Alessio Rastani and Charlie Burton on why catching exact tops and bottoms is a false goal in trading
Alessio Rastani and trader Charlie Burton discuss the mindset trap of trying to call exact market tops and bottoms in Bitcoin and other markets.
Summary
Alessio Rastani and Charlie Burton discuss what Rastani calls the most dangerous belief in Bitcoin investing: the idea that successful trading requires catching the exact bottom and exact top of a market move. Rastani argues this mindset is both unrealistic and unnecessary, since a trader only needs to capture the middle portion of a trend to profit. Burton agrees, noting that the broader financial media and established analysts who publicly call tops and bottoms bear some responsibility for perpetuating this expectation among retail traders. Both share personal examples — Burton entering Bitcoin in the 30,000s and exiting around 100,000, and selling silver bought at $15 somewhere in the 60–80 range — to illustrate that profitable trades do not require perfect entries or exits.
Key Takeaways
FULL TRANSCRIPT
The danger of trying to call exact tops and bottoms
Alessio Rastani: I'm seeing a really bad habit among people, not just in the Bitcoin community, but actually in any market, which is they assume that the purpose of analysis and trading is to catch the exact bottom and catch the exact top. It's often called bottom fishing, but it really is a dangerous and false mindset. People who think that the purpose of analysis and trading is to give you the exact bottom and the exact tops probably don't have much experience. Maybe they're beginners. But honestly, I've said this many times before, and Charlie will chime in on this — the purpose of analysis and trading is never to try to get the exact bottom or the exact top.
First of all, the only way you're going to get the exact bottom or the exact top of any market is sheer luck. You need a lot of luck on your side. Even if it happens with some degree of skill — and I'm not saying there's no skill involved — the bottom line is you can't just rely on skill and your technicals to give you the exact bottom and the exact top. You need a lot of luck on your side.
The second thing is this: you don't need the exact bottom or the exact top. You just need the meat in the middle. If you look at a burger, you don't need the bun at the top and you don't need the bun at the bottom. You only need the meat in the middle. As a trend follower, as a trend trader, you don't need the exact bottom of a trend and you don't need the exact top of a trend to make money. You only need the bit in the middle — the two-thirds or three-quarters in the middle.
So please get rid of this ridiculous backward mindset that you have to get exact bottoms and exact tops. The reason I'm saying this, Charlie, is because there will be people in the comment section who say, "Oh, well, you didn't get the exact bottom and you didn't get the exact top of Bitcoin." You don't need it, guys. You don't need that. If you try to call the exact bottom, you'll be much more likely to be wrong. You get it wrong far more often than if you're patient — just waiting for the market to give you a nice high-probability setup for a bottoming process, a bottoming formation, which can take weeks and months, especially if you're looking at a daily chart or a weekly chart. You've got to have some patience. Sorry, my rant is done. My rant in E minor. There you go, Charlie. Go ahead.
Charlie Burton: I don't need to say any more. I understand exactly what you're saying, but unfortunately there are analysts out there who have been around for decades who don't help the situation, because they do try to predict tops and bottoms — and you know who I'm talking about — and they do try to pinpoint levels. There are loads of analysts out there like that. So I don't think you can blame the average person who's got involved in the market and is trying to do that, because they're watching all sorts of stuff on social media or wherever and they think, "Yeah, but that guy predicted this or he predicted that." The industry itself has to take some blame — Wall Street, whatever — because I think that's the case. But I agree with your point.
You don't have to hit a low or hit a high. Sometimes it is a bit of luck. I'll sometimes get lucky on some entries and think, "Wow, that was a good entry," but you don't have to. You just follow your rules — whatever your style of trading is and the things you look for in order to take an entry in whatever market you're trading. That's trading. We're just trading with probabilities. As long as we're using risk management and stop losses.
The Bitcoin bull run as a practical example
Alessio Rastani: Absolutely. And here's a question I want to ask those people. I know some people probably won't agree with me, but here's a question I want to put out there. Look at the bull market that took Bitcoin from around 15,000 — that was the bottom — and then eventually went up to 126,000. Ask yourself this question about that previous bull market: did you have to buy Bitcoin exactly at the bottom near 15,000 or 16,000 to have made money? No. All you had to do — you could have bought Bitcoin at 20,000 or 25,000 even — and you still would have made money on that rally. And even if you didn't sell exactly at the top at 126,000, which by the way required a lot of luck to have done, even if you sold at, let's say, 110,000 — or just in the 100,000 to 110,000 region — you still would have made money.
And let me say this: most people would never have sold it in any case. The majority of people out there who buy Bitcoin are not in the business of selling. They don't even have that mindset. Their idea is, "No, I'm just going to hold it forever." And that's okay. But if that's the case, then why are you interested in tops and bottoms in the first place? I think there's a lot of nonsense out there.
Charlie Burton: I think that's a valid point. In fact, some of my entries in Bitcoin were in the 30,000s. And funny enough, I got out around 100,000 because it was a big, massive psychological level. And you're absolutely right that the people who are still holding at 120,000 are probably still holding when it pulls back to 70,000. And again, if that's a strategy and they're willing to hold through everything, that's fine too. But when I bought in — long before that exit — I had no intent to be out at the top. There's nothing wrong with not being out at the top.
It's the same with silver. I bought silver at $15 an ounce and then sold out at whatever it was — 60-odd or 80-odd. And I had people saying on my social media, "Oh, you're an idiot — silver did go higher." But who cares? I was happy with that. That was my trade. And I think that's the thing: you've got to be content with your trade and happy with your analysis. But those same people who thought, "Well, that's it — 80,000, it's going to carry on" — it did carry on, but silver also crashed back down. So those are the same people who would have still held on because they were thinking it was going to go to 300 or 500. You just have to have a plan. That's it.
Alessio Rastani: You have to have a plan and follow it. I agree with you. And again, my point simply is this: if you're a trend follower, you have to wait until the balance of probabilities are in your favor. Patience is required for that.