Chop is bad? Daytrading the swings (Concept Of Pain)
"A choppy market is bad, can't make money in this erratic sideways movements..." I often read these statements, but is it true?
Not if you can trade a 800 point range in Bitcoin and make money from the swings intraday.
The key to trading with price action in a range is to buy low and sell high.
Of course that sounds trivial, but it is not, because the market tries to trap people into thinking that the range is over and done.
So a lot of traders start thinking " new strong trend" and buy high or sell low, expecting the trend to go on.
These breakout points often look very bullish/bearish and it may feel "easy" to go long/short at these points, but they are the worst places to enter long/short.
So always ask yourself "what can the market at this point do to inflict pain, to cause damage?"...
The concept of pain in intraday trading is extremely important, because what do you think drives prices intraday when there are no news?
It is just a game of fooling other traders and to trap them in the wrong direction.
When people can't stand the pain any more and close their position because all hope is lost, then the markets turns and goes straight to the point where they may have thought it would go.
So try to think tactical all the time: Where are breakeven stops or stop loss levels of "easy" entries? Prices tend to go there!
Sorry for that philosophical rant, but it is the weekend and I felt like sharing my philosophy :)
Now we get down to business and look at some price action entries (numbered arrows):
Trade 1: After I wrote in my last posting (see link below), that I expect a sideways movement and a target of 9600, there was a short entry at the top of the range.
At this point some people might have thought we have a double bottom at 9750 and a new uptrend, but I there is often a third test or a new low (9600).
Notice how bearish it looked at 9600, a lot of longs might have been closing their position at this point.
Next thing you know prices rise to 10.000 again...the concept of pain, remember?
Trade 2 + 3: Prices now are moving in the range again. The breakeven stops from the early longs at 9700 have been taken out, the second leg up can start.
That would take prices near the top of the range again (10.100).
Trade 2 is more aggressive than Nr.3, because there is only a small double bottom and a bullish candle. Trade 3 is a failed second entry short in a steeper short term uptrend.
Trade 4: This short illustrates the concept of pain again. We now have seen a break of the steeper uptrend from trades 2+3, then two legs up to a new high:
This is where you expect a move down. Prices also climbed right to the top of a possible broader uptrend channel (acting like a range).
As a skilled price action trader you look for an aggressive short entry at this point, while others are crying "moon" because of the uptrend and the breakout above 10.250.
Trade 5 + 6: Now a all the "easy" long entries (above Trade 3) have seen their breakeven stops hit, the concept of pain again!
The market has moved down in two legs to the lower side of the upwards tilted channel at 9.900, it sure looks bearish again, right?
Meanwhile a lot of people are short again and may already look for a retest of the low at 9.600. But that would be too easy, so the concept of pain strikes again!
Prices rocket up in a steep trend making a new high (10.500). The powerful trend is now fueled by all the stops from shorts who need to exit.
Again trade 5 is more agressive than trade 6, both can be seen as failed second entry shorts, but at trade 6 there is already the steep uptrend in play.
Trade 7: Up there people think long, we have a strong uptrend and a new high and higher lows, right? The same price action pattern as always: After the break of an uptrend and two legs to a new high you should be careful about that long position ;) The space for text here is limited, continues in update...
Not if you can trade a 800 point range in Bitcoin and make money from the swings intraday.
The key to trading with price action in a range is to buy low and sell high.
Of course that sounds trivial, but it is not, because the market tries to trap people into thinking that the range is over and done.
So a lot of traders start thinking " new strong trend" and buy high or sell low, expecting the trend to go on.
These breakout points often look very bullish/bearish and it may feel "easy" to go long/short at these points, but they are the worst places to enter long/short.
So always ask yourself "what can the market at this point do to inflict pain, to cause damage?"...
The concept of pain in intraday trading is extremely important, because what do you think drives prices intraday when there are no news?
It is just a game of fooling other traders and to trap them in the wrong direction.
When people can't stand the pain any more and close their position because all hope is lost, then the markets turns and goes straight to the point where they may have thought it would go.
So try to think tactical all the time: Where are breakeven stops or stop loss levels of "easy" entries? Prices tend to go there!
Sorry for that philosophical rant, but it is the weekend and I felt like sharing my philosophy :)
Now we get down to business and look at some price action entries (numbered arrows):
Trade 1: After I wrote in my last posting (see link below), that I expect a sideways movement and a target of 9600, there was a short entry at the top of the range.
At this point some people might have thought we have a double bottom at 9750 and a new uptrend, but I there is often a third test or a new low (9600).
Notice how bearish it looked at 9600, a lot of longs might have been closing their position at this point.
Next thing you know prices rise to 10.000 again...the concept of pain, remember?
Trade 2 + 3: Prices now are moving in the range again. The breakeven stops from the early longs at 9700 have been taken out, the second leg up can start.
That would take prices near the top of the range again (10.100).
Trade 2 is more aggressive than Nr.3, because there is only a small double bottom and a bullish candle. Trade 3 is a failed second entry short in a steeper short term uptrend.
Trade 4: This short illustrates the concept of pain again. We now have seen a break of the steeper uptrend from trades 2+3, then two legs up to a new high:
This is where you expect a move down. Prices also climbed right to the top of a possible broader uptrend channel (acting like a range).
As a skilled price action trader you look for an aggressive short entry at this point, while others are crying "moon" because of the uptrend and the breakout above 10.250.
Trade 5 + 6: Now a all the "easy" long entries (above Trade 3) have seen their breakeven stops hit, the concept of pain again!
The market has moved down in two legs to the lower side of the upwards tilted channel at 9.900, it sure looks bearish again, right?
Meanwhile a lot of people are short again and may already look for a retest of the low at 9.600. But that would be too easy, so the concept of pain strikes again!
Prices rocket up in a steep trend making a new high (10.500). The powerful trend is now fueled by all the stops from shorts who need to exit.
Again trade 5 is more agressive than trade 6, both can be seen as failed second entry shorts, but at trade 6 there is already the steep uptrend in play.
Trade 7: Up there people think long, we have a strong uptrend and a new high and higher lows, right? The same price action pattern as always: After the break of an uptrend and two legs to a new high you should be careful about that long position ;) The space for text here is limited, continues in update...
ความคิดเห็น:
Three times in a row a double bottom (red circles) was broken in the third attempt to go lower! This pattern I see in BTC very often, so be careful at the third attempt...talking about pain for the traders who bought the double bottoms...
Three times in a row a double bottom (red circles) was broken in the third attempt to go lower! This pattern I see in BTC very often, so be careful at the third attempt...talking about pain for the traders who bought the double bottoms...
So trade 7 is at the top of the broader channel, you expect it to go down at this point, but what happend here is out of the ordinary. There was a flash crash at Bitfinex, the quick move down to 9500 and up again took place inside a 1 min bar!
Trade 8 + 9: Both entries look for a second leg down, which would be the retest of the low at 9.600. They are both at the top of a small range and can be seen as second entries short (second attempt to go down). Both have also nice little traps to the upside! Trade 9 is more aggressive, because it is more like selling low, but often a double bottom at 9.600 will get taken out the third time...
Notice what happend at the new low (9.520): Prices shoot up 200 points, the concept of pain strikes again ;)