Crypto Investment Diary 1/8 - The Market Has Changed

My recent thoughts on operating cryptocurrencies have been published on TradingView and shared in English, in order to reach the most people and hope to learn from others.

And just after I started the operation of Bitcoin's four-hour trend in January, in the third four-hour trend , I encountered a big rally that I haven't seen for a long time.

I’m ashamed to say that in 1/3 of the diary I mentioned that the rise I saw that day was probably a bullish market, just like I saw in the past six months, which made me lack interest. I didn’t expect that what I was witnessing was a The beginning of the big wave.

You might say it's hard to know in advance, but in my post-mortem analysis, I think there are signs of a bottom, but my own market acumen has dropped.

First of all, the head-and-shoulders bottom pattern at the daily level has clearly appeared, and after these three drops below $7,000, the trading volume has become smaller and smaller, which is a sign of the exhaustion of sellers:

Again, this wave of gains clearly started from the conflict between the United States and Iran. At the same time, gold and crude oil have risen earlier, revealing that the market is in a risk-averse mood.

In a recent analysis, Dan mentioned that compared to the surge triggered by China’s announcement of its investment in blockchain on 10/26, the reason for this surge is more than sufficient.

Of course, whether the reason for the increase is sufficient is a matter of opinion. I basically agree with Dan's view. The link between China's investment in the blockchain and Bitcoin is still undetermined, and it is imagined. But once the U.S.-Iraq war broke out, some people immediately needed assets to flee (Iran is a very rich country, don’t mistake the Middle East for poor people). At the same time, because the stock market will fall, people outside the war zone also have a safe haven. In the past, they fled to precious metals such as gold. This time, there is a niche market of Bitcoin, which is not difficult to understand.

Therefore, based on the opinions of many experts and my own judgment, I would say that the trend of the market that has been falling for six months has probably changed . I will say this conservatively, because this is the cryptocurrency market, inexperienced friends may think that it has risen by 20+%, of course, it has doubled, my friend, you are shallow.

Go back and look through the historical line chart. After a 20% or 40% surge in a few days, the market quickly spit back and then turned empty. It happens every year. Didn’t it only appear once on October 26 last year?

So why do I say the trend may have changed?

First, from an uptrend line from 2015 that tells us that a bottom may be in place:

Second, from the relationship between the Stock to Flow Ratio and the price , prices below $7,000 are lower than the long-term average:

Third, an obvious change in the cryptocurrency market in 2019 is that futures and options trading has become very common. For example, the rapid rise of FTX exchanges has led to Binance having to enter into strategic partnerships with them, and Binance itself has been increasing these Derivative trading commodities, these will lead to the continuous looting of retail investors' chips. This looting process was also an important judgment for me in the second half of last year, but I did not expect that it would take so long and the unprofessional leveraged trading behavior of retail investors to be cleaned up enough. Clean means that the leek chips are almost harvested, and most of the chips are concentrated in the hands of big households. These conditions will help the market to rise in large bands.

Having said so much, I don’t know if you will have the same problem as me in the past: the analysis is clear, why didn’t you say it a few days earlier, so that everyone can enter the market and make a lot of money! ?

First of all, I am not an expert at all. The above analysis is indeed an afterthought.

Furthermore, the so-called experts are all probabilities. If someone told you last week that the bottom has appeared, go long! Then I'm sure of you, that's not an expert, just a gambler.

What does a real expert look like?

• Dan had seen a head and shoulders bottom pattern five days ago, and he said that "if" outflows rose, then he would raise the "probability" of a bottom already in place.
• This pundit I saw recently, he said that in a few days or a week or two, "if" Bitcoin rises above 7,760, he will start to be bullish.
• The expert I studied, Alex, said on 12/29 that based on the information he saw, Bitcoin "has a chance" to rise above 8,000 in the near future.

Have you noticed that the descriptions are all about "probability", I used to think that these experts are very cunning, saying that if it is possible, there is an excuse for being wrong afterwards...

But this is the truth of the trading market: thousands of people have their own opinions, and new information comes in every minute and every second, constantly changing people's opinions, and finally condensing on the trading market to form what they see on the surface. price.

Dan described it very vividly, saying that the market is like an organism with its own life, constantly deforming and moving. Traders can only try to capture the pattern of the market and improve the success rate of transactions.

Therefore all judgments are only possible in the form of probability.

The legendary trader I admire, Mr. Mark Ritchie, said in his book: My Trading Bible , "Don't mistake a bull market for an expert", which means that everyone in a bull market looks like an expert, you see me in the last four hours Trend trading , you will also mistake me for an expert:

• I didn't make it in the first wave of the big rally, but I managed to get into the market near 7,260. Today's price is at 8,300, and the spread is almost a thousand dollars. Do I look like an expert?
• There was a pullback to 7,400 and I managed to take profits before the pullback.
• A big rally started again and I managed to re-enter around 7,580 before taking profits at the round 8,000 level.
• After that the market started to rise again, I managed to enter again at 8,080 and took profit again before the pullback of 8,400.

It looks like I'm showing off, but I really don't consider myself an expert:

1. My greatest luck is that at the beginning of the 4-hour trend trading, I encountered this wave of rising market, and it was a market that I did not expect at all beforehand.
2. All of my trades strictly adhere to the 10% position of the stack to make a stop loss, and take profit when the profit reaches 120% of this position. (See this diary for details.)
3. As long as the 4-hour uptrend hasn't reversed (judging by the 12EMA moving average), I'll go long blindfolded, not guessing when it's overheating to flip down.

In his book, Mr. Mark Ritchie mentions that in his forty years of trading, he came to the conclusion that the success of a trader has more to do with a person's "personality" (rather than his How accurate the trades are!), and contrary to popular belief, the more "conservative" in character, the easier it is to become a successful long-term trader .

My own experience with Mr. Ritchie's remarks is that whenever I have the idea that "this one is going to make a lot of money", I am not "conservative and careful", no matter whether I make this money or not, this mentality is always Appearance is not a long-term solution.

In this market, I did have this thought at one or two points in time: Is there any reason for me not to raise the stakes in such a mindless bull market and make a fortune? Then I calmed down and thought, stretched the time, what the hell am I trying to do?

1. Like a gambler who just wants to win all the wealth he needs in life with just a few big bets?
2. Or do you continue to survive in the trading market for years and months like a connoisseur? (Yes, one of the definitions of a connoisseur is someone who survives for a long time.)

My answer was clear, I wanted to be an expert. It is very clear what to do with the so-called mindless bull market. In fact, what I should do has nothing to do with the current market situation, just follow my own established rules.

PS: Mr. Ritchie's book is really good. He doesn't talk about fundamental analysis and technical analysis at all. He is all about storytelling and mentality, but it is very helpful to my practical trading. I will continue to share from him. learned experience.

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