Editors Note: Bitcoinist is bringing you a series of market information and trading guides by Yann Wahli of Crypto Finance Analysis Consulting
First, I would like to wish you a great year in 2015 and all the personal and professional success that you deserve. I also wish that this new series of articles will allow you to trade as best as possible this year.
This new year starts off in a very complicated way. The price of Bitcoin is extremely low, and the recent Bitstamp hack (2nd exchange platform in terms of dollar volume) will not boost confidence in crypto currencies. 2014 has been a very difficult year for those who hold Bitcoins for long term reasons, but, nonetheless, numerous and promising evolutions have come to existence. Like many of you, I think that crypto currencies are the future. They are comparable to the Internet in 1995. They will become part of our everyday life and, the more they will get used, the more prices will rise and stabilize. That is why I am not worried about crypto currencies on the long term. For those who want to remain reactive and benefit from the current price volatility, I hope this new series of articles will help you realize gains up to your expectations.
In every one of my “Decadays” articles, I will give a rule to follow absolutely to ensure your trading is profitable. I have learned these rules at Lausanne, Geneva, and Paris universities. They are quite simple but absolutely indispensable to survive in the world of trading. After that, these articles will end with an update on the situation of Bitcoin. I will then give you my opinions on the days to come and the levels to watch.
The very first rule to respect is that THE MARKET IS ALWAYS RIGHT!
Even if the market acts irrationally, it doesn’t care about what you think. It is useless to think “the market should do this”. No, the market does what it needs to do that’s all. It doesn’t care about you, whether you invest based on fundamental or technical analysis, it will not bend to your wishes. What you really need to understand here is that there is only one judge on the markets, it is the PRICE, not you. Once you have understood this, you still need to adopt the state of mind of a trader. When you decide to take a position, make a plan and stick to it! Forget about your emotions, think objectively. That’s how a trader can be recognized. He can admit he was wrong and take his loss, instead of complaining and wait for the market to bounce back as “it should do”. No, remember, the market does not “have to” do anything; it “does”. So if you got wrong, take your losses. But do not take it personally. No trader in the world has always been right, it actually took most of them years to adopt this state of mind and they have not become profitable before doing so.
To be in this state of mind will allow you to know from a neutral point of view, objectively, when you must cut your losses and when to lock in your profits. Without asking yourself too many useless questions. That will allow you to protect your portfolio without engaging into “effective” trades.
Update on Bitcoin at the start of the year:
The general trend is bearish. How to know where a trend goes? It is actually quite simple. For a trend to be bullish, highs must be ever higher. In contrast, when a trend is bearish, lows are ever lower. That is exactly what we can see on this chart in daily time units. So, for all those who invest in a long term perspective and do not trade daily, do not invest right now! Remember, “the market is always right”! Even if many people think that Bitcoin is so undervalued that it is time to buy, put your emotions aside and think like a trader.
On December 18th and 30th, the market went to test a new long term support (green arrows) before a violent breakout on January 3rd. At today’s price levels, there is no more existing support to back the prices and start reversing the trend. Those, who do not want to or cannot short Bitcoin, will have to wait for another reversal signal.
The coming days do not look bright, and Bitcoin could well get bellow $255 quite fast. Be careful nonetheless. For those who know about the “Elliot waves” (theory that will be explained in a later article), the bearish trend is coming to an end. So it is not impossible that the prices will bounce back at medium term. Watch out for warning signs of reversal, especially around the $303 zone in the coming days.
In these circumstances, do not change your trading plans. Those who are short, bring your stops closer, and those who are waiting for a reversal of the situation, be a little more patient.
Manager of the Cryptocoins Hedge Fund.
Co-founder and CFO of Crypto Finance Analysis Consulting
Yann Wahli was born in 1987 in Switzerland; he began his studies with a bachelor in management at HEC Lausanne. He then continued with a master in finance (Wealth management) at HEC Geneva. He also has a master in trading obtained in Paris. Since then, he works as a financial consultant in Switzerland.
Photo Credit: Featured Image: Bloomberg, Chart provided by Crypto Finance Analysis Consulting