April 20th 2021, Crypto Chartbook: Bitcoin, Striking out is good.

Babe Ruth (“The Great bambino”) was an American professional baseball player with the most home runs (714) in history in his time (still number three today). This larger-than-life figure also held the record for the most strikeouts (1,330) at the same time. What we mean to say is that you need to strike out to hit home runs. Trading is no different. Every professional will tell you that you can only learn from your losses and that taking a loss is the most important skill to acquire. Bitcoin, Striking out is good.

Still, as humans, we have a hard time being proven wrong by the markets. We make many mistakes like running stops to avoid accepting being wrong!

Bitcoin is clearly in a significant bull market, and one of these mistakes is not pulling the trigger. We fear with prices this high, it is too late to get into the Bitcoin market. Wrong!

BTC-USD, Daily Chart, What happened since last week:

Bitcoin in US Dollar, daily chart as of April 19th, 2021.

Last week’s false breakout to all-time new highs stopped at US$64,895 and retraced below the previous all-time high US$61,781 . A few days later, we had a double-digit intraday percentage bar down, proving this attempt to break through prior highs to be a false breakout.

There is always this debate in one’s head: “Is the retracement done? Should I try again?”, “Will it go to all-time new highs again? Maybe even break to new ATH”, “Will it bounce from this support?”. You can’t afford to listen to these voices. You need, like Babe, to give it your best shot on each low-risk opportunity, and some will strikeout, and some will be home runs. It is useless to try to predict the future when no one can. All we can do is identify a high probability turning point and execute the trade to the best of our ability.

BTC-USD, Daily Chart, Early warning signs:

Bitcoin in US Dollar, daily chart as of April 19th, 2021.

This chart shows that as much as the market has managed to make higher highs, it seems to run temporarily out of steam. The lower line of the linear regression channel got penetrated, and we might see a transition from a steep upward move to a sideways zone.

BTC-USD, Weekly Chart, Bitcoin, Striking out is good:

Bitcoin in US Dollar, weekly chart as of April 19th, 2021.

Nevertheless, stepping a timeframe up to the weekly chart shows a clear dominance of the bulls. While we might reduce position size slightly to honor early warning signs, we cannot assume that we can forsee the future. Quite the contrary, each retracement for a contrarian, provides an opportunity. We take low-risk entries in the zone between US$51,000 and US$55,000 should this opportunity present itself.

Like Babe, we show up to the game, give it all we got — and except the strikeouts, knowing they are part of the process to get those home runs.

Bitcoin, Striking out is good:

Reading through sports autobiographies, you will find many principles in alignment with trading. The Bambino wasn’t the only one realizing that learning to lose is a skill necessary to become a consistent winner. Once you have identified a trend, you need to work it. Alongside stacking additional edges to the directional advantage, you can’t expect all trades to be winners. It is necessary to consistently take small risks and allow trades to develop to either be small losers, medium winners or turn out to be those home runs where you truly get paid.

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Florian Grummes

Florian Grummes

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