Bitcoin (BTC) is one asset we don’t touch on all that often here on this blog, but we’re going to make an exemption this week
The fact of the matter is that even though most of our traders are active in the traditional forex market only, the skills they learn can be applied anywhere. And we know for a fact that some of you have put those skills to use in the bitcoin and crypto market.
So, this week, we’re going to take a look at the chart of bitcoin, and see what’s been happening since we reached a bottom around mid-December last year.
Those of you who follow the bitcoin price will know that after surging in the first half of 2019, the digital asset saw lacklustre performance in the second half of the year. From the 2019 top at over USD 13,000, bitcoin lost about 50% to hit the 6,500 level before finally bouncing back up.
As can be seen from the chart, however, bitcoin printed an almost perfect inverse head-and-shoulder pattern after hitting the low in December last year, and has since surged by more than 40%.
As many traders already know, head-and-shoulder patterns are among the most reliable chart patterns in trading, and when it is inversed – like it was this time – it is universally considered an incredibly bullish signal.
And the logic behind the bullishness of this pattern is simple, as the inverse head-and-shoulder simply represents a transition from a trend with lower lows, to a trend with higher lows – the very definition of a trend reversal! This is exactly the kind of signal trend traders look for before they take a position in any market.
Key barrier broken
While the head-and-shoulder pattern was certainly important in order to signal a trend reversal for bitcoin this time, another key technical barrier was recently broken that confirmed the new trend, namely the 200-day moving average.
Moving average lines are often used by trend-following traders, including large institutional traders active in the futures markets, who use them to distinguish between bull and bear market conditions. And among the moving averages, the 200-day is probably the most used one among long-term trend followers, while the 50 and 100-day are more popular among the shorter-term swing traders.
With this key long-term psychological barrier now broken, there is little resistance ahead for the bulls as they work to push bitcoin higher. As always, however, it’s important to be picky about your entries & exits, and choose them wisely.
In clear uptrends, however, pullbacks are there to be taken advantage of, and the key is to have the mental strength to buy at the moment when others are selling. If you can do that, chances are you will have at least some success in trading, whether it is in forex or crypto. Buy the red days, sell the green days, as the experts say!
Join our trading seminars in Australia
If you want to learn more about how to trade bitcoin, crypto, forex, and other assets, feel free to visit us at one of the free trading workshops we will be hosting around Australia this year. We have already successfully completed several of meet-ups in 2020, and look forward to doing more.
At this 2-hour session, you will learn all trading basics that you need to be able to go out and explore on your own, while also having the opportunity to sign up for future training sessions if you wish to do so. We look forward to welcoming you!