Hi, I've been following you for a while now. I'm a huge fan of your calls. I started trading a year ago, when I started college. I bought in when Bitcoin was at ~$1000 (yeah). Basically lost most of my money .....
I'm impressed by how accurate your calls are. Though I don't follow your exit, I usually follow your entry.
I expect volume and open interest to pick up in the coming weeks. I am slightly more bullish than bearish because we have not retraced 100% from the previous rally (yet). BTC shorts and longs are increasing. I will wait for a big volume move before making a trade decision.
Lets talk about trading and shorting:
I will first go over basic concept of shorting (feel free to skip ahead if you already know), its risk involved, and why it is different from a traditional long position. Then, I will talk about short strategies and how hedge funds and traders use it.
Short concept explained:
Going short is essentially a bet that is profitable when price goes down. In order to short a stock or bitcoin, you must borrow the underlying asset from someone else. Instead of buy low sell high like a long position, you sell high buy low. So you sell the asset after you borrow. If the asset price drops, you profit because you can now buy it back for cheaper than you sold it for.
The risk for shorting compared to long:
- Markets price is negatively skewed; the fall is faster than the rise. The decline is fast and violent so timing the market for entry and exit becomes very important since timing window is narrow.
- Shorting has potentially unlimited loss. In reality, it’s likely your margin call requirement. That is why Bitfinex exchange offers insurance in the off chance that your loss is greater than the margin requirement.
It is very easy to understand the risk#2 because it is just math. However, the first risk is very difficult to grasp for a beginners. This is also subjective so it is best that I cover it with a few examples.
I've covered my short at 394 yesterday at a small profit, market has retraced back since. I honestly cannot tell which way Bitcoin will go.
Trend obviously says up in the short term since we have bottomed two weeks ago. However looking at the amount of bfx USD and BTC swaps, USD has increased by a bit. But the number of BTC swaps is at 12K! Speculators are increasing their bets on both sides. As I have said it before, one side is wrong, but I don't know which. I am going to let this play itself out until new opportunities present.
I wrote a bitcoin article regarding why there is a strong tendency for market to behave a certain way. This was few days ago and we were at the height of the third push higher to 2480. I marked the pullback level at the time like in the charts.
I may be bearish but I will speak my mind, A bottom and top reversal is a process, it takes waves of buying/selling before it reverses. There are exceptions to this, I'll go over later. But the idea is that momentum in a direction doesn't stop suddenly.
I have been posting daily market updates for a while. I want to provide a list of good trading tips applicable for novice and advanced traders. Hopefully this post will help clear misconception and improve your trading. This is for trading only, not investment. IE: Speculate for profit through the volatility of the market.
When it comes to trading, where you get your information and how you filter them is important. During market movements, people always want to know why Bitcoin is moving by justifying it with news (related or unrelated). I can tell you from my experience that news always come after market movement. I have some personal stories, but I’ll share later. As a trader, we need to focus on the price action and how price reacts to news. A good piece of news during a bear market could be a sell-off. Market often shrugs off bad news during bull markets. My point being: observe what the market action is telling you, not what news is telling you.
I noticed the reddit market community talks a great deal about when to buy. Whether your reason is based on fundamental or technical analysis, bitcoins like stocks and currencies don't go up forever. You need an exit strategy. In this post, I will go over the basics so you can have a better understanding of risk management.
Exit strategy 1: Have your exits determined before the trade.
Today, I will be covering a continuation trading pattern called a flag. Flag can be bullish and bearish. I will cover only bullish patterns, it works just as well for bear flags as well. Concept explained and history of this pattern will be covered at the end.
What is a flag?
The pattern is exactly how it sounds; it looks like a flag waving. The pole part of the flag is the fast price rise and the flag itself is the consolidation period. (Look at my chart for reference). A bull flag is a continuation pattern where the price stalls and consolidates briefly before continuing to rise further.