$BTC Trading Psychology & Liquidation Dynamics in a Bull Market
Let me break it down with a simple example. Imagine two traders—one goes long on Bitcoin at $108,000, and another goes short at the same price.
The long position has a liquidation price of $106,000.
The short position has a liquidation price of $110,000.
Now, suppose the market is bullish, and price begins to rise. When BTC hits $108,800, the long trader decides to exit and take profits.
What happens next?
Because the market is trending upward and the bulls are taking profits, the price continues to move toward $110,000. Why? There's minimal resistance from sellers (shorts), and no significant opposing orders below. The pressure is all on the bears.
Importantly, there's no actual "fuel" pushing the price up—until it nears the bears’ liquidation or stop-loss zones. At that point, the bears’ positions are force-closed, releasing funds into the market.
A portion of that liquidated capital subsidizes the profits of the earlier long positions.
The rest goes to the exchange as part of its mechanics.
So, what’s the takeaway?
In a bullish trend, if you keep opening short positions expecting a reversal, you'll likely be buried before ever hitting your target price. I exited my long position at $108,800, but the price kept climbing. That’s the power of understanding liquidation dynamics in a trending market.
📌 Lesson: Trade with the trend. Fighting momentum can be costly.