Reversed Polarity

Markets Edge Higher

The Crypto market has had a slow rise to the upside, which is good, Isn’t it? Well, when it comes to markets unless you are scalping, understanding where the destination point is can help a lot. Many say that you cannot call bottoms and tops. I disagree, you may not predict the exact figure, but it is possible to identify a “range” or zone that technicals and other indicators are pointing towards. This is how I was able to predict a bottom of $18K some months ago when BTC was still above $30K. Sure, it was not “perfect”, as the price dropped to approximately $17.600, but you get the idea. This is where I moved more into stablecoins. Scrolling back in the charts will reveal that there was a nice little bounce at approximately $27K. If we go back in time, we would be able to observe many buying that pump. The fact that $27K is significantly lower than $31.500 is the only motivation behind such a move. What followed was a significant collapse that found a local bottom at $17.600. This is why I chose not to be distracted by the “noise” because I had already observed a very probable destination.

Playing Both Sides

This is where I chose to rather short the market. This unfortunately always implies leverage. However, I never exceed 3X when trading Crypto. Gold, on the other hand, is extremely stable and is unlikely to experience significant moves in either direction. I usually trade 10X when trading gold futures. If you don’t play both sides of the market you are likely to find yourself in a constant state of being bullish. Because you have no other type of execution but to buy, you may find yourself becoming “disconnected”. The same thing will happen to leverage traders that only trade “short”. I must be honest, I would really love to start getting bullish but the charts, as well as the macro environment, are still signaling that it would be a premature move.

An Optimistic Motivator

Retail investors are generally buyers, buying the dip in order to “make bank” sooner rather than later. This is why bear markets have multiple pumps that ultimately go nowhere. There will always be a positive “number” or news announcement being released. Retail investors often become overly optimistic and initiate a rally that gets utilized by the “smart money”. One also needs to note that there are retail traders that trade exactly the same as “smart money”. They have learned the ropes over many years and have also endured some very difficult lessons. What we need to see now is an actual trend reversal. What happens on the hourly and four hourly chart doesn’t mean much in terms of the actual market trend. Once the longer-term trend has shifted and experienced a confirmation I will be the first one crying “BULL”.

What Do Experienced Traders Do?

Effective trading relies on one very important aspect and that is the dynamic of probability. This in turn is realized via confluence, which is established through the accumulation of various indicators, including TA. When you are working with smaller amounts of capital you can take bigger risks. However, those working with extremely large amounts of capital have to secure a “solid case” before initiating a move. Another important aspect of trading is volume. This is imperative in sustaining significant percentage moves. If you consider this “rule of trading” then it makes sense that “smart money” moves the market definitively, while “dumb money” triggers momentary moves that ultimately fail. Once you understand this and begin looking at the charts, the picture becomes a lot clearer.

New Year’s Resolution

I don’t usually partake in this type of practice. However, I chose to make one this year and that was to ignore “unnecessary noise”. This includes the noise on Crypto Twitter and the markets as a whole. I simply focus on the core fundamentals, stats, and analysis. Let me remind you of a statement made by JP Morgan some months ago. The investment bank issued a statement that BTC would soon reach $30K. The market was only able to realize $25K, which shows how bearish the sentiment has truly been. How do I classify noise? Noise is “information” that has no point of authoritative origin. This is how “retail” is fooled. Because a well-known company has a “good reputation” in terms of understanding market dynamics, its opinion is viewed as “gospel”. An authoritative source is composed of fundamentals, stats, and analysis, as I just mentioned. How is it that such large entities are not held accountable for this type of misinformation?

Even if it was a statement that the company truly believed, it only serves to promote the idea of doing your own research. They got it wrong! We can only speculate as to whether the intentions were “true” or not. However, doing your own research could have saved you from making a bad move.

Consider This

Many argue that buying at $25K is not the end of the world if the price goes on to correct to $21K. That might be true for you but what about those trading with leverage? A lot of people are naturally opposed to leverage but it is a market tool that has been around for ages and is very effective if utilized correctly. However, “bad information” can plot out a path that doesn’t exist. Everyone has their own approach, plan, and goal. What might not be an issue for you could be the end of the road for someone else. This is why I promote the idea of conducting your own research. Anyway, that’s about enough for this edition. See you in the next one! Hoping that you will outsmart and conquer the market as we journey on!

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