It’s been a while since our last proper market update.
🥶 Believe us, it’s not that we haven’t been watching the markets. We have. Somewhat like a frozen caveman. The truth is, it’s not been a great time to trade.
💡 That leaves an important question: When is a good time to trade?
✅ By the end of today’s letter, you’ll know how to spot big shifts in market structure.
Read, enjoy and share with your network. Let’s all build wealth together.
At Market Meditations, we firmly believe that generational wealth should be accessible to everyone. To that end, we’re delighted to be partnered with Nexo: one of the most user-friendly crypto lending and earning platforms in the industry.
💎 You can use our link to start earning now.
💥 For 6 clear, concise and actionable newsletters a week, fundamental and technical analysis to compliment your trading/investing, trading education and self improvement, consider joining the free Market Meditations community 👇
🔐 Square To Make A Hardware Wallet For Bitcoin
Square is going to make a hardware wallet for Bitcoin, the company’s hardware lead, Jesse Dorogusker, announced on Thursday. CEO Jack Dorsey, who is also the CEO of Twitter, had said in June that the company was considering making one, and now Square has made the decision to move forward.
The topic of crypto custody is becoming increasingly important.
Storing funds in an exchange can be risky, to say the least.
You’re subject to hacks and regulation (which we’ve seen be the case recently with Binance).
For storing longer term, we prefer hardware wallets. Trouble is, they tend to be very difficult to use. This is where Dorsey intends to provide a solution with end to end reliability and minimal set up time. A notable feature of the wallet is assisted custody. Whilst this somewhat diminishes the idea of ownership of your own assets, it will potentially aid in security and making crypto more mainstream and accessible.
👉 For more on crypto security, including hardware wallets, check out our 9 Steps Essential Cryptocurrency Security Guide.
⏳ A Journey Through Time And Charts
What happened to the markets in 2021? We lost market structure. We experienced the same scenario in 2017. By drawing parallels, we can see how traders could have played the current downtrend. As well as how to play future downtrends.
Price made a high at $19.7k in December 2017. This was followed by a low all the way down to around $10k. Let’s take the $10k as an anomaly and consider the low at the $12.9k level.
After hitting those lows we saw: one white candle, one sideways red candle and then another big white candle. At this point, traders may have thought the bull market was set to resume. There are two levels to pay attention to:
$19.7k. For a bullish structure, we would need a new higher high above this level.
$16.5k. A softer level to reclaim to recover market structure.
Here’s what happened next 👇
Prices came down and then went up to softly claim the $16.5k level. Only to fail to claim the $17k psychological level and come right back down to the lows. And then lower lows dipping to $9k.
Suddenly, our low of $12.9k becomes the key level to recover. Not even to become bullish. To become neutral. We need the $16.5k level to be bullish again! We are starting to see the pattern. Lower lows and lower highs.
Carrying on with the example 👇
We made another lower high at $12.9k. Followed by a lower low at around the $6k level. And then another lower high at $11.6k. The pattern continues for months. With lower highs and lower lows. All until a key break at around $6.4k level. That is, we didn’t see any substantial recovery until we started to trade above that $6.4k level again. Thereafter, we see a rally upwards.
This time around, the key break level is around $10.4k 👇
We can see $10.4k acting as a resistance level many times. As soon as it is reclaimed. We see another bull market 👇
You can make 99% of your money 1% of the time by identifying these key breaks and waiting for them. What are the key breaks this time around? Chart here 👇
At the moment, the safest level to wait for is $60k. It will require a lot of patience but you could outperform everyone just by waiting for the right moments to make the best plays. You can avoid getting chopped up by volatile market conditions.
Outside of that, if we lose $30k we expect much further downside.
For upside, we need to get above $40k to be neutral at the least. And then the $60k level.
And there you have it. How to find key breaks and why it pays to wait.
For more FREE alpha and insights into navigating the crypto markets, consider joining the market meditations community!
🧘 Free subscribers get full access to:
6 clear, concise and actionable newsletters a week
Fundamental and technical analysis to compliment your trading/investing
Trading education and self improvement
🎁 Decisions, Decisions, Decisions
It is estimated that we make 35,000 decisions everyday1, from whether we are going to drink coffee in the morning, to what projects we are going to work on and if trading, what we are going to buy and sell. The problem, however, is that these decisions come at a cost. As shown by a series of experiments in 19982, our decision making abilities worsen after carrying out any task that involves active choices. In the first experiment, it was shown that people who forced themselves to eat radishes instead of chocolates subsequently quit faster on unsolvable puzzles than people who did not have to exert self-control when eating. There were three other experiments that showed carrying out personal, emotional or further self-regulation choices before carrying out a subsequent task decreased both willingness to engage with, and performance of that task.
This is because of willpower or the ability to resist short term gratification in pursuit of long term goals. Willpower is a finite resource and we are only able to use so much of it at any given time before it is reset.
Making any decision, no matter how small, decreases the amount of willpower we have left to use and it is this that leads to the negative impacts discovered in 1998.
The amount of willpower spent on a choice is increased when that action involves a trade off. When making trading and investing decisions, we face the constant backdrop of opportunity cost (including that of doing nothing) so it is clear how big of an impact decision fatigue can have on our profitability.
Given how many important decisions we make outside of our financial lives, not being aware of decision fatigue will significantly decrease our decision making abilities and therefore affect every aspect of life in a negative manner.
So we know that decision fatigue exists and can heavily impact our ability to make choices, whilst decreasing mental performance, but how do we avoid it?
Actively remove decisions from our lives. This may come in the form of preparing large amounts of food in advance (removing the decision of what to eat) or simplifying your wardrobe (removing the decision of what to wear). You may think we are exaggerating but these tricks were used by former US President, Barack Obama who claimed he only wore gray or blue suits because he had “too many other decisions to make”. Applying this to trading, if you have a checklist of exactly what you need to enter and exit a trade, this will significantly limit fatigue and increase the ability to stick to your system.
Find ways to increase your capacity for willpower. The best ways you can do this are to ensure you get consistent and adequate amounts of sleep3, eat regular healthy meals4 and meditate. More willpower means you can carry out more tasks, more effectively.
Learn to recognize decision fatigue and avoid making important decisions accordingly. Even with preparation, we often reach our limits. If you find yourself unable to make the most basic of choices or getting irritable for no reason you are likely already fatigued. In these instances, simply don’t make any decisions until your willpower is reset.
Understanding decision fatigue and willpower management are essential for success in all areas of our lives. Increase your capacity for willpower, learn when to avoid making choices and you will be a master of your own decisions.
Not financial or tax advice. The content in this newsletter is for informational purposes only. Nothing in this email is intended to serve as financial advice. We are not financial advisors. Every investment and trading move involves risk. Do your own research when making a decision. See our important security disclaimers here.
Disclosure. Some of the links we’ve included are affiliate, they give you rewards and discounts and earn us a commission. Additionally, the Market Meditator writers hold crypto assets. See our investment disclosures here.
Sollisch J. The cure for decision fatigue. Wall Street Journal 2016
Baumeister RF, et al. Ego depletion: is the active self a limited resource? Journal of personality and social psychology. 1998;74(5):1252–1265.
Pilcher J. J., Morris D. M., Donnelly J., Feigl H. B. (2015). Interactions between sleep habits and self-control. Front. Hum. Neurosci. 9:284 10.3389/fnhum.2015.00284
Gailliot, M. T., Baumeister, R. F., DeWall, C. N., Maner, J. K., Plant, E. A., Tice, D. M., Brewer, L. E., & Schmeichel, B. J. (2007). Self-control relies on glucose as a limited energy source: Willpower is more than a metaphor. Journal of Personality and Social Psychology, 92(2), 325–336.