ETHUSD update: 954 all time high reached as price reacts to the upper boundary of the 945 reversal zone. Price momentum is bullish and is likely to test 1000 but buying at current prices presents increased risk.
This price action is nothing new. When you have strong markets like we have seen in these coins, it is still better to lock SOME profits at highs, and look to buy nearer supports. The biggest problem that I see with new investors is they are controlled by greed. They want to sell at the exact top and feel as if they have lost if the market goes higher without them. This is a normal reaction but must be identified and eliminated because this same greed is what leads to turning a winning position into a losing one.
The 945 upper boundary of the reversal zone is a projected level that is measured from the 492 low. IF price fails within this zone, like it is now, that presents a situation that is similar to a double top but not as obvious. This zone, along with target extensions serve as better places to lock in profits, not establish new positions.
Why not lock in all profits and just buy back on the pullback? The reason is there is no way to be certain that price will retrace or how much. By locking in some profit, you reduce risk if price decides to fall apart, and by holding onto some of the position allows you to continue to participate in the market IF it continues higher without any significant retrace. This is how a swing trade evolves into a position trade. We can't control profits, we can control risk.
As far as where to buy now, the first level I am anticipating is the 835 minor support (.382 of recent bullish swing) which is also an old resistance/new support level (inversion). The second area is the 761 to 710 zone which is relative to the .618 of the recent bullish swing measured from the 640 low.
Buying at these levels would be for a swing trade and would have a target some where in the high 900s. The risk has to be determined at the time of the entry. And that will be based on what kind of price action unfolds IF the market chooses to retest one of these areas. I would like to see a reversal pattern such as a double bottom or failed low before I consider anything else.
What if price never pulls back? Then I miss the move. I do not care about how high or low markets go, I am only interested in opportunities that present a well defined risk, a signal that shows momentum is in my favor, and a target that is within reason and relatively attractive compared to the risk I have to take. It is possible price may hesitate to retrace and just continue higher to test the psychological 1K resistance, but the risk is unattractive at current levels.
In summary, the concept of selling while you can is nothing new to professionals who are aware of the limitations of greed. When markets push highs, that is an opportunity to sell while buyers are plentiful, while selling the precise top is irrelevant. Buying strong markets at a low point offers greater reward potential at a lower risk. Controlling risk is what leads to long term success in any market, not home runs. In a case like this market, waiting for a retrace to a relevant level is the best I can do, especially when price is showing some signs of selling off of a projected resistance area. All markets eventually retrace and if the market I am interested refuses to, then I will look elsewhere for a market that offers opportunities that make much more sense in terms of the risk I have to take.
This quote “I made a fortune getting out too soon” ~ JP Morgan which @goldbug1 referenced seems relevant here :)
It helps remind you that there are always more profits to be made but you can only lose your money once
Turobej
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@MarcPMarkets Greed seems to be hard to control...
...sentences like 'We can't control profits, we can control risk.' and the whole summary is worth a lot for a peace of mind...
...for 'meditation' just read this summary here :)
thank you!
deCarbonMan
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Very well said...
"They want to sell at the exact top and feel as if they have lost if the market goes higher without them."
Got stung with that one today. Not all lost though, as the lesson was reinforced.
omk799
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Hi! Thank you for your analyses and also for the psychological/strategical pieces of advice! I have found them very useful. I would have one question... Because of taxes I would not like to lock my profits by trading cryptos into fiat. Which cryptocurrency would you recommend as a "safe haven"? Do you use fiat, USDT, BTC or something else for that purpose? Thank you!
satertrading
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@omk799, if you are a US citizen, I recommend that you check the latest tax legislation. From what I understand, the law was clarified to classify crypto transactions as non-like-kind...they are not currencies, but securities. This means selling crypto for crypto is a taxable event. I AM NOT a tax expert, but picked this up from some reading I was doing during the holidays.
tvbman17
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@satertrading is correct. All completed trades are considered taxable events.
Over the holidays, I was looking for software to help me keep all of this straight - who wants to get in trouble with the IRS?? I found CoinTracking.info, a site that does all kinds of tracking activity. I found it especially useful for organizing all of my transactions for tax purposes. In addition to providing downloadable versions of the various tax forms needed (complete with your transactions), they have downloadable files that support TaxACT and TurboTax (which I use). It automatically does all of the FIFO tracking on buys/sells, short/long-term gains classifying, and the list goes on. There are a few settings that you need to make in order for it to give you the correct result for a US citizen, but other than loading all of your transactions (some of which can be uploaded from exchange-extracted data, depending on the "package" you sign up for), that is about it.
omk799
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@satertrading, Hi! I'm from Finland and we play with "the old rules" (at least for now). Thank you for hinting about CoinTracking.info! That may become very useful since I've done some fiat-crypto-fiat trading last year.
It helps remind you that there are always more profits to be made but you can only lose your money once