Have you been in a situation where you followed a prediction that went perfectly but you still lost money? Or, have you seen a similar chart like the above and decide to sell when the price breaks down the support and soon realized you short right at the bottom of the move?
If you are a new trader, I am sure you have been in these situations before and struggled to make money from trading. The reason for this is simple – ‘trading is not the same as predicting’.
Let’s use the chart above as an example. It looks as if the market has followed the prediction perfectly, doesn’t it? But, does it?
If you are a seller, when the price went below the support level briefly with that wick (yellow circle on the chart), you would have opened your short right at the bottom of the move and got stopped out when the market suddenly decides to do a reversal.
The situation is worse if you are a buyer because:
1. If you are preparing yourself to short when the market breaks down the support, why would you enter a buy limit order to go against your short trade? Does it even make sense? If, somehow you smacked your head and decided to place both buy and sell limit orders, you would have been stopped out on both trades in this scenario because of the wick (yellow circle).
2. Ok, even if you didn’t sell and decide to only buy, where are you going to set your stop-loss? If you set it too high (scenario 1 below), the wick would have stopped you out. But if you set it too low (scenario 2), your risk reward would have been horrible even if the trade is a winning trade.
in the eyes of new traders, the above prediction went perfectly. But after my simple explanation above, can you see why trading is not the same as predicting? How you are going to risk manage your position is what distinguish you from a novice trader.
Predicting up or down is not difficult at all as market can only go three directions - up, down or sideways. Even tossing a coin can give you a 50% win rate. And if you are lucky, you might get a 70-80% win rate. But if it’s that easy, why does 90% of traders lose money? First, is because you need a bias, whether it’s up or down, but not both. Second, risk management is the key in trading in which the novice traders are lack of.
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I am one of the very few traders on TradingView that teach you risk management. If you have found this post useful, don’t hesitate to give a LIKE. If this chart receives 500 likes I will share more ideas about risk management.
If you haven’t read my previous educational ideas, go ahead and read them as they have been extremely profitable. Links are attached below at the bottom of this analysis.
In terms of Bitcoin price movement, last trade was beautiful. Currently, my view stays the same as my ‘Don’t trade the dumb zone’ idea – that is, the market is in a zone that I am not interested much in trading.
Last trade:
Past analysis (click & play):
Bought between $5,000 - $5,500. Sold around $6,850 (30% profits)
Bitcoin, perfect call (300% profits)
Entered $8450, sold around $9,800 (16% profits)
Bitcoin, bought between $6.8k - $7.3k (40% profits)
Perfect call on $12k weekly resistance
Bitcoin dropped from 12k to 7k as expected (40% fall)
Bitcoin dropped to $3.5k as expected (40% fall)
Bitcoin, bought $6220 target $8480 (36% profits)
Perfect re-bought target
Education posts:
2618 trade
Top-down analysis
How I draw the trendline
If you are a new trader, I am sure you have been in these situations before and struggled to make money from trading. The reason for this is simple – ‘trading is not the same as predicting’.
Let’s use the chart above as an example. It looks as if the market has followed the prediction perfectly, doesn’t it? But, does it?
If you are a seller, when the price went below the support level briefly with that wick (yellow circle on the chart), you would have opened your short right at the bottom of the move and got stopped out when the market suddenly decides to do a reversal.
The situation is worse if you are a buyer because:
1. If you are preparing yourself to short when the market breaks down the support, why would you enter a buy limit order to go against your short trade? Does it even make sense? If, somehow you smacked your head and decided to place both buy and sell limit orders, you would have been stopped out on both trades in this scenario because of the wick (yellow circle).
2. Ok, even if you didn’t sell and decide to only buy, where are you going to set your stop-loss? If you set it too high (scenario 1 below), the wick would have stopped you out. But if you set it too low (scenario 2), your risk reward would have been horrible even if the trade is a winning trade.
in the eyes of new traders, the above prediction went perfectly. But after my simple explanation above, can you see why trading is not the same as predicting? How you are going to risk manage your position is what distinguish you from a novice trader.
Predicting up or down is not difficult at all as market can only go three directions - up, down or sideways. Even tossing a coin can give you a 50% win rate. And if you are lucky, you might get a 70-80% win rate. But if it’s that easy, why does 90% of traders lose money? First, is because you need a bias, whether it’s up or down, but not both. Second, risk management is the key in trading in which the novice traders are lack of.
----------------------------------------------------------------------------------------------------------------
I am one of the very few traders on TradingView that teach you risk management. If you have found this post useful, don’t hesitate to give a LIKE. If this chart receives 500 likes I will share more ideas about risk management.
If you haven’t read my previous educational ideas, go ahead and read them as they have been extremely profitable. Links are attached below at the bottom of this analysis.
In terms of Bitcoin price movement, last trade was beautiful. Currently, my view stays the same as my ‘Don’t trade the dumb zone’ idea – that is, the market is in a zone that I am not interested much in trading.
Last trade:
Past analysis (click & play):
Bought between $5,000 - $5,500. Sold around $6,850 (30% profits)
Bitcoin, perfect call (300% profits)
Entered $8450, sold around $9,800 (16% profits)
Bitcoin, bought between $6.8k - $7.3k (40% profits)
Perfect call on $12k weekly resistance
Bitcoin dropped from 12k to 7k as expected (40% fall)
Bitcoin dropped to $3.5k as expected (40% fall)
Bitcoin, bought $6220 target $8480 (36% profits)
Perfect re-bought target
Education posts:
2618 trade
Top-down analysis
How I draw the trendline
Chapter 1 is here (Scroll down to the bottom half of the analysis):