I have been waiting several months for the price to reach the major support zone, as the main target for the bearish movement.
This creates a clear ABC pattern as you can see in the next picture.
But, what does this mean? It means that the price has reached a level where we observed bullish pressure and that caused the beginning of the previous bullish wave. Is this any guarantee that the price will behave in the same way? ABSOLUTELY NOT.
However, what we are trying to do here is something like this:
- IF the price behaves in the same way as before. How can I develop a setup that takes advantage of that movement?
- IF the price does not behave in the same way as before. How can I avoid opening positions in bitcoin?
To answer both questions, I have defined the following filter to develop bullish setups:
a) The price reaches the Major support zone (Checked)
b) The price breaks the descending trendline (Pending)
c) The price makes a correction (3 to 5 daily candlesticks) after the breakout of the trendline (Pending)
d) IF the price makes a new high after the correction I will open positions as you can see on the main chart of this post. (Pending)
As you can see I need to wait for a lot of factors before risking my money. The pros of this are that you engage in high-quality setups once all the filters happened. The negative thing is that sometimes you will miss setups. However, you can optimize this if you study past behavior.
Let's dig into the last 3 important details. How did I come up with that filter? What's the risk I will be using on that setup? How much time am I expecting for the execution of the setup, and the evolution of it?
The filter: When I define a filter what I do is: FIRST, understand the current context in terms of shape, % decline, and duration. With that clear, I go into the past and look for similar situations, IF I can see a clear pattern in all those situations, then I define it, and then I wait for it. The main tool I use for this is the logarithmic chart which allows you to see all the historical movements in terms of % movements.
The Risk: I will be using 3% of my capital on the stop loss. That means that if my entry is executed and everything goes wrong, I will assume a 3% loss on that setup. However, I'm looking to make almost 5 times what I'm risking. (That's my edge)
The time: I think we are at least 1 month away to see the breakout of the descending trendline. And for the evolution of the setup in case, everything goes as planned. I expect a two-three months evolution.
Alright, thanks for reading! My idea was to share with you my processes when I develop setups. If you have any doubt feel free to ask in the comments or share your charts and opinions as well.
This creates a clear ABC pattern as you can see in the next picture.
But, what does this mean? It means that the price has reached a level where we observed bullish pressure and that caused the beginning of the previous bullish wave. Is this any guarantee that the price will behave in the same way? ABSOLUTELY NOT.
However, what we are trying to do here is something like this:
- IF the price behaves in the same way as before. How can I develop a setup that takes advantage of that movement?
- IF the price does not behave in the same way as before. How can I avoid opening positions in bitcoin?
To answer both questions, I have defined the following filter to develop bullish setups:
a) The price reaches the Major support zone (Checked)
b) The price breaks the descending trendline (Pending)
c) The price makes a correction (3 to 5 daily candlesticks) after the breakout of the trendline (Pending)
d) IF the price makes a new high after the correction I will open positions as you can see on the main chart of this post. (Pending)
As you can see I need to wait for a lot of factors before risking my money. The pros of this are that you engage in high-quality setups once all the filters happened. The negative thing is that sometimes you will miss setups. However, you can optimize this if you study past behavior.
Let's dig into the last 3 important details. How did I come up with that filter? What's the risk I will be using on that setup? How much time am I expecting for the execution of the setup, and the evolution of it?
The filter: When I define a filter what I do is: FIRST, understand the current context in terms of shape, % decline, and duration. With that clear, I go into the past and look for similar situations, IF I can see a clear pattern in all those situations, then I define it, and then I wait for it. The main tool I use for this is the logarithmic chart which allows you to see all the historical movements in terms of % movements.
The Risk: I will be using 3% of my capital on the stop loss. That means that if my entry is executed and everything goes wrong, I will assume a 3% loss on that setup. However, I'm looking to make almost 5 times what I'm risking. (That's my edge)
The time: I think we are at least 1 month away to see the breakout of the descending trendline. And for the evolution of the setup in case, everything goes as planned. I expect a two-three months evolution.
Alright, thanks for reading! My idea was to share with you my processes when I develop setups. If you have any doubt feel free to ask in the comments or share your charts and opinions as well.