Does technical analysis work with Bitcoin?
When it comes to investing, I am a macro person.
I take a view of the future and if a business fits that future, I perform the necessary fundamental checks to ensure that it will arrive there, and not go bust because it was an idea hatched before its time, or that it ran out of cash and went belly up.
It has done me well and this is the same view that I take with crypto. I may be wrong. But because I am certain that the S2F model will work, I am going in long.
However, from my limited understanding, all good traders use FIVE pieces of information to guide their technical analysis, and if you get nothing out of the entire sharing from this article, at least bookmark it to get these FIVE pieces always on your screen.
The 5 truths of Technical Analysis (TA)
rend direction — This is the direction of where prices are heading.
It is either going up, down, or sideways
1. Direction.
Where is the trend heading? This will determine where prices will land. There are only 3 directions – UP, DOWN and SIDEWAYS.
2. Persistence.
Is the signal strong or weak, or is it about to turn?
3. Entry.
This is the point and price that you are willing to step into the ring, and of course profit from what you do.
4. Stop loss point.
This is your MUST SELL price in case you are wrong in your analysis. This protects you from losing more. I always recall this story told of triumphant Roman generals entering into the city to be cheered by the crowd. There will be a servant whose duty is to run after him and whisper in his ear these words "REMEMBER THAT YOU ARE MORTAL". Losses are always humbling experiences. Don't let them get to you or get you down. Learn from errors by firstly not allowing an error be so great you stay down.
Remember, you are mortal.
5. Exit.
This is the price you will sell to realise profits.
Does Technical Analysis work with Bitcoin?
TA gives you a sense of price direction and persistence. The reason why there is a stock to flow model provided is because this is something that allows us to have a sense of where the trend lies and how strong the trend might be.
The real key lies in the selection of factors to determine the trend and how you apply the TA. While we do not engage in TA ourselves, in the recent months that have seen a 50% dip of Bitcoin, we realise that many posts have come onto Twitter regarding TA, and many have been wrong.
We heard cries for blood as the crypto market plunged in May.
The top was realised at $64k BTC-USD and the sell-down began. It worsened with Elon Musk’s U-turn and China’s ban. We understand that given its infancy, cryptocurrencies are susceptible and vulnerable to narrative-shifts. The love-hate relationship, kiss-and-make-up, curse-and-break-up problem keeps occurring and for those who are unable to stomach volatility, can end up selling at unnecessary losses.
BOTS ARE BEING USED
Did you know that bots have been created to automate trading and help people profit from just the movement of cryptocurrency trends? The bots have these basic 5 truths that guide their purchase decisions.
Take a look at this video that provides some insights for beginners as well as advanced experts.
As again, this is not investment advice. You will have to do your own due diligence and learn how to do it properly. Trade with care and may the curve be with you!
Yours
Chief Editor
BBA Market Perspectives
