Two thoughts recently formed in my mind, nothing very coherent yet perhaps, but thought I'd share it anyway, see what your responses are...
(1)
Sometimes, the market (and by that I mean: our little market, Bitcoin) acts kinda predictably. Sometimes, less so. Right now, we're in the second kind of phase, I'd say.
Don't get this the wrong way: this is coming from someone who practices TA himself... No wide ranging claims coming from me that TA is all b*shit. Just saying that there seem to periods where the market seems to send very clear signals where it is going, and sometimes, less so. For example:
* Mid May 2014. At the very least when the breakout happened, it was pretty clear we'd see some decent rally. Less clear when and where it'd stop, but buying and selling at a ~50% profit was not really rocket science.
* Mid August 2014, this time: down. When the rally just mentioned had run its course. Again, exact targets are a different matter, but the general direction was pretty clear.
It's hardly the same now, is it? We fail to rally /and/ we fail to crash. I suspect a large part of our predictive inventory relies on some form of momentum, and right now, there's pretty little of that. I think anyone is well advised to admit this to him/herself - at least from my perspective, it looks like right now, almost everyone I follow is a bit at a loss.
(2)
Shower thought on 'trained behavior' and exploiting it for profit: What if the market can be seen as different phases of *training* the masses to a certain reaction, and then smaller groups taking advantage of that trained behavior, until it disappears?
Example: The 2012/2013 era taught the Bitcoin masses to "hodl". Nothing but up uP UP! Enter a small perturbation - like a record high, cracking thousand, and people wondering "is it really worth that much?", and a resulting crash, predictably.
Not a problem, the trained behavior (over the last 2 years) was always "just buy when it's low, it'll go back up again". And so people did, again and again, in 2014.
Now, what if a smaller part of the market starts taking advantage of this? These traders (intuitively, or algorithmically - doesn't really matter) a) identify the above pattern, and b) take advantage of it. Which means: they take profit when the FOMO rallies really get started. No ill intention, just profiting from some lazy trained behavior, i.e. skinning the hodlers. Fair deal, it's a market, not a Steinerian playground.
What next? That small group (conventionally called: "bears", but in reality just traders that value actual profits over paper profits) becomes "trained" itself. Perhaps overtrained. Also, they accumulated quite a bit of capital, so they're now larger (in market terms) than they were before. They're now (not *now* now, but in a hypothetical world where the last bull is dead) the dominant group.
You can probably see where I'm going with this.
What if that group is in the process of being "taken advantage of" as well? The reaction to sell at the drop of a hat became almost automatic (like the automatic reaction to "hodl" by the other group before), so there's profit in it for another group of traders to take advantage of that. Not sure if that's already going on, or if we're just going through some low volatility phase before the bear rocks on again, but it's an option: overtrained buyers -> profitable counter strategy -> counter strategy becomes dominant and overtrained itself -> profitable counter-counter strategy.
Do me one favor please, don't give me the usual bull/bear bullshit. I'm not interested to hear why the market's going to drop to $50 next month, and I don't care why it's guaranteed to go to $5000 either. Other than that, pick apart my two ideas above.
