Trying to predict the market is suicide.

Trying to predict the market is suicide.

By MadMaxx | Psycho Crypto | 1 Mar 2020


That's a very harsh title. But it's also a very true title.

Have you ever tried to predict a sports game? There are many variables that go into trying to do that. The star player may slide on some wet grass and break his knees. Or worse, he could be out of commission for ever.

I always wonder how people who engage in sports betting think. Because there are so many factors against you that it just doesn't make any sense to actually place money on something as uncertain as that.

Beefing sports betting aside, I feel that it's also very dangerous to try to predict the market movements.

"But wait! Isn't that the whole aim of technical analysis?" You ask.

We'll, yes and no.

Technical analysis was created because someone believed that humans tend to repeat patterns, and therefore repeat themselves.

That's not to say that humans will repeat themselves ALL the time.

Like, for example, the formation of a hammer pattern on a support line usually signals a strong uptrend, when paired with certain other factors.

Well, Bitcoin had all those stars in place, and still didn't rally. In fact, Bitcoin fell to a new low for the year, all the way down to 8.5k, and has been struggling to keep that support intact.

Oh, and this is by the way, but a break of that support will paint the town red with Bitcoin's blood. Have at thee, and buy the dip at your own risk. Moving on.....

This is a prime example that anything can happen, and that we shouldn't try to predict the markets.

So what should we do?

How about REACT to the market? 

So you see a hammer pattern form on Bitcoin's graph. Most people decide that buying is the best option, so they go ahead and buy.

But they weren't given any sign of an uptrend. There was no RSI reading above 50. There was no bullish engulfer fronting after the candle. There was no green marubozu forming after the hammer. No golden cross. The price was below the 200 MA. All these are bearish signs, but because you saw the hammer, all your skills go out the window.

But if you had waited for some of these patterns to form, and you had been sure to check if a reversal was the case, then your chances for success would have been greater.

Say you bought at the top or middle of the next candle after the hammer, but this was after you saw it was a bullish engulfer. You didn't predict the market. You reacted to it. And now, you will be rewarded for your correct reaction.

So the morale of all this is: Learn to react to the market, not predict it.

Thanks for reading.

PS: I recently started a very big project that I'd like you to be a part of. All the tips on this post and my next 1 post are going into that project, because I really believe in it. Check out the post explaining this project here. And please, consider supporting. Thanks!

How do you rate this article?


6

2

MadMaxx
MadMaxx

In the eternal quest for crypto fulfilment. I'm an obese frog on the internet, what I say most definitely isn't financial advice.


Psycho Crypto
Psycho Crypto

Fun experiments with crypto!

Send a $0.01 microtip in crypto to the author, and earn yourself as you read!

20% to author / 80% to me.
We pay the tips from our rewards pool.