Why Price Patterns And Technical Signals Can Fail
– Price patterns and technical signals are difficult to trade in cryptocurrencies because the market often punishes those who act on obvious patterns.
– For example, a rising wedge pattern is typically bearish, but it can breakout to the upside.
– Technical signals like crossovers and changes in momentum can also be unreliable if too many traders are paying attention to them.
Spot Possible Divergences With Bitcoin Futures
– BTC CME Futures, used by institutions to speculate on BTCUSD, can diverge from spot BTCUSD charts.
– The BTC CME Futures chart reflects more traditional market traits and has gaps due to the platform shutting down daily and on weekends.
– This discrepancy and divergence between spot and futures charts can lead to fakeouts and false signals.
Predicting Fakeouts and Phony Breakouts
– The recent “fakeout” higher in BTCUSD could be predicted by analyzing the discrepancies between spot and BTC CME Futures charts.
– This discrepancy has been happening for years and when the futures market finally catches up to the spot market, the expected results often occur.
– Paying attention to any divergences between spot and futures charts can provide valuable insights.
Hot Take
While price patterns and technical signals can be useful in trading cryptocurrencies, they are not foolproof. The recent fakeout in BTCUSD demonstrates the importance of considering other factors, such as discrepancies between spot and futures charts. By analyzing these divergences, traders can better predict market movements and avoid falling for false signals.
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