Bitcoin Riches Through Sitting On One’s Hands

We are not speaking of “hodl”. Consequently, we also are not referring to any other way of passive long term investing. Nevertheless, two paradigms come into play when dealing with a wealth preservation strategy in Bitcoin. One, Satoshi Nakamoto pointed out:

“As the number of users grows, the value per coin increases. It has the potential for a positive feedback loop; as users increase, the value goes up, which could attract more users to take advantage of the increasing value.”

The other is Bitcoins’ limited supply of 21 million as a decentralized easy, fast, and long-distance payment method.

Jesse Livermore said:

“It was never my thinking that made the big money for me, it always was sitting.”

Easier said than done. We are wired to take quick small profits and find it as such extremely difficult to sit through lengthy-time periods to ensure larger profits should a trade develop into a sustainable trend.

While trailing stops most often fail being set too tight motivated again by the fear of losing one’s gains, one solution is our quad exit method that we use in our free telegram channel in which we post-trade entries and exits in real-time.

BTC-USDT, Weekly Chart, Taking profits into the extended move:/h3

Here is an example of the application of this psychological and money management tool. We entered a long trade on April 15 last year at US$6,726. Shortly thereafter, we took partial profits to erase risk at US$6,993 and locked in some more profits at US$7,248. This did not just provide for solid trade results. Most of all it satisfied the psychological hunger to now be able to sustain the idea of “sitting on one’s hands”.

With a preset like this, we were able to let the remaining position size of twenty-five percent, fittingly named “the runner”, do its thing. We exited the trade last week on 1/9/2021 at US$40,729 (a 506% profit). An exhaustion move with a confirmed counter directional signal on a larger time frame warranted to do so.

BTC-USDT, Weekly Chart, Ten runners still on the move:/h3

BTC-USDT, weekly chart as of January 9th, 2021

Get The News You Want

Read market moving news with a personalized feed of stocks you care about.

Get The App

Still, we would be in trouble without another additional methodology in play. We call these reloads. Far from a typical form of a high-risk methodology of pyramiding, this way of adding an individual low-risk trade allows for ending up with multiple runners should a trend develop as it has over the last three quarters in Bitcoin.

With this methodology, there is no need to pick tops and bottoms. Surviving runners extend into building a large position size. In the same way, partial profit-taking of such a position through closing out trades, meaning reducing overall position size is possible. Useful if possible trend exhaustion, distribution zones, or otherwise target zones establish themselves throughout the upward move.

The weekly chart above shows with yellow arrows entry points of trades we posted live in our free Telegram channel where we still have the runner portion exposed to the market. It is this combination of tools we apply that allows us to be left with choices. This in regards to additional entries and various partial profit taking points. It allows us to let a good portion ride while sitting on our hands.

BTC-USDT, Weekly Chart, Bitcoin riches through sitting on one’s hands:/h3

Now that the cat is out of the bag and mass media has pointed out Bitcoin´s staggering gains last week, professionals typically fade the money coming in from amateurs stimulated by the hype. But not so fast. Are we seeing Bitcoin’s typical extreme retracement? In the weekly chart above we have identified four (A to D) major retracement support zones.

• All-time new highs from 2017, retested in November last year near US$19,888 (D).
• The most dominant supply zone marked by a “POC” of the 4th leg up volume analysis near $23,512 (C).
• Fibonacci retracement 0.618 with price zone near US$27,392 (B).
• Fibonacci retracement 0.786 with price zone near US$33,945 (A)

Yes, we had a four-leg move up from US$3,782 and we are extended without a doubt, but who says we won’t find ourselves in a few years at levels tenfold from here. Livermore was right in his approach of sitting on one’s hands.

Luckily our approach takes the worry and guesswork out of these debates. We let the runners run. Should we see a deep retracement we get additional low-risk entries with their runners possibly surviving as well. And yes, if you are relying on an, in part, income-producing system this is certainly a spot right here to take partial profits off the sum of your runners. What is not wise is to tighten stops here or typically place them somewhere where they are emotionally comfortable in the middle and have the typical experience that they just get nicked out before prices advance further again.

Bitcoin riches through sitting on one’s hands/h3

Jesse Livermore also said: “Nobody can catch all the fluctuations.” With the above-described methodology, one doesn’t need to.

This self-regulatory system allows taking the agony of being right, the need for perfect timing, and most of all the hardship of not letting the cash register ring out of the equation. Livermore also stated: “Men who can both be right and sit tight are uncommon”. We find that the illustrated approach is one way to circumvent the difficulties of participating in a steep trend without its typical pitfalls.

Written By: Korbinian Koller