Yesterday traded with a $11,000 handle, $12,000 handle and $13,000 handle. $14,000 next
In the wonderful world of bitcoin, the digital currency continues to to rise and rise and rise even more.
Yesterday bitcoin traded with an $11,000 handle (low was around $11,700) and a $13,000 handle (the high $13,461).
In the couple hours of trading today, there has been a new record high of $13,870.88. We currently traded $13,644. The next target at $14,000 seems to be more of a question of "when" vs "if".
Technically, with the price surging from below $6000 on November 13, to $13,000+ today, traders may have some pretty good entry levels. Where do you take profit?
Well, you can randomly sell in anticipation of the price "falling at some point". Traders who have taken profit in the past, missed out on $2000 over the last 24 hours (and much more on nearly any other day since November 15). If you randomly sell, what if it goes to $15,000 or $20,000, or even higher on a continuation of the madness?
Alternatively, you can give up profit by letting the technicals tell you when to get out. This keeps the longs in the trade, just in case the price does continue the surge higher.
Looking at the hourly chart above, what sticks out?
For me, since November 15th, the price has not been able to trade below the green line. That line is the 200 hour moving average. ON November 30th, the price got really close to the line, but buyers leaned against it and started to overwhelm the sellers once again. That was the base (at around $9000), and it led to the surge to nearly $14,000 today.
If the traders keep on buying against the 200 hour MA, doesn't it make sense to use that MA line as your stop? If the price stays above, stay long. If the price moves below, get out.
The MA is currently at $10,703, but it is moving higher as every hour passes. That is good news for longs. It of course is better for your P/L if the trailing stop below, moves higher with the price over time. For example, tomorrow if the MA keeps rising at the pace it did today, it will be be around $11,300 at this time. That is about a $600 change in your stop. That is $600 more guaranteed in your P/L..
Now, what if you don't want to risk that much. After all, the price is at $13,600 now and the MA is currently at $10,703.
Well, you can also use the 100 hour MA (blue line). That line is higher at $11,501 currently and is also moving higher. The price of the bitcoin has moved below that MA line, but you might argue that if broken now (at a higher, loftier price), it would lead to much more selling (maybe... maybe not).
So the 100 hour MA is an option, but you should be cautious about a snap back simply judging from prior market reactions.
Another thing you could do, is use the shorter term chart like the 5-minute chart (see chart below).
Looking at it over the last few trading day, traders also have tended to use the 200 bar MA (green line in the chart below) as a level to stall falls. Therefore, if the price falls below that MA line (at $12884 and moving higher), it should solicit more selling.
The problem with this strategy is that what happens if the price fall stalls ahead of the more important 100 and 200 hour MAs? What happens if it reverses and goes back higher before reaching those key longer term targets?
Well that is trading. Anything can happen. However, if you sell on a break below the MA because the short term bias turns lower, you can always buy on a break back above the MA if the momentum lower stalls. You can also look to buy a dip against the 100 hour or 200 hour MA as well.
Even though buyers of bitcoin are up large, that does not get rid of what I call the "fear of success" from your big gains/profits. However, by seeing the price react to things like the 200 bar MA (on the 5-minute and the hourly chart), a plan can be outlined that will manage your trading risk AND get rid of the fear of success from what could be wild swings in the crypto currency.
Follow the pictures and the lines and let the market price action tell you when to get out. If the price action and tools don't tell you to get out, enjoy the bullish ride.
PS. the price is up to $14,200 currently.