BTC - Quality VS Quantity In Trading
Updated
Been a while since I posted, but nothing really has changed in my opinion as to this is simply part of a broader consolidation for the next leg higher. After broad bullish moves like the one we had from the low of 3k to 60k markets take a breather, and during this period trading becomes a little more difficult.
Sure everyone is a genius in a bull market, but corrections require more patience, more sitting to allow the range to unfold before taking a lot of trades. So though we are attempting to bottom here I am not so sure the pain is over, but what good is my opinion if there is no perspective in how to invest or trade? Just another fortune teller that's all.
First lets start with some time frame to put it into perspective:
Broad consolidations can take many months to several years to play out. During which the market is not trending, so trading is slower, often looking for the lower end of a forming range and pullbacks bought for longer term positions.
Currently we are 34 weeks from the 64k peak last April, and though this is a corrective type structure, the strength of the bounce is rather strong, so IMO we are looking for the next leg higher, potentially into the mid 70k area for a rally.
Investing and or Position Trades:
Under 50k I think it is an area to step your toes in the water with a small position or so, but because of the type of structure I am holding some cash to buy at possibly lower levels. Under 40k want to step up my purchases, any retest of 30k is a good level to back up the truck.
Swing Trading:
For swing trading lets zoom in on the daily candle structure.
Ideally the low 40's is where I want to be looking for longs specifically 41-43k area. The current consolidation is often a continuation pattern but the 47k level is decent support as well, so potentially a long trade out of here is warranted, but very risky. Key level to clear is 51k, so need to see a close above and that candle taken out.
Reasonable for a swing back to 58k here so in order to take a trade the Reward to Risk must make sense. If it does not then it is rational to pass on the trade. I want to see a 2:1 Reward Risk at minimum.
Currently 52k would be a long with a stop at 46k (low of the range) and an overall target of 58k. Well that trade does not make sense period so going to pass here. Risking 6k to make 6k when the interim structure is bearish, series of lower highs and lows, does not equal hoping it rallies to 58k from here. Maybe it does, but odds favor a continuation lower so need better than a 1:1 R:R to take a trade IMO, or you are setting yourself up for capital erosion.
It is not about trade quantity it is about trade quality and this is simply not a quality trading area as tempting as it may be. Now we push 55-58k and then get a setup off a higher low, I would be more interested, or as I mentioned prior we get a pullback into the low 40's with a setup, I am more interested, so until then simply need to be patient.
In closing, a rally to 58k-60k is reasonable here, but just as reasonable is a retest of the low 40's. Coin flip with slight odds in favor of a retest of the low. Regardless I am positioning for a move into the 70's and potentially into the 100k area over the next 12-18 months and though that does not sound as sexy as those calling for 100k in the next two, it is a reasonable expectation for the long term.
As for trading, you can choose quality or quantity. During bull runs quantity will work, but during corrections you really have to be more choosey and look for quality and right now I just do not see a quality trade here.
Sure everyone is a genius in a bull market, but corrections require more patience, more sitting to allow the range to unfold before taking a lot of trades. So though we are attempting to bottom here I am not so sure the pain is over, but what good is my opinion if there is no perspective in how to invest or trade? Just another fortune teller that's all.
First lets start with some time frame to put it into perspective:
Broad consolidations can take many months to several years to play out. During which the market is not trending, so trading is slower, often looking for the lower end of a forming range and pullbacks bought for longer term positions.
Currently we are 34 weeks from the 64k peak last April, and though this is a corrective type structure, the strength of the bounce is rather strong, so IMO we are looking for the next leg higher, potentially into the mid 70k area for a rally.
Investing and or Position Trades:
Under 50k I think it is an area to step your toes in the water with a small position or so, but because of the type of structure I am holding some cash to buy at possibly lower levels. Under 40k want to step up my purchases, any retest of 30k is a good level to back up the truck.
Swing Trading:
For swing trading lets zoom in on the daily candle structure.
Ideally the low 40's is where I want to be looking for longs specifically 41-43k area. The current consolidation is often a continuation pattern but the 47k level is decent support as well, so potentially a long trade out of here is warranted, but very risky. Key level to clear is 51k, so need to see a close above and that candle taken out.
Reasonable for a swing back to 58k here so in order to take a trade the Reward to Risk must make sense. If it does not then it is rational to pass on the trade. I want to see a 2:1 Reward Risk at minimum.
Currently 52k would be a long with a stop at 46k (low of the range) and an overall target of 58k. Well that trade does not make sense period so going to pass here. Risking 6k to make 6k when the interim structure is bearish, series of lower highs and lows, does not equal hoping it rallies to 58k from here. Maybe it does, but odds favor a continuation lower so need better than a 1:1 R:R to take a trade IMO, or you are setting yourself up for capital erosion.
It is not about trade quantity it is about trade quality and this is simply not a quality trading area as tempting as it may be. Now we push 55-58k and then get a setup off a higher low, I would be more interested, or as I mentioned prior we get a pullback into the low 40's with a setup, I am more interested, so until then simply need to be patient.
In closing, a rally to 58k-60k is reasonable here, but just as reasonable is a retest of the low 40's. Coin flip with slight odds in favor of a retest of the low. Regardless I am positioning for a move into the 70's and potentially into the 100k area over the next 12-18 months and though that does not sound as sexy as those calling for 100k in the next two, it is a reasonable expectation for the long term.
As for trading, you can choose quality or quantity. During bull runs quantity will work, but during corrections you really have to be more choosey and look for quality and right now I just do not see a quality trade here.
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