Bitcoin: 3 Levels Of Risk To Consider Before Going Long?

6 de dez. de 2020

Bitcoin is consolidating within the 18,500 to 20K resistance area. It has had a number of opportunities to take out supports and has proven to be resilient. While we are still very cautious in this price location, the newly unfolding structure justifies an adjustment in terms of outlook.

Risk Is The Focus NOT Reward.

Anyone that considers themselves a "professional" or authority in this game should understand and exemplify one simple concept: Risk first. Rewards should be considered random and a bi product of good risk management. All of our strategies evaluate probabilities and RISK first. This is why we have forfeited the 5 swing trade long signals in November. 3 would have stopped out which would have resulted in a break even or slightly red outcome. Fear of missing out is something that our rules minimize. I would rather miss a move and lose nothing than get caught in countless fake outs that erode capital AND confidence in the long run. We trade RULES. It's not perfect, but it promotes consistency over time.

So what are the 3 levels of risk to consider now?

18,300 support: This is where swing trade risk is most appropriate and I would be willing to accept this risk upon a break out of the 19,600 range resistance. While the general location is still a vulnerable area, recent structure and price projection offers a setup with clear reward/risk. (Max Target for next leg higher is 24K AREA).

16,300 support: This is the broader area where it would make sense to consider inventory purchases upon any appearance of bullish reversal structures. Keep in mind you if buy Bitcoin in the 19Ks, and plan to hold it for months or years, one risk you face is the potential that it can take out 16K. Can you afford to take that kind of pain from current levels? If NOT, then it would be a better idea to WAIT for a broader retrace. Swing trades and positions trades (inventory) are NOT the same strategy in terms of reward/risk.

13,825 support: This is the trend support. If this area is taken out, the outlook (as per the rules of our strategy) will change from bullish to broad consolidation. Again this would be a VERY attractive area for new inventory, but the chances of reaching this level soon are low.

How do we use this information?

Current levels justify a swing trade (upon a break of 19,600). If it stops out in the low 18's then that is the risk we accepted. Reward targets would be placed between the mid 20Ks and 24Ks. Why should Bitcoin go higher now? The bullish trend is intact and supports are not being taken out. Higher lows often lead to higher highs.

IF 16,300 is reached, we look to buy more inventory but only in SMALL quantities.

IF 13,825 is reached, we look to buy more inventory AGAIN, but small.

IF 13K area is compromised, WE STOP BUYING and WAIT FOR STABILITY before doing anything else.

We turned our portfolio that contained a number of alt coins and Bitcoin (which was RED in 2018) to a portfolio that is now up 50%. This process required careful adjustments throughout the Bitcoin bear period, and rotating out of garbage and into quality. We took the losses in the alt coins and moved the capital into Bitcoin. The best part is NOT ONCE have we considered a short since shorting is NOT part of our plan. Our track record proves following rules and enforcing PATIENCE pays.

Risk fist. We don't follow news, opinions, oscillators or nonsense.

I hope you find my analysis helpful. Thank you for taking the time to read it.