BTCUSD: The Break Out? Or Just More Noise?

Bitcoin update: Recent price action has everyone excited, confused and most likely losing money. First the confusion set off from the recent outside bar, followed by partial continuation, but the lack of conviction still lingers. This is typical of a consolidating environment. Trying to catch the "big move" before the market provides evidence is a losing proposition.

At S.C., we don't just interpret lines on a chart and call ourselves market technicians. We look beyond the lines and evaluate factors that dictate typical market conditions. By doing this, we have a much better idea of when our strategies are most likely to perform.

Market environments play an important role when it comes to the success or failure of a strategy. That is why during strong bullish trends, all the current amateurs appear to be experts. Anyone can make money in a forgiving environment, but most cannot hold on to it when the market returns to reality. The varying level of difficulty that we have seen since February is a good example of a typical market.

Anyone can learn to recognize basic setups, formations and signals. The common mistake is not evaluating these setups within the context of the environment that they appear in. We recognize the degree of noise in these markets and have the ability to steer clear.

While the herd continues to chase the "breakout" that never seems to follow through, they exhaust their capital and confidence. When the market eventually makes a decisive move, we will be prepared to capitalize on the opportunities that follow. Meanwhile we exhaust nothing by waiting.

At S.C., we remain long term bullish but recognize the short term conflict. We have defined particular scenarios that we are waiting for in order to take action and share these ideas with our community. For starters, Bitcoin needs to close above a recent resistance before we even think about adding risk to our portfolio.

The more bearish scenario involves a test of the 6K psychological support or lower. Unlike many of the other "experts", we don't react to movements, we wait for the market to fit our criteria. In other words we let the market show its hand, not force its hand.

In summary, knowing your environment is just as important as checking the weather each day. Why do we bother? So we can make a more informed decision as to what we should wear. Do we need a jacket? An umbrella? Or can we just wear a tee shirt and shorts?

Why would you not attempt to protect your capital from the market environment the same way? The answers will not come from oscillators or small time frame charts. They come from being in tune with market sentiment as it expresses itself in varying degrees through price action.

Professional landscapers are experts at mowing lawns. If they are so good, why can't they get the job done while it's raining? The environment is not conducive, no matter how skilled they are. So what do they do? They wait until weather is more favorable. Trade the same way.