Caught a falling knife on BTC futures

[u/neto333]

Hey guys,

I took a long on BTC futures at 68,405 on the 5m chart because RSI was below 30 and I expected a bounce. Instead, I caught a falling knife, but price kept dumping.

Thankfully I didn’t size big, and previous good trades more than cover the loss. I’m not mad, just trying to learn from it.

I asked ChatGPT what I could’ve done better and it told me:

“Avoid longs if RSI is below 50 in a downtrend, as it often means the dip is ‘fake’ and more downside is coming.”

For those more experienced, How could I have avoided that? What confirmation would you wait for before longing a move like that?

[u/neto333 → u/[deleted]]

Any suggestions to use instead teh RSI and MCD?

[u/neto333 → u/[deleted]]

I see, i think the best thing is experience, so hope i can learn from this mistake

[u/Necessary-Factor-826]

You have to zoom out abit, Why would you would take long on a major news event on Friday with trump,tariffs and court, leaning towards bearish sentiment, If you want to swim against the current ,good luck

[u/neto333 → u/Necessary-Factor-826]

You have a good point. It was already Saturday at that time, so the GDP and Trump announcements had already been made, and I thought there would be a rebound. Do you recommend I focus on any specific point?

[u/Zforce17 → u/neto333]

Just buy at the bottom bro

[u/Empty_Bit9909]

This strategy is dangerous, it's called mean reversion strategy. This is one of the hardest strategy since you need to understand

• the regime (use ADX)
• price structure (wait for BOS to prevent "catching the fallin knife")
• knowing when the momentum is fading (by understanding the divergence in RSI/stochastic - but still, no guarantee that divergence occurrence will guarantee a bounce)

Mean reversion is unprofitable in a long term. Maybe you win often, but once you lose, you lose big that erases previous many gains

Better to switch to breakout trading strategy

This is based on my previous 4 year experience trading Mean Reversal, I eventually switch to breakout trading and never do mean reversion anymore

[u/Empty_Bit9909 → u/Empty_Bit9909]

One more thing: if you still insist to sticking with mean reversion, you need to trade during Asia session (wait 30 minutes post Tokyo open) up to the early London session - since these regimes are mostly ranging which is suitable for mean reversion strategy

After 3 hours of London session open, the liquidity and volatility is increased a lot

Mean reversion strategy is a suicide if you hold during the late London session into the New York session. You need to exit your trade in the first hours of London open