In before: hur dur TA doesn't work told you so...

So that's going to be the resolution of our grand (log) triangle? No decisive breakout, bearish or bullish, but just sliding through it (or maybe staying just an inch below resistance) on zero volume? What a letdown...

close up:




full view:

Funny little pattern (32 weeks).

Did I mention I'm in a relatively bullish mood lately?

Here's an amusing little pattern that I never noticed before. Discovered, or at least posted on r/BitcoinMarkets by user:amichateur.

The basic observation is: it appears that after (on average) 31.8 weeks, price reaches a local maximum (where local maximum is not properly defined for now, missing a specification of the distance/neighbourhood. deal with it, formally minded people).

Here's his thread: http://www.reddit.com/r/BitcoinMarkets/comments/25to0r/bitcoin_price_past_and_future_local_maximum_every/

Don't take it too serious, please. It's quite possibly a meaningless observation, and an even less informative extrapolation, but it will be fun at least to see if the pattern holds around early July or not.

I take it that's your way of saying that I'm right :)

That's a simplification. More specifically: an unhelpful simplification.

Bitcoin price increased over the long term in a way that lends itself to view it as exponential growth. That does not mean: 1) that it always grew exponentially at all times (in fact, there are long stretches that are very clearly modeled best by a linear growth function), 2) that a single exponential growth function governed the price, 3) there are stretches of time where, conceivably, super exponential growth took place.

the tl;dr: sometimes it makes sense to look at price on a linear chart, sometimes on a log chart. the "broader" the view (e.g. the entire history of bitcoin trading), the more likely it is that the log view is more informative.

I used the 25% constant as a very rough approximation. I called some of the tops/bottoms more accurately, and some I just slept through (I literally slept through them :/) But in principle, the answer is 'yes, mostly'. The strategy I tend to use I'd say is a hybrid between momentum trading and predictive trading. I'm sure, better and more experienced traders than me are more apt at pattern recognition, so they can see the major lines (and where they converge) ahead of time, but I most of the time trade after the fact, so my main emphasis is based on momentum. The question then is, "how long after the fact", and is it still consistently profitable.

You noticed that in the chart I posted, I specifically said to exclude the last period of trading, so the trendline isn't relying on the gox death throes.

Still, 3 areas of contact, so at least as good as the Bitstamp chart.

What an awfully complicated way to set up a very basic question: how often do you trade, and do you make a consistent profit doing so.

I don't see how the taxes factor into the frequency of trading. In the tax system that applies to me, any selling of btc before a year will incur a tax depending on my personal tax rate, so any profit of an individual trade will need to be lowered by that tax rate. If the trade itself was profitable though, it will be so even after tax.

Here's a list of the trades cycles I took part in during this bear market. I'm sure you can easily find the corresponding dates on the chart.

sell at 1200, buy at 400: ((1200*0.75)/(400*1.25))*0.95 ~= 1.7 times btc
sell at 1000, buy at 400: 1.4 times btc
sell at 700, buy at 340: 1.17 times btc

The assumption here is that you missed the optimal selling point after a 25% decline, and the optimal buying back point after a 25% increase. Then take off 5% for slippage and fees. Taxes not included in this calculation yet. The overall result is about 2.8 times the amount of btc than initially held. The same could have been achieved of course with a single perfect trade (from 1200 to 400), but it's not a very realistic assumption.

The numbers above are not exactly what I personally traded, but not completely unrelated to my trades either.

This type of naive extrapolation, from data points /years/ in the past, is really not a good predictor of anything short or mid term.

The chart by Elwar relies on the data point of the flash crash in October 2013, so it can construct the "nice line" from Jan 2013, via October 2013, to now.

But who can say with certainty that this isn't the "real" exponential trendline:



(ignore the last 60 or so candles, of course)

So, why not that one? It has 3 beautiful "areas of contact": the end of the 2011 bear market, several contact in July 2012, and in Jan 2013. That's as good, if not better, than the motivation for the Bitstamp chart by Elwar.

Plot twist: the lower line of this one currently sits at $135.

Here's the take home message: don't trade based on extrapolations from year-long trends. If you must, use them to inform your long-term investment goals, but they sure as hell won't tell you when a correction is over, or about to begin for that matter.

Yes, there's a lot of similarity between the two plateau phases. But in my circlejerky echochamber TA thread I just posted and argument that there is one underlying difference, possibly, maybe, kinda: better buying support now vs. then, as evidenced by money flow.

Price support, finally?

Okay, here's a (cautiously) bullish observation. I've argued before that one way to conceptualize the different periods of the bear market we've seen is that the market goes through rapid price swings, then stabilizes for a moment, and then determines if the price at whatever plateau we landed at is supported sufficiently by buying. In the past 4 months or so, the answer was always: "no". I have also argued that those plateaus are (probably not coincidentally) located around "round numbers", like 800, probably for psychological reasons, but I'm not sure about the latter part anymore. (here's an idea I wrote on this on tradingview).

Alright, so here's the bullish part: if I define those "briefly stable plateaus" in a natural way, say via BBW, and look at an oscillator like MFI (that in my experience is excellent for picking up changes in buying pressure), we get a rather positive picture for the current plateau:



The orange line in the MFI window (at 50) marks the difference between negative and positive money flow. The 6h view is, imo, a good compromise between picking up changes reasonably fast, while filtering out unwanted noise.

The picture I get is that during plateau #1 (January, 1st red rectangle) and plateau #2 (March, 2nd red rectangle), we saw substantial negative money flow, spending most of the time below the zero/50 line, and peaking deeper into negative territory than we did into positive territory. In other words, we didn't find support at those levels at those times, and price declined as a consequence.

Contrast this with the most recent plateau, around 440/450, and we see that we stay mostly in positive MFI territory, and see a possible upwards trend in MFI where higher MFI highs and lows indicate that we found buying support at the current level.

To really be sure of this, I would say we'd need to see MFI go above 80 now (pretty close already, at 78/79 right now). Note that in January, a (slightly weaker) upwards trend seemed to form as well, but was followed by a very sharp drop into negative territory and subsequent price decline. Say 6h MFI would cross above 80, and then, on the following (inevitable) swing down would stay in positive territory (or only briefly dip into negative), then we have  strong case that buying support for mid-400s really exists.

* * *

That's the observation. I said "cautiously bullish", because I still see a) the possibility that a large enough dump by a whale (e.g. on the Chinese exchanges) will take us back into panic selling mode, and b) because based on the overall low volume, I don't see us entering a fully developed bull market anytime soon.

But if my observation about support at this price level is correct, then that would mean that any sharp price drop (caused for example by a whale) would probably be quickly reversed, by snapping back to the current price level. It would also give us the chance to slowly grind our way out of the bearish triangle.

No, I don't. By July / August, gox was in hot water already, and it reflected in volume. More specifically, April 2013 was gox volume in full glory, by the middle of the year they had already taken a hit. I guess to do this the right way, we'd have to sum over gox, stamp, btce and btcchina, but I can't bring myself to do it for such little gain.

Me too.

Which of those two look more like  "Volume is slowly picking up again a month after the bottom" to you?






Possibly the 'reversal' is more stretched out this time, because the entire correction was more stretched out, so I'm not taking the above as proof that we must go down again. I'm just pointing out that, so far, they look pretty dissimilar to me.

No, not really. Actually, not similar at all.

I'm pretty much neutral on the question whether the bottom is in or not, but last year, July to be precise, saw a pitch perfect reversal that I picked up comparably easily (and remember making a number of, cautiously, bullish posts about).

This year, assuming the bottom is in fact in, looks much more restrained, bordering on timid, both in volume and price development. I'm sure tera will be quick to jump in pointing to the weekly averages that saw a bearish cross this time vs. no such thing happening last year.

Anyway, the tldr is: last year the bottom was followed by a 2 month period of stable, probably linear (how novel!) growth. This year's "bottom" is followed by sheer stagnation. What conclusion to draw from this is up to you.

+1 for an insightful and levelheaded perspective, and just general awesomeness.


EDIT: oh, and by the way, congrats YipYip for being the first ever Hero member I put on ignore. Lay off the steroids for a while, mkay?

Great answer. Screencapped and saved.

Thanks.

Thanks adam :D Never said my TA was beyond reproach. Guess divergences really aren't my cup of tea.

Thanks. You are right. And I even checked the 'cheat sheet' that was posted earlier in here.

I guess it's just so damn unintuitive to me... lower highs in price, higher highs in indicator seems to indicate a bullish div to me, intuitively at least.

But yeah, no point in arguing, I made the same mistake as last time :P

Can we play the divergence game again? As I said before, they still elude me quite a lot.

Your critique, please:



The biggest problem I see: In addition to what I drew into the chart, there are also /hidden/ divergences in there that would technically count as bearish, e.g. lower highs in price, higher lows in MACD = hidden (bearish) div.

How to rank them? hidden div > regular div, or vice versa?

Not that tera needs the white knighting, but he's in no meaningful sense a bear, unless you didn't trust the charts since December, in which case you're either sitting on a big loss now, or at the very least, missed out on a lot of potential profits.

Maybe we should distinguish panic buying and "panic buying". Buying at points breaking through major resistances is in the latter category. But perhaps the distinction is potato potahtoe