an area we look for signs of a reversal. One sign we look for is the double bottom or double bottom alteration. We see some evidence that Bitcoin' is attempting to form one, but it again is still too early to call. We need to see buyers step in taking out 3300 consolidation and a swing up an through 3625. This increases the probability we have bottomed in the near term.
Contrarian Trade:
As I wrote about Saturday with Litecoin', there are a few items we look for a contrarian trade. I won't get into all of these here, but bottom line, sentiment is at a low, most are calling for further price depreciation, short interest is at a high, and the "pain trade" is being short here. However being a true contrarian requires having a stomach and the financial means to weather out further price depreciation, this is not for the pipsqueek trader. This is a perfect area for the contrarian trader, but keep in mind most do not have the emotional or capital requirements to be a true contrarian.
See it is easy to be a paper contrarian, but a true contrarian requires you to step into a declining market, hold on and cost average in even as the market goes against you, when everyone is shouting at you how wrong you are. The most important thing though is you have to be right eventually! This is why we say you "must be willing and able to hold to zero". Most do not get the third part! So you truly must believe in the long term viability of the space and in the long term we move higher. In the short term you have to be willing and able to voluntarily take the pain of being a contrarian.
Too Many Trades:
One mistake many new traders make is taking too many trades in one sector that is heavily correlated. In bull markets this may work out, as a rising tide raises all ships, but in a bear market, not so much. We currently are looking at some chip stocks, and for position trades, having two or three stocks in the hopper is not uncommon. However for swing trading, where you are looking for shorter time frame moves, this can cause capital erosion, and quickly.
We get asked why we do not take more trades with some of the smaller market cap coins right now. Quite simply, the market moves with Bitcoin, so whether it is XLM' XRP' ETH' LTC' or Dash' they are all correlating and trading with Bitcoin'. There are a few exceptions which we saw with waves but this is an exception not the general rule. The challenge with loading up on swing trades in correlating markets is being wrong can be devastating to your account. If you can not determine which chart is the best one, than maybe you are really not a chart analysts but a weather forecaster. I mean we are not always right regardless, but we can at least make a rational reason for choosing one instrument over another.
This is no different than Forex. Taking 5 trades vs the Dollar is no different than trading one dollar pair for the most part. Your either short or long the dollar, pick which pair has the most favorable chart, best risk/reward, and go with it. Five trades against the dollar, and being wrong makes those pips squeek out your capital, hence the term pipsqueek ;).
Recently I saw a trader get stopped out of 8 trades. All 8 of them were stopped out almost simultaneously, which is an account killer. I mean with 8 charts you couldn't pick one or maybe even two trades that had the highest potential for success? Was risk reward or the stop target spread even considered here? Often we see 3 or 4 setups and it comes down to looking at which one has the best risk to reward or which one has the tightest spread between the target and stop.
Take a coin like Omisego' for example vs trading Bitcoin'. Bitcoin is trading 3200, and a pullback to 3k would be a typical stop. 200 pts or around 7%. However with OMG' trading at 1.30 your stop would be likely around 1.00 which is a 23% loss. Sure if you are right, the gains are more, but it is not about being right it is about risk management. In addition this is not a bull market, at best we had a range bound market for a couple months. Not the time for higher risk trades. When I see swing trades with Pivx' Waves' and coins like XLM' that is at 10 cents it takes me back to those trying to get rich off daytrading penny stocks. Hey you believe in Waves' for the long term, nothing wrong with throwing a few bones in and seeing if you are right, but to swing trade Waves' you have to be reckless.
There is also the probability some hit their targets and some don't. How many times has a trade come within a few points and reverse, where another trade with a tighter spread hit the target. Having 4 or more of these trades simultaneously often results in profits from one trade being given back on another.
In simple words, if you take one swing trade, it either hits its target or gets stopped out if you allow the trade to run out. If you have two trades, both can hit the target, both can hit the stop, or one can hit the target, the other hit the stop. Simply, you can be right and end up with a neutral trade or in some cases even a small loss. Where markets move fast like in Forex or Cryptos it can be an account killer!
I know you will get out in time right? Just look at some of the moves made in the Pound' where 60-100 pips are hit in minutes just as a knee jerk reaction to news. Half the time it takes me 10 minutes just to log into my Forex account let alone a crypto exchange.
In the end more trades is not better, and introduces another variable to deal with including trying to close out numerous trades in the event the market starts going against you. In addition because of slippage you should choose your instruments wisely. Going long the Dollar against the Kiwi, is more prone to slippage than going long the dollar vs the Euro. Both are essentially long the dollar. Same with cryptos, going long Litecoin' is pretty much the same as going long XMR', BCH', or DASH' and even Bitcoin for that matter. Why go long all five at once?
To be TROLL clear this concerns swing or day trades, not position trades or investing. I hope I do not have to clarify this five times.
If you are going to Troll with your charts, or simply like the article, give me thumbs up!
노트
Nice swing to the upside. We are looking for a shallow retrace and consolidation around the 3470 area and a continuation through the 3610 support/resistance level towards 3750. 
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