As traders, we have to ask ourselves this question routinely—particularly if changing anything.
My edge identifies the market structure, trend and odds-based trades.
Identification of the market structure comes down to experience in the live market. Backtesting is a must but is no substitute for watching price in our chosen timeframe.
The trend is much talked about but remains elusive to most of us. I found the volume-weighted average price (VWAP) indicator on its session setting invaluable here. If trading a higher timeframe (such as the crypto investment), I like the anchored VWAP.
The shorter the time frame we use, the more we seem embroiled in odds-based trades: stops and targets—reward and risk—and the management of a transaction. So I have reintroduced trend line breaks and a two to one no quibble reward to risk. I’m also interested in the study of volume profiling.
As I’m still, and will be for many weeks yet, in the process of moving home—and making the one we’re moving to livable—I’m limited to an hour or so each evening backtesting the day. I do, however, take at least one day a week to dedicate to the charts.
Staying current in the currency markets is vitally important. But time out is also an opportunity to develop and reflect. Therefore, trading with clarity of method with practised (no mistake) purpose is vital.
Simplification is also a product of my time out. When busy in the game, I can be blind to development creep. That is, I introduce too many markets and systems without objectively examining what works and what doesn’t.
Getting back to an honest reflection of ‘what is my edge’? And only doing what that is.
We’d posted buy levels in Bitcoin and Ethereum—provided again below in British pounds.
Bitcoin provided both entry levels before returning to the all-time high. Those that bought, fundamentally and technically, you will find much information to influence whether you now stay or sell.
Taking at least some profit at this point would be sensible. Investing is a different approach. It’s for the long haul. But taking some, if not all, of the gain now is still advisable, and if we have a pullback in price, I will provide a suitable re-entry level. However, there is a 40 per cent chance that the price will continue higher and you are not on board!
Ethereum gave us only the higher entry-level. So we are only half loaded in Ethereum. It, too, although not at an all-time high, is at a distinct technical level. So the same profit-taking argument above with Bitcoin applies equally to Ethereum.
Bitcoin and Ethereum daily bars priced in British Pounds.
Bitcoin and Ethereum activated the first buy level last week (See the previous post).
Price has briefly climbed again, but the weekend close indicates an imminent drop to at least the middle buy level is likely.
Information we’ve read suggests that crypto and, in particular, bitcoin and ethereum are only at the level of the big toe in terms of relative potential.
However, not all are singing crypto’s praises. Jack Schwager, author of the highly regarded ‘Market Wizards’ series, voiced in a recent podcast that the only value he’d give to crypto is what it gains from the ‘black market’.
But might this be similar to IBM’s comment back in the day, “I think there is a world market for maybe five computers”? At some 2.5 trillion in value, Apple, primarily a PC company, is leading the way.
I’m on the fence as far as crypto is concerned. However, if you are of a mind, a long-term purchase in line with our previous discussions is worth a punt.
From my perspective, 100% of my concentration is on my day to day trading with the slow trader fund. I’ve traded small recently, working on all aspects of my game.
The old but still highly regarded book ‘Mind over Markets” is an excellent addition to any traders knowledge. From which, I’ve applied slight changes to my approach.
Although ready to move up the gears again, I will continue to trade small for a few weeks more as I manage through the disruption of a home move.
The future of crypto continues to look bright. With general prices still below their all-time highs, this is not the wrong time to start accumulating.
However, the price is not favourable enough for me to invest. Bitcoin may pull back to at least the higher of the VWAP yellow lines drawn. Depending on the price action at the time, I might favour a purchase if price retreats to the lower VWAP lines. (See charts below).
I will report as soon as I see a possible great opportunity.
If following, be ready with your Binance account or similar.
In the meantime, for information, review Chris Lee’s awesome Crypto newsletter. In addition, Chris provides a reference list for those that want to research further.
As expected, Ethereum has taken the more significant leap in price. It is almost getting back to its high in May this year.
I am not in the business of predictions. But, on the other hand, Bitcoin has been less dynamic of late, and a pullback of some sort is more probable.
Soon after suggesting an investment in either Bitcoin or Ethereum, the price of each ballooned.
That is not to say a buying opportunity will not present itself again, but the likelihood of the same ‘early bird’ has probably gone.
But let us wait and see. First, of course, we are considering the dollar-cost averaging approach. But as a trader, I cannot entirely agree with entering in this manner. I want a defined risk and a reasonable probability of success.
Let us see what develops. In the meantime, to understand Crypto better, working through the excellent post by Chris Lee is a good start.
I am trading small for the time being and putting a lot of time and effort into my skill development. August is well known as the holiday month for most industries, undoubtedly reflected in the market. Volume is exceptionally light so far this month. Being in training mode right now, therefore, is no actual loss of opportunity. My work continues as an intraday currency trader. I am significantly more trend-oriented than previously and enjoy incorporating my understanding of the Volume Weighted Average Price indicator (VWAP). I am using the VWAP in both the session mode with standard deviation lines and (which is proving to be a pleasant bonus) the anchored VWAP. I’d spent a lot of time previously on the Commitment of Traders (COT) report. And, although the VWAP and COT are worlds apart in how they have derived and their respective timeframes nonetheless, I feel that being familiar with one has aided my adaptability to the other.
I’ve had a few questions recently on the best place to put aside money for grandchildren. Long term investing. The usual ISAs are an option, but if you’ve filled those and want somewhere with a significant oomph, you must consider Crypto. If you’re looking long term and you are not going to get too stressed about the ups and downs—in essence, you’re happy to use dollar-cost averaging. Then you have to get in on this. Consider going back in time and having the opportunity to buy Apple while Jobs and Wozniak were still operating out of a garage. That could be Crypto right now. I know you’re not convinced, but the more I study the subject, the more I realise the potential of Crypto. In a nutshell, an investment in Crypto has a probability of a 50% loss or a 500% gain. It could be worth the ride! I will provide links here soon to simple explanations on what it is all about. The two that I’m watching are Bitcoin and Ethereum. They are very different. However, each has an overarching reason to invest. Bitcoin has a hard limit of 21 million coins, and Ethereum (as early as next year) could provide a yield. Volatility is mainly due to the small number of big players and low institutional involvement. But that is all changing. Crypto is a billion-dollar market. However, it has the potential to take a significant slice of the Bond and Gold trillion-dollar market.
But how do I invest?
The first advice in Crypto is don’t use leverage. It would be best if you bought it. And this is easier than you might think. Again, I will provide the links on how-to soon.
To get you thinking.
Even though we are dollar-cost averaging, it is better to not throw money at it willy nilly. I want to provide critical moments based on VWAP signals and technical analysis on value and break out points. You would then do your purchasing. One of the advantages of Crypto is that you can buy small amounts. Let’s say you had £1,000 (or multiples of) to invest in Crypto. I’d follow Chris Lee’s suggestion (more of his links in the next blog) and split the investment equally between the two coins. Of the split amount, I’d put half (£250 split into quarters, say) into value entries and the remainder into breakout entries. Then, finally, I’d give you the timing to enter each. That is enough for now. As I say, this is food for thought, with more to follow soon.