BTC - Bullish Momentum and Market Recovery from Extreme Lows

BITFINEX:BTCUSD   Bitcoin / Dollar
Another day of fresh air as the market is starting to showing signs of strength especially with some of the more blue chip coins. Bot ETh' and BCH' are showing good momentum from their lows as well as Bitcoin' itself. NEO' is trading up 35% off its recent low as well as many others.

I originally planned on being overweight Bitcoin' (and I am) as my thinking was that bitcoin' recovered prior to the alt coins in the last market correction. But this time it appears the market is moving as a whole. This may simply be due to that fact that it is no longer just bitcoin' new investors are interested in, they are starting to see the potential of other coins and are simply diversifying accordingly. However we are still sitting on a good cash position and as I mentioned last Friday I was looking to start adding this week. Quite simply after large corrections things are choppy for a few days or weeks, and we want to see signs of a recovery before being aggressive.

How do I add in positions
Now lets say right now that we are working with a 100k portfolio and you have 30k in cash just to make it simple. Should be more than 30% at this point as the market has pulled back significantly and though we added a few small positions during the correction, we are still cash heavy.

A full positional trade should never be more than 2-5% of your portfolio. I like numbers where I can quickly determine my profit, so in this example I would be looking at $2500 as a full trade. If I want to add bitcoin in increments my trade positions would be $500-$800 each. So a full position is not more than 10% of my trading portfolio or 5% of my total portfolio. THIS IS SIMPLE RISK MANAGEMENT! Large positions cause Large problems when the market goes against you. In addition this provides opportunity to add at lower prices, as you have managed your cash position wisely. So if you have 10k in the market, a trade should not be 3k, it should be no more than $500. PERIOD! Now before I get the "that's peanuts" comments, go ahead an risk more and see how that works for you in the long term. If your new do not look to score home runs! Base hits are the name of the game. You may be the best market timer in the world, but if you do not have good money management skills, you will under perform those that do.

As far as bitcoin' goes this was a solid two days of movement on the back of a positive SEC and CFTC hearing. I want to add at least one more time as a longer term play, but I'm not adding here. We may get one more pullback to the 7500 level off the upper channel or the 8398 level where I would be a buyer. I am also looking at other coins to add to as well, as most are recovering off extreme lows. I will post as I add, but patience and small positions are still critical at this time. We are not out of the woods yet but there may be a clearing up ahead.

Kommentar: I see several comments on position size. My portfolio size determines the size of an overall trade, not my cash position. I do want to take into context my cash position size as well but it is not the determining factor. I am sorry that I worded this wrong.

In a 100k portfolio (overall) if I was to max out a trade at 5% or $5000, and I was to take a 20% hit on that trade. I limited my loss to 1% of my overall portfolio. That is the key point.

Now if I have a 100k portfolio and 30k of that makes up my trading portion, then I wouldn't want to personally trade 5k on one trade as that is more than 10% of my trading account. That limits my trades to 6. As I own more than 6 coins I want to be able to scoop up deals when they come without closing a trade. So that is why I would limit it to 10%. but that is me. There are times I'm over 10% of my trading portion, but never over 5% of my overall portfolio.
Very interesting, but one more question please: your Bitcoin position can be higher than 5% of your overall portfolio size, as it is a core position, i suggest?
Thank you for the analysis!
You are the real MVP!
a little self promotion here:
benji-man benji-man
@benji-man, though I predicted this....I didn't take my own advice, so... But it will be up to 25 by year end anyway!
but never over 5% of my overall portfolio...... and that is what separates the big traders from the little guys
Imo, i think the correction is over. The Daily chart is very nice. We have some pretty good bullish signals IMO ( MOM, RSI, move of the price ... ). Furthermore, the RSi level is historically low...
Like this so i can get in chat Please
+3 Antworten
Thanks for clarifying it for us!

Now I can see how you're controlling your risk in a downtrending market. I was slightly confused before when I saw that you add money to losing positions (remember: "Losers Average Losers") but now I can see that it's all part of your plan to add in increments and your positions are purposely kept relative small to account for the cumulative risk. So, this post helps me understand you better.

Yet, wouldn't it still be better to start adding only after the market has actually broken structure to the upside? Have a great weekend @goldbug1!
+2 Antworten
@pjims, Absolutely. What is meant by losers average losers is that in down markets people tend to sell their winners and hold on to losers and then buy losers because they are cheaper instead of selling their losers and cost averaging down their winners.

Yes I want to add on a breakout that is why i'm not just buying stuff up on every dip, only buying back that of which we sold off already, and slowly adding to good coins.

You have a great weekend Jim!
+2 Antworten
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