A Simple Market Timing Technique for Bitcoin Investors

In my last article, I listed a broad set of tips and tricks any beginner can consider when investing in crypto markets using technical analysis.

I also advocated not having to “time the market” when you’re just starting out as a crypto investor, that you can just begin a dollar cost averaging program, i.e. buying a fixed dollar amount of crypto, say, once a week every week, at whatever the price.

I still feel you shouldn’t need to worry about timing the market if you’re just beginning to dip your toes into crypto.

But after a few months of just purchasing crypto regularly as part of a simple savings program, you might have felt weird — if not a little silly — for buying at so-called highs before prices fell again, or continuing to buy as prices continue to fall.

If you didn’t feel silly, then all is still well. Dollar cost averaging is still viable, especially for relatively mature cryptocurrencies like bitcoin. There’s nothing wrong with continuing to do that.

But what if there existed a way to buy at market bottoms and take profit at market tops?

Then market timing would start to look a little more juicy, wouldn’t it?

Is it even possible to time the market exactly?

The short answer is no. At least, not exactly.

In this article, I’ll cover a few simple, no-fluff market timing techniques using just technical analysis to help beginner bitcoin punters finesse their investing decisions.

Notice that I said “using just technical analysis” in the previous paragraph.

It means I won’t confuse you with related concepts like “long-term economic cycles,” “intermarket correlations,” etc, etc.

So many investors complicate their market timing with “back-testing,” “curve fitting,” etc., that they waste a lot of time over-optimizing their investing strategies.

There’s not going to be any of that in this article.

All you need are your eyeballs, software that can display a candlestick chart, a way to draw support and resistance lines, and a healthy amount of risk tolerance.

It’s important you’ve read (if you haven’t already) the article preceding this one.

The most important reason is that you need to have at least a basic grasp of identifying support and resistance and trading with a trend.

Once you’ve done this, let’s begin.

I don’t like to dwell too much on definitions, because they don’t put food on the table. Let’s get this out of the way.

In other words, it amounts to making investment decisions based on predictions of what the markets will do.

Some people like to define market timing as simply “trying to predict when one can buy the low and sell the high.”

I personally like to call it “trying to buy when the market has stopped being weak, and trying to sell when the market has stopped being strong.”

In the following section, I’ll explain what I mean.

So here it comes. …

If you draw your support and resistance lines for bitcoin on the daily chart — using the guidelines I taught in my last article — you might end up with a chart that looks similar to the following.

Of course, if you’re too lazy to draw your own lines, feel free to copy my lines on your own bitcoin daily chart using whatever platform you prefer.

As long as you have these support and resistance lines in place, you only ever have to do the following things:

- Look out for support levels to buy bitcoin

- Look out for resistance levels to sell bitcoin

If you’re looking to buy bitcoin, but don’t want to keep buying at (what seems to be) ridiculously overpriced levels, just wait for bitcoin to “stop being strong” and start to fall.

There are many ways to determine this, but the most no-frills way I can imagine is to wait for bitcoin to cross a fast moving average (MA) line from above. It’s sort of like the way bitcoin crossed the 50 MA back in mid-November in the following chart.

When that happens, you can simply layer multiple buy limit orders at support lines as prices go down, and just let the market do its thing.

Sooner or later, bitcoin will start to “stop being weak” and reverse course.

When that happens, you would have already accumulated more bitcoin at better holding costs, and you can start to think about partial profit-taking and/or a more scaled-back buying program, i.e. still buying bitcoin as prices go up, but not as much as when prices were going down.

And that’s all you do, really.

In future articles, I may cover (slightly) more advanced (but still simple) market timing techniques, but in the meantime, if you have any questions or need me to clarify anything, do comment below and I’ll get back to you as soon as possible.

This content is for educational purposes only. It does not constitute trading advice. Past performance does not indicate future results. Do not invest more than you can afford to lose. The author of this article may hold assets mentioned in the piece.

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