The first question in response to this came via twitter;
Are you interested in going long any of these once settled?Do you use long term moving averages as potential support ie 100+ 200dma?
Ok. So a very specific question about technical analysis to kick things off. After Facebook announced a ban on adverts for crypto currency trading this week, there are now a few less crypto ‘educators’ around talking technicals. Coming from a professional background, its important to understand the market your trading, and essential to attempt to understand the decision making process of the buyers and sellers. In the case of Bitcoin, Ethereum, Litecoin etc, the majority of 'investors’ are typically inexperienced retail traders who tend to trade based on basic technical indictors. Things such as the RSI and moving average crossings certainly feature, as do Fibonacci retracements (hence why I use them - recognising a self fulfilling prophecy).
Now, there is no reason why price should stop and honour any level on a chart, but there are times (of day, week, month, year) when markets are technically driven. It seems to be that crypto currencies like Bitcoin are almost entirely sentiment driven, and thus technicals have greater influence than fundamentals most of the time. So getting to the specifics of your question, I do use a combination of charting tools when analysing cryptos, including the 200-day simple moving average which the predominantly retail investor base seems to follow. However I do not place much importance on this, and instead look for areas of attraction based on price and volume to form a view before seeing whether there is confluence with a major moving average (specifically the 200 period MA). There is currently a fine example of this confluence in Bitcoin with the 200-day MA around 7800, in the middle of a major area of interest between 7500 - 8000 (which I have been watching since before Christmas to re-enter long). Sometimes there are perfect examples, hey!
To be honest, I always think this product [Bitcoin] is for sophisticated speculators to pursuit, so I can't understand why so many people jump into the pool wish to gain from something neither supported by a nation/government, nor regulations and compete with most sophisticated who don't play market rules.
Well said! In as much as people with no previous trading experience hastily buying in to things they don’t understand… thats certainly not a recipe for successful investing! Whilst there is no way that professionals approach the market in this way (though perhaps on their personal accounts in the case of cryptocurrencies), I’m not sure that it should be considered a ‘sophisticated’ market where only ‘sophisticated investors’ can compete. In fact, perhaps the opposite is true. Of course, transferrable trading experience is certainly an advantage, but Bitcoin & Co represent the purest form of old school speculation and trading I am yet to see in my career. For this reason it is ultimately a battle of wits where the coolest heads with the strongest hands prevail. Its quite exciting to think that for some people this first experience could be formative in how they progress to trading traditional asset markets in later years. Volatility will certainly be easy for them to embrace!
Hey Lex. I’m very new to trading , just learning. I have people wanting to mine for me... they say I put usd in and they do all the work for me and they get 20% comission. Is that something thats legit or no? I want ro learn but everything i fibd to give me info cost $1000.Thanks for your time and help.
First of all, its great that you approached us with this question as a trusted source (even if you are not prepared to pay for it - like the guys you say are asking $1000 to probably be less truthful!). I could write a nice balanced response to this, but in the interests of time lets keep it simple. I would avoid these people. Without knowing the individual operators (who we would never comment on anyway) there are a lot of scams in this area so you are right to be sceptical. This goes back to what we are all about at the Academy - empowering people to be responsible for taking care of their own investments rather than giving your money to somebody else who probably won’t treat it with the same care. That said, it is your money and your decision, so my only other advice would be to ensure that the operation is regulated and do plenty of further ‘due diligence’ on the company (you should start by checking Google, Facebook, Twitter and other social media for reviews). Having undertaken due diligence on several start ups myself, I have learned that if it doesn’t feel right, it is always best to walk away.
As an aside, I have very good knowledge of cryptocurrency mining operations (or ‘farming’ as it is sometimes known) as I am currently reviewing a similar project that is looking for institutional investment...
I am just watching the Video, but don't you think the chart you draw like to go 87 (but once break, can be 83 like free fall?) whilst the monthly and weekly reports (data) are still positive for $. Could you explain why the index rose over 80 since 2014 from an economic perspective (that is what I lack) and compared the situation nowadays any changes so I know what would support the price to be there?
Moving on from Bitcoin, on to the Trading Club! A nice question here from one of our members who saw this week’s video where we featured the US Dollar Index and looked at some related setups. As to the first part of your question regarding my analysis, I draw the lines as I see them! Technical analysis can often be ‘in the eye of the beholder’, so if you see something different in the chart then I’m fine with that (and its what makes a market). Remember though that we go through the entire process first and finish with technicals i.e. we don’t start with a chart. So to your point about the weekly report perhaps being in contrast with this - that should ultimately preside over any technical analysis although this information was not available to me at the time.
To the second part, I’m simply going to quote one of my favourite traders of all time, Paul Tudor Jones:
“These days, there are many more deep intellectuals in the business, and that, coupled with the explosion of information on the Internet, creates the illusion that there is an explanation for everything and that the primary task is simply to find that explanation. As a result, technical analysis is at the bottom of the study list for many of the younger generation, particularly since the skill often requires them to close their eyes and trust the price action.”
The trading setups in the workbooks, show certain time frames for that plan. Does that mean they can only be traded in that time frame as demonstrated?
And lastly, a question from one of our students completing our Million Dollar Traders course regarding the course workbooks. I believe this refers to some of the technical setups that we demonstrate - some of them (such as Richard Dennis’s Turtle Traders channel breakout) are unique to a certain period, e.g. daily. However, most of them are applicable to multiple time frames (have a read about the ‘fractal’ nature of price action in markets) i.e. an oversold RSI is just as applicable to an hourly time frame as it is a daily or weekly interval. It really depends on the horizon you are looking to trade - there is no point looking at an hourly RSI if you are a long term position trader, and to a lesser extent vice versa if you are a day trader looking at a weekly RSI. So many of the indicators and techniques can are applicable to most time frames, but the actual setups featured in the work books are mostly relevant to that specific time frame (and most of our trading is based on daily rather than intraday setups anyway).
That concludes this week’s Q&A! Thanks for sending in all your questions, and I hope that you find my candid responses helpful.
Just before I go, if any of you are around in London on Tuesday 6th February (next week) Lex and I will be speaking at an event as guests of Football Index near Oxford Circus (more info here). It would be great to see some of you if you can make it!
Have a great weekend,
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