It has been awhile since I have posted, so here is a quick review of Bitcoin’s exciting year. I have been watching it with some interest, and got wrapped up in the price action with a relative of mine. Before getting started, let me say that there is certainty regarding whether Bitcoin is a bubble – it probably is, and it certainly is behaving like one. Nonetheless, it trades just as you would expect any other currency or financial instrument to.
The key is to realise that in an bubble, there is no telling how far it could go, but as long as there is a super-trend in place, pullback trading is extremely profitable. In Figure 1, I have identified the various entries we took. There was no additional entry, and no, this is not a chart made up later. It would be nice to say that every trend I traded was entered at the price swing low, as it was in this case, several times in a row. However, that would be unrealistic. Nonetheless, it may prove educational for traders to study the entry levels in this case.
Figure 1: Bitcoin Entries
I would also love to tell you that we held the position all the way through, never taking profits. That is not true. Each swing trade was scaled out partially very quickly, reducing the size by a third or half. This was because we were cognizant of the fact the situation could reverse very quickly, and the idea was to take partial profits quickly, leveraging ourselves into a position where it was risk-free as quickly as possible. In fact, by the time we reached the right edge of this chart, the trading campaign was essentially risk-free. The exposure and risk was entirely upon the profits gained.
This was just as well, as we were only a short distance away from the pre-Christmas plunge, which I will talk about next…
Head Trader Consultant