《How to Understand the Market》 Episode 1

When we open the market, we often feel regret every time we see the market drop or rise to a certain point.

Is there a possibility that when the price rises or falls to that range, it is a result of a predetermined trend?

In that case, the outcome is probably already destined (excluding black swan events).

Take $ETH as an example (shanzhai coins are easy to manipulate, and the probability of technical analysis failure is relatively high).

As shown in Figure 1, what can everyone see when looking at this K-line chart?

It seems that besides the crooked red and green bars, there isn’t much else?

Now looking at the purple area in Figure 2, let’s analyze the two charts.

We discovered a characteristic

That is when the K-line candle's body breaks below a certain point of the purple rectangle, it quickly rises again.

Then, the subsequent K-lines at most only test that point, and afterwards, it doesn’t break down further.

So the two bottoms (Figure 3) connected are a relatively effective support.

It is relatively effective

Because when the K-line body breaks below that support, that point is no longer a support and is likely to become a resistance level.

Resistance is the same; if there are two points or more that haven’t been broken through (Figure 4), it is also a relatively effective resistance.

When it breaks through and stands firm (the K-line candle body closes above the resistance, and the second candle or more does not break that position).

Then it means resistance has been broken, if it breaks the previous high and does not reach a new historical high, how high the price can go depends on how high the market enthusiasm is and how much capital is available.

Next is the blue-purple diagonal line in the chart, which is a trend line.

Currently, it is a downward trend.

The downward trend is characterized by:

High points getting lower and low points (possibly) getting lower.

Why do I say possibly getting lower? Because the bottom has support, unless it breaks the support, otherwise the low point remains above that support (the K-line candle’s bottom closes within the support range).

Conversely, the upward trend is characterized by:

High points (possibly) getting higher, and low points getting higher.

Because there is resistance at the top, unless it breaks the resistance, otherwise the high points remain limited below a certain level.