Bitcoin Outlook: Scenarios, Trend and Risk
Updated: 3 days ago
Bitcoin Outlook must be considered in the context of exceptional volatility, continuous trading, execution costs and custody risk. Scenarios are more useful than confident price predictions.
In This Guide
Key lessons and practical rules
The original Financial Wisdom guide and media
Evidence, limitations and risk controls
Frequently asked questions
Related guides and authoritative sources
Key Takeaways
Use scenario planning instead of a single price forecast.
Size positions for volatility and possible gaps between venues.
Include fees, slippage, custody and counterparty risks.
Past appreciation does not establish future returns.
Original Financial Wisdom Guide
Background and Core Ideas
Ignore Opinion & Follow A Proven Approach
In this video we quickly look at answering the million-dollar question on where Bitcoin is heading next, and how I plan to trade it. For those who follow the channel, you will already know my trading philosophy regarding the financial markets; Follow momentum, keep losses small, and compound your winners for as long as you can. It’s a simple theory but many find it so frustratingly hard to follow.
My Bitcoin strategy is no different, in our previous Bitcoin video (Published 18 months ago) I demonstrated how a simple concept turned $10,000 into almost 1.4 million dollars with just 12 trades, whilst keeping losses limited. Let’s quickly take a recap of the strategy and look to see how the strategy has performed since.
The detail of the approach can be seen in the previous video, but to summarise, I call the approach Dual Mack Dee, using the weekly mack dee to determine the medium-term trend, and the daily mack dee for the short-term trend.
Both mack dee lines presented here represent the price movements of Bitcoin from late 2020. If the weekly mack dee line is above the signal line, which we see here, we have a confirmed trading window. Within the trading window we then look to the daily mack dee to make trading decisions.
When the blue mack dee line crosses above the signal line we place a trade, and when the mack dee crosses below the signal line, we place a stop loss position underneath the wick of that closing daily candle. This process is repeated for as long as the weekly mack dee window is confirmed.
If we traded purely on the daily mack dee, whilst the weekly mack dee was under its signal line, we would have endured many losing trades and considerable capital loss.
Let’s look at a recent example before showing the results.
Here we see the weekly Bitcoin chart. From late 2020 through 2021 we can see a large trading window, confirmed by the blue mack dee line trending above the red signal line. Let’s look at a trade made within the window, but to do that we need to revert to the daily chart.
Practical Checkpoint
Define the setup, entry and invalidation level before acting.
Compare the potential payoff with risk-reward planning.
Set the trade size using consistent position-sizing rules.
Rules and Practical Application
A trade was made after the close of the daily candle confirmed the crossing of the daily mack dee, we therefore placed a buy order ready for the open of the following day.
We then simply watch the mack dee and wait for an eventual cross down, which we finally see here on the 24th of February. The cross can also be confirmed by the histogram underneath, showing the first red bar below zero.
We place a stop loss below the wick of the closing candle which aligned to the red bar. Two days later price moved below the stop loss, and we close the position for a near 24% return.
By following this exact approach, we can now update the performance through to the end of July 2022. These results were shown trade by trade in the previous video, with the last trade being closed in January 2021.
The first trade of this update was seen in the previous example on the 4th of February 2021, with a return of 23.7%.
By following the process, our next trade came around on the 10th of March when the mack dee line crossed up on the daily chart. Two weeks later and price eventually lost its momentum, we therefore placed a stop loss position under the wick of the closing candle when the mack dee line crossed back down. The trade was closed at a loss of 3.98%.
The next trade came on the second of April when the mack dee marginally closed above the signal line. The trade was again closed for a small loss of 5% just two days later when price could not hold its momentum and the mack dee once again crossed down.
Without going through the detail of every trade, here we see the results of each trade following the same process, bringing us up to date as of July 2022.
At first glance the results may not look too impressive, with a total return of minus 17.61%, however this came through a period where bitcoin dropped from a peak of just over 69000 in November 2021, to a low of 18200 just 5 months later, equating to a huge drawdown of 74%.
Evidence Check
Is the sample broad enough to include difficult markets?
Do the results include spreads, fees, slippage and failed signals?
Could hindsight, survivorship or selective examples explain the result?
Evidence and Examples
We also need to look at the longer-term perspective. Over the 21 trades, the average winning trade provided a 75.47% return, whilst the average losing trade equated to 8.46%. This currently provides an overall risk reward ratio of almost 1 to 9, meaning that on average we are risking 1 dollar to return 9 dollars, a great proposition indeed.
The key to the approach is to cut the losses short, follow momentum and allow the winners to run, a philosophy I use throughout the channel. We can see here that by using the weekly mack dee to keep us on the right side of momentum, we not only avoided the largest part of the 74% fall, but we also saved ourselves from significant opportunity cost, by not having our capital tied up in the declining asset for over 7 months.
The question is however, which direction is Bitcoin heading next?...... Despite the many gurus offering opinions, the obvious answer is that nobody knows, everyone is trying to predict with most offering a narrative to suit their own bias, and although many prospered during the bull party, many now have egg on their face during the recent decline.
My advice is to avoid prediction and instead react, react to the flow of money, follow it, and stay disciplined to the approach.
Many of the principles applied within this Bitcoin strategy are also applied to my personal stock trading approach which you can reach through the links below, you can also find links to our community, follow all my trades and access our bespoke breakout scanner.
To learn more why not download my strategy or join our forum.
Access Our Group Here - https://www.financialwisdomtv.com/plans-pricing
My Breakout Scanner - https://bit.ly/3ea6sl8
My Forum - https://www.financialwisdomTV.com/forum
Risk and Limitations
My Strategy Blueprint - https://www.financialwisdomtv.com/plans-pricing
My Brokerage Account (Interactive Brokers) - https://bit.ly/3HVA1nc
Practical Limitations
Historical examples, book claims and indicator results are educational illustrations rather than forecasts. Outcomes depend on the market, timeframe, data, transaction costs, financing, taxes and execution assumptions. Test complete rules across varied conditions and define the maximum acceptable account risk before taking a position.
Put This Into Practice
These ideas become more useful when selection, entry, stop placement, position sizing and trade management form one repeatable process. The Financial Wisdom Trading Blueprint connects those decisions in a practical weekly framework.
Frequently Asked Questions
Can anyone reliably predict the next Bitcoin price?
No. Forecasts are highly uncertain, so it is better to define multiple scenarios and risk limits.
What risks sit beyond price volatility?
Venue failure, custody, fraud, regulation, liquidity and operational mistakes can all affect outcomes.
Further Reading
References and Further Reading
Educational information only. Trading and investing involve risk, including the possible loss of capital. Examples are illustrative, not guarantees of future performance, and nothing in this article is personalised financial advice.
About the Author
Written by Gareth, MBA
Gareth, founder of Financial Wisdom, has more than 30 years of personal trading experience. He competes in the United States Investing Championship, creates award-winning trading content and has been featured in Technical Analysis of Stocks & Commodities.
Hi FW, frankly soeaking this strategy very simple very beautiful and works also in other coins. Thanks for sharing it