The sixth installment of my trade journal features one of my best Bitcoin (BTC) swing trades ever, catching much of the 40% move that caught many traders off guard. 

This was a straightforward trade for me, filling bids in an area that I was expecting to be near the potential bottom. The entire trade is immortalized in a twitter thread. After closing this trade, I opened a new one on the retrace, which is still active.

BTC/USD

Setting up the trade

Entries: $7,390, $7,450 ($7,420 average entry)

Targets: $7,712, $8,535, $10,000

Stop loss: I set the stop loss at $7,240, below the 61.8% fib and recent swing low. This would result in a 2.4% loss on the position and a 1% portfolio loss. 

Risk / reward: Target 1 = 1.62, Target 2 = 6.19 Target 3 = 14.33

Part 1: Catching Bitcoin’s biggest pump since 2011

As discussed in my previous journal, after a significant break down from the bear flag on Oct. 23, Bitcoin price approached a buy order that I had set in June 2019. There was no rational reason for me to remove this order as doing so would be an emotional decision based on the recent drop. I filled my bids at $7,390 in the highlighted zone below. 

This also amounted to an almost perfect 61.8% retrace of the entire move from the $3,100 bottom to the $13,800 top, considered by many to be an ideal entry. 

XBT USD daily chart. Source: TradingView

Further, Bitcoin was flashing a bullish divergence on every time frame ranging from the 4-hour to the 3-day time frame. These divergences eventually confirmed on all time frames, shown below on the daily chart.

BTC USD daily chart. Source: TradingView

I doubled down on this position on Oct. 24 after price showed a clear swing failure pattern (SFP), wicking below a key swing low from months ago and closing above. 

This is viewed as a sign that liquidity has been engineered by a large party, who has likely moved priced below a certain level to sweep stop-loss orders and fill bids by enticing traders to go short. This SFP is shown below, both on the daily and 4-hour time frames.

BTC USD daily chart. Source: TradingView

BTC USD 4-hour chart. Source: TradingView

How it worked out

Oct. 25th and 26th saw one of the largest daily moves in 24 hours in the history of Bitcoin, and the largest since 2011 — a 40% pump. 

All 3 of my targets were hit, which are illustrated below. The first target was just below the bottom of the previous trading range, a likely point of resistance. Considering the 40% move, this was a very early place to start taking profit, but I was comfortable locking in gains in an area where the price was likely to stall, if not reverse back down. I sold ⅓ of my position here. 

BTC USD 4-hour chart. Source: TradingView

BTC price moved quickly through the first target, and in a matter of hours had reached the top of the range, filling my second round of asks at $8,500. This accounted for another ⅓ of my position closing.

At this point, I did not have an exact take profit set, as I wanted to watch price action for a good spot to close the remaining ⅓ of the position Price ultimately moved above $10,000 quickly, so I moved a stop loss to just under this psychological level. It was night time where I live, so I went to sleep and woke up “stopped out” at just under $10,000. 

This trade (alongside a massive move on Tesla) accounted for a large enough gain to fulfill my profit quota for the rest of 2019. As I always say, the less I trade, the more I make. 

Part 2: Setting up my new Bitcoin trade

Entry: $8,995

Targets: $9,600, $9,809, $10,379.15, $10,943, $12,700… and some higher!

Stop loss: $8,775

Entry Idea

As chronicled in the previous trade, Bitcoin made a massive move and then began to retrace. For me, the 40% Bitcoin pump was a sign that the downside was likely over for good, and that it was time to continue looking for long entries. 

On any impulsive move, it is common to see a 50% retrace, a knee-jerk selling reaction to a massive change in market conditions. For this reason, I was eyeing the 50% retrace for an entry. 

BTC USD 4-hour chart. Source: TradingView

Price dropped to the 50% level, filling my bids for a new Bitcoin position. The chart below shows fresh areas of interest I highlighted for a new trade, including the swing high ($8,995) on the 4-hour chart, immediately after the move down from late September. This is why I chose to set my bids on this line. 

BTC USD 4-hour chart. Source: TradingView

The lines drawn on the above chart account for likely short-term targets, as well as area below to use for stop losses (with a bit of room beneath for a wick). I will continue to update this trade as it continues.

The views and opinions expressed here are solely those of the (@scottmelker) and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.