It is said that people are ‘fooled by randomness.’ This is true and it is also true that we are fooled by noise, which is actually the same thing.
As such it is good to keep things simple and where possible to remove noise. One way to do this is to use moving averages and this is effective but because averages include tails of data they introduce lags. This means that by the time an average has turned up or down to show a new trend the big move may already have happened. Nonetheless indicators like the 200 day moving average are broadly quoted and followed. You can of course weight averages and do all sorts of tweaking but before you know it you can be either discombobulated by all the different results or guilty of fitting the indicators to the desired narrative rather than the opposite of using the indicators to expose the narrative.
The best thing to do is to try and keep it simple and one ways to do this is to step away and not become hypnotised to the final ticking bar or flickering ticker price and plan you entrances and exits and merely cast a sleepy eye on goings on. Some investors simply look at prices at close or put in advanced order and let them ride. The reason is the same, if you can keep the noise down you end up with a clearer picture.
If you can find a trick to remove the noise you will end up with a clearer picture.
This is investing of course, rather than trading, but even in trading keeping it simple is usually the key to success.
So here is away of keeping it simple. A way that can unclutter a chart and give you a clear picture. Make the time base for each move long. Where as you might look at 10 minutes segments, 1hr charts, even tick by tick ones, try making the time base 1 month.
Here is Bitcoin on that time base.
There is not much zigging and zagging when you plot this way. The only open question is, did we see the bottom of Bitcoin?
Here is the previous Bitcoin boom and bust:
Its hard not to see the similarity. It very easy to jump to conclusions, but Im happy to leap to them in this case and in the next few weeks if this bullish conjecture is correct we should see Bitcoin past $6000.
I continue to acquire.