It never ceases to amaze me the resilience of Bull markets. But as an investor for the long term I do not buy on the fear of missing out. Been there done that been burned. I also do not sell my core holdings because I think I can time the market with my crystal ball. However I can increase my return in small time frame trades. This is the exact reason I have the 70/30 portfolio. 70% long term holdings I do not touch, and 30% in cash and trades.
I mentioned in previous articles the importance of long term investing. In the S&P there have been 2 major corrections since 1995 to 2014. In 20 years if you missed the 10 best days of the market your returns were cut almost in half. Keep in mind six of the best 10 days occurred within two weeks of the worst 10 days (many sell at the low and cannot get back in in time). This is why investors beat 90% of traders in the long run. But there is also a time to trade and a time to be in cash. Nothing like having cash when the market corrects. So now what can we expect since we just hit an all time highs? Well we can expect a correction at some point. Where I have no idea which is why we always look at key levels, and not just any level. So let's take a look.
The graph above shows the run from 2013. This is the BEGINNING of a long term super cycle in my opinion. Let's forget about the mid term cycles and just focus on the super cycle. Let's also forget about the current price and look at the facts and historical trends.
From I to II I drew the Fibonacci extension. Now it does not take a rocket scientist to look at the peaks since the end of wave II to realize just about every peak in the bull market (except one at $1300) happened at these "key" levels. It's almost mind blowing isn't it. Well we just passed the 5.618 extension. So if I'm in a trade, this is probably a good point to close it out or take some off the table and move my stop up. Only 1 out of 8 impulse waves skipped a fibb. So it's likely (87.5% likely) we pull back here, but there is always a chance (12.5%) we go higher to the next level at $7000.
But let's not stop there. Five out of six times each impulse wave retraced to the 0.618 level or lower. Only once did we just hit the 0.5 level. So there is an 83.3% chance we pull back this level to the 0.618 or $4143. So by simple probabilities I have a good chance of being able to buy at $4143 and this is where I would look to add to my core and maybe even make a trade. But we did skip the 3.618 level. So let's say we skip the 5.618 and go to $7000. Well the retrace is still lower at $4586. $1500 cheaper than the current price.
This same principle applies to the super cycle (larger market corrections). If we do hit $7000 the 0.618 correction of the super cycle is $2700. Now I know that is hard to comprehend for many but for anyone that has been in the markets for 30 years knows to expect this at some point. They go by the name of market crashes! Bitcoin had one in 2014.
This is why trends are so important! Now on to risk reward for long term adds, and the reason I recommend saving money and wait to buy the dips and why I am not adding here. (there is nothing wrong with auto buy where you buy ever week regardless of the price)
The risk to reward.
If I have $6100 to throw in the market NOW I would get 1 BTC. But if I am patient I may get to buy at $4140 which is 1.5 BTC. Actually I have an 80% chance of that happening. It's more than a 90% chance I get it at $4600 or 1.33 BTC. Do this over a period of 10 years and you can see how you can really increase your overall returns. So those of you going "crap I need to buy", be patient!
Bitcoin is very sentimental and for this reason Fibb is so accurate. In the shorter term cycle, a break through of $6250 level I will add for $7000. But that is $200 away. And I could get a chance at $4140 ($2000 away) which is about 1/10 risk to reward. If we had a major correction I could get it at $3000 or lower! Do not think it cannot happen!
I mentioned in previous articles the importance of long term investing. In the S&P there have been 2 major corrections since 1995 to 2014. In 20 years if you missed the 10 best days of the market your returns were cut almost in half. Keep in mind six of the best 10 days occurred within two weeks of the worst 10 days (many sell at the low and cannot get back in in time). This is why investors beat 90% of traders in the long run. But there is also a time to trade and a time to be in cash. Nothing like having cash when the market corrects. So now what can we expect since we just hit an all time highs? Well we can expect a correction at some point. Where I have no idea which is why we always look at key levels, and not just any level. So let's take a look.
The graph above shows the run from 2013. This is the BEGINNING of a long term super cycle in my opinion. Let's forget about the mid term cycles and just focus on the super cycle. Let's also forget about the current price and look at the facts and historical trends.
From I to II I drew the Fibonacci extension. Now it does not take a rocket scientist to look at the peaks since the end of wave II to realize just about every peak in the bull market (except one at $1300) happened at these "key" levels. It's almost mind blowing isn't it. Well we just passed the 5.618 extension. So if I'm in a trade, this is probably a good point to close it out or take some off the table and move my stop up. Only 1 out of 8 impulse waves skipped a fibb. So it's likely (87.5% likely) we pull back here, but there is always a chance (12.5%) we go higher to the next level at $7000.
But let's not stop there. Five out of six times each impulse wave retraced to the 0.618 level or lower. Only once did we just hit the 0.5 level. So there is an 83.3% chance we pull back this level to the 0.618 or $4143. So by simple probabilities I have a good chance of being able to buy at $4143 and this is where I would look to add to my core and maybe even make a trade. But we did skip the 3.618 level. So let's say we skip the 5.618 and go to $7000. Well the retrace is still lower at $4586. $1500 cheaper than the current price.
This same principle applies to the super cycle (larger market corrections). If we do hit $7000 the 0.618 correction of the super cycle is $2700. Now I know that is hard to comprehend for many but for anyone that has been in the markets for 30 years knows to expect this at some point. They go by the name of market crashes! Bitcoin had one in 2014.
This is why trends are so important! Now on to risk reward for long term adds, and the reason I recommend saving money and wait to buy the dips and why I am not adding here. (there is nothing wrong with auto buy where you buy ever week regardless of the price)
The risk to reward.
If I have $6100 to throw in the market NOW I would get 1 BTC. But if I am patient I may get to buy at $4140 which is 1.5 BTC. Actually I have an 80% chance of that happening. It's more than a 90% chance I get it at $4600 or 1.33 BTC. Do this over a period of 10 years and you can see how you can really increase your overall returns. So those of you going "crap I need to buy", be patient!
Bitcoin is very sentimental and for this reason Fibb is so accurate. In the shorter term cycle, a break through of $6250 level I will add for $7000. But that is $200 away. And I could get a chance at $4140 ($2000 away) which is about 1/10 risk to reward. If we had a major correction I could get it at $3000 or lower! Do not think it cannot happen!
