Today, I am going to explain one of the simplest thing in trading that we often forget. The question is why 6K for Bitcoin, why not 7K or 4K or 2K or 1K?
You may have your answer but do you have any explanation to that. Perhaps, yes or maybe not. Hang-on, we need something that you can tell from the data without drawing so many lines.
Here comes a dirty chart, with messy lines and one simple explanation. Below this chart, I explain two mindsets, first the dirty trader mindset, and second, the simpler investor's thinking.
I hope I've explained it well!
Good luck!
You may have your answer but do you have any explanation to that. Perhaps, yes or maybe not. Hang-on, we need something that you can tell from the data without drawing so many lines.
Here comes a dirty chart, with messy lines and one simple explanation. Below this chart, I explain two mindsets, first the dirty trader mindset, and second, the simpler investor's thinking.
A Trader's Explanation
An average crypto trader trades a few bitcoins. He has to draw all small scale features on a chart to trade a trend. For instance on this chart you see a simple Fibonacci fan in a bear market. Each high developed a peak on a fan and followed the fan such that there are lower lows, a bear market. Then the next lower high, which is followed by subsequent lower lows until July 2018. But see what happens next, still a bear market mindset, but no lower lows. Just a double bottom. The decline height also decreases, so sellers are running out of steam. But what happens overall? Everything falls on to Fibonacci 0.236=6000 from ATH. Why this 6K all in sudden & bears kept on playing above 6K? A trader will simply say that is Fibonacci retracement so whatever holds, is my level. But is that the explanation you were looking for? Certainly not!!An Investor's Explanation
An investor will put the equation into a simpler answer. He will say that ATH=20K, take 70% out, we get 6K. That is it! He is not going to think about all cumbersome equations, models, or trends.What happens next?
Now what happens next, small hands will shake hands around 6K, perhaps they will push the price a bit further lower. Since they don't trade big, they won't be able to break it down as much as big players can. So, if the people sell in panic, it is good for an investor, he will take the benefit of it since he was looking forward to an equation i.e. anything below 70% is my interest. He will accumulate while others will fear.I hope I've explained it well!
Good luck!
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