thetradingparrot
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Death cross what?
🕑 Added 2021-06-20 12:50:30 +0000 UTCA death cross is a signal that triggers when 2 moving averages cross in the daily chart: the 200MA and the 50MA.
The death cross effectively happened in the Bitcoin chart yesterday. People have been making a lot of noise about this event for at least a month.
The death cross is a lagging indicator and will usually trigger based on what we already know: that the market has been correcting for a while.
Even though no indicator can predict the future it generates a lot of FUD as statistically something that is already falling can carry on falling. And this indicator flags when something is already bearish. So it's like only confirming the trend. But a trend can end and switch to bullish and this indicator cannot predict when.
This limitation (and many lagging indicators) has got wrecked investors not just once but many times in history.
Once it fires many investors will normally freak out, pull out at a loss just to see then the trend change direction and have to buy in at higher prices later. It can act as a last shake out of weak hands.
Of course, many times the market carried on going down and then it was perceived as an "accurate indicator to forecast the future".
Personally I'm not selling my long term holdings. I'm only taking care of the extra volatility that this will cause. There will most likely be some downside, yes. But in my honest opinion that is not determined by two silly average calculations, it's based on all the FUD that miners being kicked out of China is causing, hash rate going down, etc. But I see them as part of the rules of the game: these events will constantly happen in crypto and high risk comes with high reward. My conviction is with strong hands will pay off, crypto is here to stay, and my long term holdings are that, long term holdings.
Historical data
There's so much noise about the death cross out there that is getting difficult to separated the objective data from the people just reacting to extreme fears or being overly bullish.
You need to know that:
- There's been bullish and bearish outcomes of the death cross.
- The market direction determines when a death cross happens, not the other way around
- If you think this is the end then you should pull out because you believe that based on events/fundamentals, lack of conviction on crypto or even some proper TA but not only because of a single moving average analysis (IMHO). There's so many other factors that can validate or invalidate the death cross that it'd be too biased to only use this one.
- People are using this event to manipulate you in either way: that you should enter or exit. not just for this event, but be careful with reacting to all that, in most cases it's only noise.
What's next?
Our attention should flip to the next golden cross which is the opposite event and once it happens it will flag a confirmation of a bullish market to many investors.
I would not expect this to happen any time soon though.
I think we will get there but it will take some time, so my focus is still with bearish and sideway market bot setups.
Comments
It's just as prone to whipsaws as any other moving average cross. As the chart above shows, it has a win rate of less than 50%.
Thank you for your point of view and your clear decision what you're doing with your investments. could be an interesting close of the weekly candle tonight.
Thank you for info and great efforts
