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Is Shorting Link Now a Foolish Trade?
Evaluating the Risks and Rewards
Greetings, fellow traders!
I hope this message finds you well. I had originally intended to create a video to discuss some crucial trading concepts with you. However, due to a recent illness, I've opted to put my thoughts into writing instead, and I'm excited to share them with you in this email.
How do you know if you should go long or short?
Let's delve into this question by examining a 3D chart and utilizing a set of dependable tools: Fisher, Volume, and VZO. I invite you to join me on this journey as we explore some valuable trading insights.
Analyzing the Chart: Key Observations
After a thorough analysis of the chart, several essential points emerge:
Direction Matters: It is crucial always to analyze charts from right to left and avoid drawing levels from left to right.
Current Position: At the moment, we find ourselves at a resistance point. But is it wise to consider a short position here?
Our Bitcoin position has recently surged from 26,800 to 28,000. Realistically, how substantial of a short position would you want to take? What is the potential return of such a short trade? It would require constant monitoring. Alternatively, why not align with the prevailing trend and explore more straightforward set-and-forget or trailing-stop strategies during this bullish rally?
Do you see the logic behind this approach?
Zooming Out: Observing Market Structure on the 2W Chart
As mentioned earlier, it's worth reflecting on whether it's truly worth your time and effort to seek out a short position at this juncture. Are you striving for a mere 30 points to gain attention on social media, or are you focused on sound trading principles that lead to profitability?
Consider these points:
We are within an exceptionally long range dating back to 2022.
This range has been thoroughly tested. Can you count how many times we've touched the upper limit of this range?
Are you genuinely inclined to take a gamble in this late phase of the range?
As previously mentioned, what downside are you seeking to capture? It seems illogical and perhaps even imprudent to actively pursue short positions here, particularly when compared to the potential upside of $10.00-$12.00.
Attempting to pinpoint a downside target in this scenario appears unproductive and time-consuming, as the price has remained steadfast at $5.70 for over a year. While some may consider the coin outdated, it enjoys support from the World Economic Forum and has cultivated a robust "link marine" community.
Furthermore, our Fisher indicator has generated buy signals, particularly on higher timeframes, enhancing its reliability.
When Should You Consider Shorting?
The primary reason to consider a short position is if you are not already in a long position.
If you observe the price topping out on shorter timeframes and wish to capitalize on a normal market reaction, this approach can be valid. However, be mindful that this type of trade entails lower timeframes, requires continuous monitoring, and typically involves quick scalping.
In Conclusion (TLDR):
In trading, there are both GOOD trades that can result in losses and BAD trades that can lead to gains. It's akin to a poker hand where there's a probability that any random two cards can beat a pair of Aces (AA). However, this doesn't mean you shouldn't strive to maximize your odds.
Given the current market conditions and the multitude of other opportunities available, shorting LINK may not be a Good trade, irrespective of whether it leads to gains or losses. Of course, there are exceptions, but those typically involve not already being in a long position.
I trust you've found this discussion enlightening and hope it has broadened your trading perspective.
Until next time,
Stay tuned for our quarterly investment letter being sent out soon.
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