Bitcoin Can Go Either Way: Don't Play?

28 mars 2021

If Bitcoin can't clear the 57K resistance, another test of 50K or lower is likely to follow in the coming week. The risk based on the time frame that we follow for our LONG only swing trade strategy is not worthwhile. The buying attempt off the 50K support (which I wrote about previously) is in line with the broader trend, BUT the current price action is NOT in a high probability location.

For our strategy, it is about trading RULES, and nothing else. The rules at the foundation of our strategy help to identify favorable probabilities and this is all the matters, particularly for swing trades. Price is now gyrating mid range between 50 and 57K which means it can go either way equally in terms of probability. In other words, the short term outcome from this spot is highly random. For that I can go to a casino.

What about the smaller time frames? Don't they matter? They are more appropriate for day trades which require very tight risk management along with very specific profit expectations. Day trades and swing trades are very different strategies which should not be confused or mixed together because of the enormous variance of risk. So for purposes of our strategy, small time frames are ignored because their weight is not relevant to the proportion of momentum that our swing trade strategy aims to capture.

So what does all this translate to?

Something that a lot of people don't want to hear: sit on your hands. Over and over I see videos and articles about "Bitcoin Price Prediction" etc. And they are full of often exaggerated and irrelevant fundamental opinions. While our long term view is still bullish, that does not mean we don't have any regard for risk.

Twenty years ago NO ONE was writing articles about how Amazon would be a 3K stock in the future. So much for "predictions". Things change, and being successful as an investor or trader requires the ability to ADJUST, not "predict", as new information shapes the environment.

Our game plan is simple: Wait for a high probability location that is in line with the broader trend. IF Bitcoin can retrace to 50K or into the high 40's, and produce a setup, we will consider another long. IF Bitcoin breaks higher from here (anything can happen), it will have to clear the 61K decisively in order to have enough momentum to push to our next inflection point in the 66K area.

You don't always have to be in the market and you don't have to play both sides to generate a positive return over time.

Thank you for considering my analysis and perspective, I hope you find it helpful.