Bitcoin - The next probable move and a way to profit
已更新
After breaking the market structure and the massive support at 6000$, Bitcoin's price has been dropping massively. And yesterday's drop didn't help it either. So what are the next PROBABLE moves? Let's see the complex puzzle of Bitcoin -2.52% from different angles and get right into it.
Setting up our short play.
STEP 1: Understanding the PSYCHOLOGY
Yesterday night, we broke yet another important support line - the 4000$ line. Why is that important? It is a high probability that lot of people had buy orders set up around 4000$ area and they are now holding their trades at a loss.
WHAT THAT MEANS
It means that the buyers are feeling the pain and they are hoping to break even and not sell at a loss, thus the 4000$ area will be of strong resistance, which also gives us the chance to use it for our short play.
STEP 2: The underlying support levels
As we can see from the chart, we have three support levels from 2017 that we should play a close attention to. These are:
~3500$
~3000$
~1400$
One other number to keep in mind is the 2000$ area, because in trading psychology , big round numbers act as a psychological support/resistance levels. These numbers are important as breaking them will give Bitcoin -2.52% even harder time to get upward traction.
For us, these numbers help us set up the price targets.
STEP 3: Indicators
Weekly indicators
Exponential moving averages are still dropping with RSI , as expected, MACD is most likely to close strong below the "0" line and ADX and DI show increased downwards movement. Elder's Force Index is also taking a sharp downturn.
These indicators give us a hint and give us high probability of the downwards trend continuing. This gives us the chance to use the smaller pullbacks on daily charts to enter short positions.
Daily indicators
The daily indicators hint (oversold on Stoch for a long time*, higher lows on Elder's Force index ), and I personally think, that we might have a slight pullback in the near-term; the drops need to be consolidated before dropping further.
*In a strong bull/bear market, the market can be overbought/oversold for longer periods of time and still continue its trend, so while volatility indicators provide some help in analysing the underlying market conditions, they are not always accurate.
1+1 = Short
Even though I believe that Bitcoin -2.52% still has room for downwards movement, I am more cautious about the trade and like always, try to limit the risks and setting up the highest probability trades. By adding up the previous information, my bet is a small rebound on Bitcoin -2.52% to around 3900$-4000$ area, which I will use to enter my short postion (or if any of the support lines mentioned before is broken and becomes a strong resistance, I will use these). The stop loss is around 4080$ and the first target is 3500$. I recommend not taking profit immediately, but trailing the stop loss after reaching the 3500$ area so even when the trend reverses, we will get our profits. This setup also gives us the risk/reward ratio of at least 1:2 to 1:3 and the limited risk provides the opportunity of playing with around 10x leverage without getting massively hurt. Also to keep in mind is the trailing stop-loss, which provides even further potential to increase the risk/reward ratio of the trade to even 1:5 or more.
In short; short at around 3900-4000$, stop loss at 4080$, profit targets are either a bit above 3500$ or 3000$, but more preferrable is to use trailing stop-loss to maximize the potential profit while keeping the risk minimum.
Safe trading!
Setting up our short play.
STEP 1: Understanding the PSYCHOLOGY
Yesterday night, we broke yet another important support line - the 4000$ line. Why is that important? It is a high probability that lot of people had buy orders set up around 4000$ area and they are now holding their trades at a loss.
WHAT THAT MEANS
It means that the buyers are feeling the pain and they are hoping to break even and not sell at a loss, thus the 4000$ area will be of strong resistance, which also gives us the chance to use it for our short play.
STEP 2: The underlying support levels
As we can see from the chart, we have three support levels from 2017 that we should play a close attention to. These are:
~3500$
~3000$
~1400$
One other number to keep in mind is the 2000$ area, because in trading psychology , big round numbers act as a psychological support/resistance levels. These numbers are important as breaking them will give Bitcoin -2.52% even harder time to get upward traction.
For us, these numbers help us set up the price targets.
STEP 3: Indicators
Weekly indicators
Exponential moving averages are still dropping with RSI , as expected, MACD is most likely to close strong below the "0" line and ADX and DI show increased downwards movement. Elder's Force Index is also taking a sharp downturn.
These indicators give us a hint and give us high probability of the downwards trend continuing. This gives us the chance to use the smaller pullbacks on daily charts to enter short positions.
Daily indicators
The daily indicators hint (oversold on Stoch for a long time*, higher lows on Elder's Force index ), and I personally think, that we might have a slight pullback in the near-term; the drops need to be consolidated before dropping further.
*In a strong bull/bear market, the market can be overbought/oversold for longer periods of time and still continue its trend, so while volatility indicators provide some help in analysing the underlying market conditions, they are not always accurate.
1+1 = Short
Even though I believe that Bitcoin -2.52% still has room for downwards movement, I am more cautious about the trade and like always, try to limit the risks and setting up the highest probability trades. By adding up the previous information, my bet is a small rebound on Bitcoin -2.52% to around 3900$-4000$ area, which I will use to enter my short postion (or if any of the support lines mentioned before is broken and becomes a strong resistance, I will use these). The stop loss is around 4080$ and the first target is 3500$. I recommend not taking profit immediately, but trailing the stop loss after reaching the 3500$ area so even when the trend reverses, we will get our profits. This setup also gives us the risk/reward ratio of at least 1:2 to 1:3 and the limited risk provides the opportunity of playing with around 10x leverage without getting massively hurt. Also to keep in mind is the trailing stop-loss, which provides even further potential to increase the risk/reward ratio of the trade to even 1:5 or more.
In short; short at around 3900-4000$, stop loss at 4080$, profit targets are either a bit above 3500$ or 3000$, but more preferrable is to use trailing stop-loss to maximize the potential profit while keeping the risk minimum.
Safe trading!
註釋
The stop loss was a bit off, but the 3500$ target was reached. Everyone who followed, I hope you enjoyed your profits!
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