PLAYING AGAINST THE BOX . . .
Those who have followed me can now recognize the importance of basis. The backwardation prevented me from getting bearish bitcoin on every dip to 6000 until recently. In fact, I was a buyer of every dip below 6000.
Basis is a lousy timing indicator but it is a very important directional indicator. And only when we went to contango and showed weakness did I warn of buying a dip to 6000. This was on October 29, 2018.
Now that did not turn me bearish. . . I simply warned that if we were going up we should not break down. . . in fact I went long on October 27th . . . and also said you could equally go short because whichever direction we broke the risk was small.
Many of you faded my trade and made some headway . . . but I did not get stopped out and the market eventually went up . . . and I also had a profitable trade. . . . those who went short should have trimmed . . . and least made a small profit. . . just as I did on my long trade. Again, trading is not about being right so much as it is about money management. My goal is simply to break even until I catch a major move. And as a trader this should be your goal.
As a rule of thumb if you can actively trade for one year and break even, you are likely on the road to success.
With the development of the Craig Wright/Roger Ver Clown Show it became evident to me that fundamentally this was the crowning moment to expose the inherent weakness of The CryptoWorld.
The technical coincided with the fundamentals plus the odds were 20:1 we would break down. Could not be a more perfect trade with everything lining up.
And the more I study the more I am convinced this is the case. Here is a recent video by Craig Wright’s NChain crowd.
The sympathetic selloff in bitcoin has started. How long it will last and how low we will go, no one knows. With the increase in activity it is now time to trade against the box. By that I mean it is time to aggressively trade small portion of your short position by trimming and scalping.
I shorted the market well before the break and added to it as the postion worked in my favor as low as 6206 and now I start trimming and scalping, either reducing my position or improving my position, but no longer adding to my position.
Again, my emphasis to you, my dear readers, is not that I made this call. My emphasis is I entered a trade not knowing what would happen but with a low risk and 20–1 odds in my favor. And you were able to see exactly how it was done. The goal is to break even until you catch that winning trade and then ride it for all it is worth.
Successful trading is not easy. But those who have ears will hear. What I teach is for the few, not the many.
One of the frustrating things that happens is during fast markets it is difficult and sometimes impossible to place an order. Now I realize many blame this on the manipulation by the exchange. . . but I have been trading since 1973 and was deeply involved with gold and silver trading along with the old Kansas City Value Line contract. I can tell you from experience that the frustration and fast markets are nothing compared to the markets of yesteryear.
While it does occasionally happen on Bitmex, it is far better today. . . than ever . . . so I give no credibility to the complaints or attribution that the exchange is manipulating things. The problem is everyone is acting at once. . . and its like a herd of cattle trying to get through a narrow shoot.
Again, I have been around the block more than once. . . and while hardly perfect Bitmex accommodates fast markets better than I have seen anywhere.
One way around it is to have high ball and low ball orders in place before time.
It should be noted that the Dec and March futures quickly went into backwardation on the break. This is due to over leveraged positions blowing out of the market. I, like hundreds of others, was trying to purchase the distant futures to no avail, so I know your frustration. In such a situation, the perp often goes to new lows after markets normalize. . . which it did and I was able to cover a small portion of my shorts at 5468 and resell it at 5661 on the perp. So there are ways to work around fast markets once they start slowing down.
The fact that we are in backwardation again changes the long term outlook. Again, the fundamentals of Bitcoin are sound compared to any and everything in The CryptoWorld . . . but that does not mean the cluster furk of BCash will not effect the only hope for sound free market money, The Hayek Standard which is The Bitcoin Standard.
Remember basis is a lousy timing indicator and it is possible that we go into a backwardation of 200 to 500 which has happened before. So I stay short until there is no longer a technical reason to stay short . . . and I trim and scalp now with the volatility back up.
How bad will this get? No one knows. It is possible we go all the way below 2000 and it is also possible we reverse right here (not likely). My experience tells me we will decline 4–6 weeks.
For those non-traders-WOW! It is time to dollar cost average. Remember the lower we go the more bitcoin you will be able to buy for the same amount of dollars. Most people are not suited to be traders, but it is possible to get similar results with the discipline of dollar cost averaging.
Hope this helps.
UOG
