Bitcoin: 2 Lessons About 56K Break.

9월 8일

Bitcoin clears 56K support even while attempting to confirm a reversal in the 60k area a week earlier. With price back in the 53K to 50K area support, this is a time to watch for short term reversals as well as an investment opportunity. At the same time, there are two very important lessons to be learned from this recent support break situation.

The arrow on the chart points to the 60K area where a week earlier price attempted to show support. Notice the green candle followed by the break of the high of that candle. That is a form of confirmation SPECIFIC to this time frame. With this clear long setup in place, the outcome was a stop out (break below the low of the green candle). The lesson here is this: Just because the market aligns and confirms, it does not guarantee a positive outcome. All markets are highly random and anything can happen at any time. This is precisely why RISK is ALWAYS the priority, NOT setups, wins, oscillators, news, etc.

The whole point of waiting for a confirmation and setup (aka signal) is to be able to clearly define risk and reward and then decide if the trade is worth taking based on your personal risk tolerance and situation. Taking trades on hunches, stepping in front of levels based on feelings and/or opinions will get you into trouble in times like this while other times these ineffective decisions seem to work. If you accept that fact that markets are random most of the time, you will be better prepared to avoid decisions like these. While it is within reason for supports the hold in this environment, it is better to be prepared for BOTH sides of the situation.

In my previous week's article I illustrated a scenario that the market completely ignored. In other words my anticipated idea was wrong. The second lesson is this: this is a NOT a game of being RIGHT, it is about defining risk and measuring potential. This is why WAITING for confirmation can help dramatically improve performance because the purpose is to prove that the market is aligning or agreeing with your anticipated premise. When there is no confirmation you can easily minimize adverse trades because you can't justify an entry. In the case of Bitcoin, there was a confirmation that failed, (green candle) followed by the test of the 56K area which attempted to reverse but NEVER confirmed on this time frame. Being able to avoid taking the wrong side of these support/resistance breaks improves overall performance significantly over time. This type of mindset is key for day trade and swing strategies.

Bitcoin is now nearing the 53K to 50K support zone. This will present potential reversal opportunities on multiple time frames (Trade Scanner Pro helps with this). At the same time, price is now within a broader support area which is ideal for investment opportunities. The 50K area is a MAJOR support in terms of the bigger picture. At the same time, there are some positive fundamental potential catalysts on the horizon: lower interest rates AND an election outcome that supports a Bitcoin friendly environment. Either way the idea here is to have an "inventory" acquisition plan and to cost average larger amounts that are weighted in terms of price location. Meaning the lower price goes, the larger the amount you can justify buying. I am not going into all the details here, but this assumes Bitcoin is NOT going to 0 in the long run. Also if accumulating in this way it is safer NOT to use leverage. IF Bitcoin breaks 50K, (it CAN happen) the mid to low 40's is the next support area (a place to buy more).

For the following week I anticipate a bullish reversal back into the 60K area and will be looking for setups across multiple time frames (day trades/swing trades). How you use this information will depend on the type of trade you are interested in taking. Either way, you have to begin with a premise, formulate a scenario around that premise, define a signal, then MEASURE the RISK if the signal appears. If RISK is not your focus, you are no better than the drunken poker player who pros warmly welcome to the table.

Thank you for considering my analysis and perspective.