Bitcoin – mastering the turning point
A mistake commonly made is trading price levels versus price behavior. Two problems arise if you insist on getting in at a certain price range. First, you will always get in at the worst price level of the supply and demand zone, since “fear of missing out” will make you catch the earliest entry point. Secondly, you are from a time perspective always the very first in the trade. Bitcoin – mastering the turning point.
What we mean with the very first is that only for the reversal pattern of a “V” formation one wants to be the very first one to enter into a trade. This is the rarest occurrence of a turning point and for any other tuning points i.e.: double/triple bottoms, ranges, diamonds, rounding bottoms, divergences to name a few you’re always too early and as such not just a sitting duck for possible stops to be triggered but have additional risk due to capital exposed over time.
BTC-USDT, Weekly Chart, No need to be first:
BTC-USDT, daily chart as of December 15th, 2020
In the daily chart, we can see our principle in action. Shorting the market on a triple top into the distribution resistance zone (red box) would make you a sitting duck. A closer look shows prices already trading above POC (point of control) of a volume analysis, indicating strength. This is confirmed by a strong trend overall (yellow trend line) and strong price behavior (daily price closes are indicating strength). You do not want to be always first just based on a price level. It requires more in-depth analysis and stacking of odds to enter or exit positions.
BTC-USDT, Weekly Chart, Overbought:
BTC-USDT, weekly chart as of December 15th, 2020
A view from a linear regression perspective (directional lines red, turquoise, green) shows how extended prices are in the weekly time frame. It puts Bitcoin into a sell zone. Bitcoin is trading in stretched standard deviation levels and could easily snap back to its mean (thin red line). Taking partial profits if exposed from lower levels provides insurance for a possible retracement. Our quad exit strategy provides a guideline on taking profits like this.
Nevertheless, recent weeks still point towards price behavior that indicates strength like last week’s candlestick hammer formation.
BTC-USDT, Monthly Chart, And the winner is:
BTC-USDT, monthly chart as of December 15th, 2020
As always the bigger picture is what matters most. Looking back, Bitcoin has accomplished what most doubted. Its biggest opponents have joined the club and invested now themselves. This left us trading at 2017 highs and congesting there. Clearly representing strength. The monthly chart above shows that with the past “W” formation alone a presence of probabilities is set that makes even the worst scenario (a retracement to 14k) attractive (white dotted line). The highest likelihood is a breakout through all-time highs. This, in turn, allows for a continuation move to higher price levels (turquoise dotted line).
Bitcoin – mastering the turning point
From the three most dominant aspects of trading (price, volume, and time), time seems to be the most overlooked in the trading approach. Traders are in principle too early in and out of trades. It is essential to at least add an edge like a volume analysis or otherwise high probability strategy if one trades form a price level perspective. Especially to not be caught by professionals who are aware of amateurs trading a support resistance approach only. At Midas Touch, we employ a complex stacking of odds to cut through a turning point in an effective way extracting low-risk entry points at the appropriate time.
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