Trading timing technics that may help you reach a prosperity in trading
In this video, we're going to talk about three great timing techniques. In other words, I'm going to show you three powerful and very simple ways in which you can time your entry into the markets and by the way, this can be any market you want it to be, whether it's stocks, stock markets, forex, gold, and of course bitcoin and cryptocurrencies. Now, first of all, why is timing so important and one of the best books ever written about trading the markets and investing called market wizards. Trader and investor lender rescue says this, he says one of her main weaknesses in her mistakes has been being a bit premature on entering positions, and she says what she does now is wait until things set up just right before she takes a trade and she says it's better to have the wrong idea and good timing than the right idea and bad timing.
So for a lot of investors and traders, the best ones in the world, timing is extremely important, and also that is what makes a difference between being an investor and the gamblers.
Gamblers do not care about timing or risk control investors. Do everything they can to make sure the timing is right and that they're controlling the risks. Let's begin with timing technique number one. Alright. The first timing method that I use and in fact has been used by some of the greatest investors and traders in the world, is what's called a false breakout signal. Let me explain this to you. I'm going to use as an example, this chart of bitcoin and a member. This chart could be whatever you want it to be, where their stock markets forex or in the cryptocurrencies. Now, the way to understand the breakout or the false breakout signal is what often happens is the markets will come back and retest a previous level of strong support or resistance.
The smart way you should try to start Bitcoin trading with small amount of money
So for example, here's bitcoin which formed the low, very significant low in 2015 after it was dropping quite heavily there. As you can see, it made this significant low right there. As you can see on my chart, notice that some months later it came back and retested that level. In other words that are retouched it and notice what it did. You will see the price went below its previous level, okay, so it went below the previous low only for it then to reverse direction and go back above it again and notice what happened afterwards. After it made that breakout or false breakout signal, you can see that bitcoin staged a massive, massive, incredible rally higher, so these false breakouts signals when you find them, when you see them, can be great opportunities, whether to go long by or indeed to go shorts go against the market. A lot of these false breakouts, signals and activities are done by bots and algorithms designed by institutions, and these are done deliberately to manipulate price on influence investor behaviour.
Let me show you another example of this. Here is again bitcoin which formed a low right here some years ago. Now I've marked that level with a red line. Now you'll see what happens next. As bitcoin comes back, goes right through that previous low that had formed there, but look what afterwards, immediately within one bar, a couple of bars later, it reverses and goes back above it again. That immediately becomes a buy signal or a long signal and you can see what happened afterwards. Bitcoin stage, the massive reversal rally, so guys, whenever you see something like this happening, a false breakout, do pay attention and here's an example for you in the opposite direction. There it is. This one is a false breakout in the upside direction so you can see what happened here. Bitcoin from the top here and then comes back, takes out the previous stuff, but just a few points, only a few points as you can see here, only for them to reverse back and go below it again.
Again, remember, a lot of this is done by bots activity. These bots designed by situations are triggering these previous highs, deliberately influencing investor behaviour to exploit the liquidity entities areas because can bitcoin then continue to drop from those levels? All right guys, let's go to timing technique number two. In fact, this is one of my favourite timing techniques that I use quite often. We just call it 21 moving average barrier, and what you want to do for this technique is put on your chart at 21 exponential moving average. Now, by the way, in case you're scratching your head right now, it's just in case you haven't heard of a moving average. What this Blue Line you see here on my chart does it averages out the price on the chart for every 21 bars or 21 days to the past. Okay, so what I'm seeing here is an average of the price for every 21 bars on this chart where every 21 days and that's a very powerful signal and in fact it's one of the most important signals or indeed levels on the charts and technical analysis, and in fact almost every chart there is has this option to put the 21 ema 21 exponential moving average on your chart.
Now, let me show you how you can use this to your advantage. You see, the rule is simply this, that whenever price moves above the 21 exponential moving average and closes above, it's twice the odds. In other words, the probability favours and move to the upside, and by the way, I have one more important rule about this, which is that I need the price to go above the 21, moving average and close above it twice. In other words, I need to see two consecutive closes of the price above the 21 average like that. Like you see there, the price closed above at twice consecutively. That puts the odds, the probability towards a move higher, and by the way, the opposite also applies in reverse. If I see two consecutive closes below the 21 moving average, which occurred right here on that bar in case you're wondering, well why not that one over there?
Well, it's probably because it's a positive bar rather than a negative bar. If I say chickens, negative bars like that, that's actually probably better. And when that happens, that means the odds, the probability has shifted for a move lower. Okay? So in other words, by using a 21 moving average, it increases the probability by just over 50 percent that the directional bias has changed from a bullish or bearish or bearish to bullish, depending on which side of the moving average it is on. In other words, the odds are just better than the flip of a coin. And in case you're wondering, could this have helped you in some way? When bitcoin dropped massively back in December, and then of course crashed by about 70 percent afterwards, the answer is yes. Take a look at this. This is bitcoin. First of all, notice back in November of last year, Bitcoin goes below 21 average, but does not close below it.
You'll notice that it did not close below 21 daily average. In fact, it went and closed above it. So this was by no means a cell signal or a reversal signal. Now let's take a look over here and you'll notice something very interesting, which is when price closed twice below the 21 moving average, which occurred right there. As you can see here, when the price closed twice below the 21 moving average, 21 daily average, the bias shifted from bullish to bearish in other wars, there's now greater than 50 percent probability that price is going to drop from here, and in fact, that's exactly what it did by the way, in case you're wondering, there are situations when this can give you a lot of false signals as well as happened here on the euro some months ago. You can see how it went below the 21 average and then went back above it, went below it, went back above it and causing a lot of whip sauce.
Now I would say this, if you are a more experienced trader, then this would not matter to you because you would know how to control your risk and how to control your entries and exits. But if you are a newer trader or investor than this situation might perhaps scare you. All I would say to you is this, that in the markets all you have are probabilities and all we're trying to do is increase our probabilities. There are no such things as certainties or guarantees in the markets. Now, let me just say this. If you're looking for certainties and guarantees, then can I suggest to you a career in accounting or politics because you're bound to have certainties and guarantees and accounting, but you're not going to find it into financial markets are guys, and finally one of my favourite tools on the charts is something called Adx, which is this indicator you see underneath down here, and what Adx or average directional index desk for you is it keeps you out of choppy market environments.
In other words, what I just showed you a few moments ago when the euro chart was doing this, as you can see, it was going up and down, up and down like that, and this indicator, what it does is this. The adx dropped below 20 when it sees a choppy market environments. In other words, when there's no directional bias or trend bias in the markets. So when the Adx falls below 20, you would likely to see a lot of these sideways choppy markets actions in the market. So what you can do in this situation is wait until the ADX has gone above 20 as you can see there, and then look for any potential trade setups and I could see when the Adx does go above 20, that's when you're more likely to spot those trending opportunities in the markets. Now, before I finish this video, I just want to quickly say this and that's if we applied these first two rules we learned in this video which is the false breakout and the 21 moving average.
You can see the charter light coin and you could put this into action. For example, at notice, the light coin has now dropped below key support levels. That's the February, April, and may lows. And if light coin was now to reverse direction and quickly move above, it's February, April, May, lows, and notice that's exactly where the 21 moving averages as well. So if we see a move on light coin above both the 21 average and above that previous lows that had broken out of that would classify as a false breakout signal. Although just to be clear for a false breakout signal, I usually wait for quick reversal within three to five bar.
All right guys, I hope this video helps about the timing techniques and if you found us needed to be useful and educational, please give it a thumbs up and also please remember to subscribe to our videos with future updates.