It is difficult to know what is wrong, but it is not easy to do it. Regarding investment in the secondary market, everyone knows that we cannot be greedy, nor can we chase the rise and kill the fall, but how many people can control their hands to achieve the unity of knowledge and action? In the Tao Te Ching, Laozi mentions Tao, Dharma, and techniques. Tao refers to rules, natural laws, and core concepts; law refers to methods, legal principles, and systems; and art refers to behaviors and operating methods. Taoism and magic combined together are regarded as important principles and guidelines to guide people's lives and social development.
For the secondary market, we can also divide investment into Tao, Dharma and Technique, and all three are indispensable.
Tao: represents investment philosophy and investment beliefs, that is, investment direction, goals and values. Includes analysis of long-term market trends, overall economic conditions, and fundamentals.
Law: represents the laws and rules of investment, including investment strategies, risk management, and asset allocation.
Technique: represents technical analysis, quantitative analysis, and trading psychology of investment.
Today, this report will focus on the "techniques" in trading. Its purpose is to share the application of technical indicators and technical analysis in actual combat. For most people, there is no need to learn many and unsophisticated technical indicators, because technology Indicators are lagging and cannot make direct profits. This report will share commonly used technical indicator methods to let more people know the meaning of technical analysis.
Disclaimer: The currencies and indicators mentioned in this report do not constitute investment advice and are only used for learning. The investment advice and indicator usage mentioned do not apply to all currencies and products. Blockchain is extremely risky and you may lose all your principal, so please do your own research.
The article mainly includes:
1. Interpretation and application of MA and MACD indicators
2. Interpretation and application of Boll and RSI indicators
3. Flag-shaped finishing variations
4. Summary
1. Explanation and application of MA moving average indicator
The MA indicator, also known as Moving Average, calculates the average price within a number. Take MA5 as an example. This represents the average price of the candle chart in 5 time periods (including the present), whether it is minute level, hour level, day level. The smaller the MA number, the more sensitive the fluctuations, and the more focused on short-term fluctuations. On the contrary, the larger the MA number, the slower the fluctuations, focusing on long-term fluctuations.
The number of MA is set according to the user's preference. Here I share two sets of MA trading methods that I commonly use, namely the Vegas channel and the pinch channel.
vegas channel
The simplified explanation of the Vegas channel is to use the 144 and 169 moving averages to judge the medium and long-term trend through three moving averages. This method is not suitable for periods below 15 minutes, but is suitable for periods above 1 hour.
Why use these two moving averages?
Looking closely, we can see that 144 and 169 are the squares of 12 and 13 respectively, and their principles imply Gann's square theory and the Fibonacci sequence. That is, the 144-digit number comes from Gann's square theory, and the 169-digit number is the square number of Fibonacci number 13. Only by combining the two can we achieve better application results in actual combat.
List and explain:
Let’s take the four-hour trend of $OP as an example. We find that when the 144-day moving average crosses the 169-day moving average, a golden cross is formed (the golden cross means that the 144-day moving average crosses the 169-day moving average), which means that it is bullish in the medium and long term, and you can try to enter the market. When the price reaches the top, the 144 moving average crosses below the 169 moving average, forming a dead cross (a dead cross means that the 144 moving average crosses below the 169 moving average), and the mid- to long-term market will be on the sidelines.
Image source: TradingView
Then someone may ask, what you say is too absolute. How do you explain the moving average before the sideways trading back and forth between golden crosses and dead crosses? It's just gambling!
The suggestion I give here is that since the 144 moving average and the 169 moving average cannot judge the short-term trend and have strong lag, the 7-day and 14-day moving average can be added on this basis to assist in judging the short-term trend. Let us zoom in on the trend of $OP, use the large-level MA moving average to judge mid- and long-term market changes, and then use the small-level MA moving average golden cross for secondary confirmation, which can achieve the highest degree of certainty.
Image source: TradingView
The Vegas channel is used to judge the mid- to long-term trend. Due to the lagging nature of the Vegas channel, it still needs to be matched with short-term moving averages for auxiliary verification. A strong market must achieve an increase in the 144 and 169 moving averages. If the price goes sideways to 144 and 169 Near the moving average, it means that the short-term market is weak and it is not suitable to enter the market. At the same time, the 144 and 169 moving averages have good support and pressure effects, and are suitable for operations such as ultra-short-term oversold rebounds.
Image source: TradingView
pinch channel
The squeeze channel mainly comes from the Squeeze Theorem of mathematical calculus. Its simplified explanation is that if a function is "squeezed" by two other functions near a certain point, and the two functions The limits are the same, then the limits of this function will tend to the same value.
Image source: TradingView
In secondary market transactions, we can also use a similar pinch theorem model. We can simplify two moving averages, namely the 111 and 350 moving averages. Since the 350 moving average has a longer period, it is recommended to be used in short-term trading.
Why these two moving averages?
Dividing the 350 and 111 moving averages, we get a number that is closest to pi, which is 3.15, or we divide 350 by 3.14 and the closest number we get is 111.
Example explanation:
Let's take the 1-hour trend of $TRB as an example. When the blue line (350) moving average is above and the yellow line (111) moving average is below, forming a similar or approximate triangle shape, it means that the "pinch" is successful. After success, the later trend will be bullish, but it should be noted that for a correct "pinch" pattern, the 111 moving average must cross the 350 moving average. If only one side crosses, it will not be true.
Image source: TradingView
This channel is suitable for 1-hour and 4-hour levels, but the accuracy is average. But once successful, the later trend will be a super-level market, so when a pinch pattern appears, you can pay more attention and attention. We can also use other technical indicators to to assist in judgment.
Image source: TradingView
MACD (Moving Average Convergence and Divergence)
MACD (Moving Average Convergence and Divergence) is the most commonly used technical indicator in trading. The core of its indicator is to analyze changes in price momentum by comparing moving averages of different periods, thereby providing buy and sell signals. MACD is mainly divided into three types: zero line, MACD line and signal line. At the same time, there are three main changes.
Three variations of MACD:
MACD line and signal line cross: Buy signal: When the MACD line (blue) crosses the signal line (yellow) from below, it means that the market momentum has turned positive and you can consider buying long. Sell signal: When the MACD line (blue) (color) crosses the signal line (yellow) from above, it indicates that the market momentum has turned negative and you can consider selling.
The relationship between the MACD line and the zero line: Above the zero line: When the MACD line is above the zero line, it means that the short-term average is above the long-term average and the market is in an upward trend. Below the zero line: When the MACD line is below the zero line, it means that the short-term The average is below the long-term average and the market is in a downtrend.
Changes in the histogram: The histogram changes from negative to positive: When the histogram changes from negative to positive, it means that the MACD line is above the signal line and the momentum is increasing, which is a buying signal. The histogram changes from positive to negative: When the histogram changes When it changes from positive to negative, it means that the MACD line is below the signal line and the momentum is weakening, which is a sell signal.
Example explanation:
Let’s take the 4-hour trend of Ethereum as an example. When the MACD line crosses the signal line, it means the market is bullish. When the signal line crosses the MACD line, it means the market is bearish. At the same time, MACD is applicable to all time periods, whether long-term or short-term, whether 1-minute level or weekly level, it is still applicable.
Image source: TradingView
Advanced use of MACD and MA
In addition to basic MACD and MA usage, it is not enough to know these. After all, the usage of these technical indicators can be queried through public information. Many main players and bookmakers will also use this to deliberately create "fake trends" to make you think that it will be too late if you don't buy. In fact, it is a trick to trick you into getting on the bus.
How to prevent and identify these "false trends"?
The false trend mainly guides novices to enter the market through the MACD golden cross. Take the 15-minute trend of BB as an example. When the 15-minute trend breaks through a new high, it then falls rapidly, and MACD enters a dead cross, which means a callback has begun. However, during the callback, its trend is quickly retracting, even approaching the previous high, but at this time, MACD has just started a golden cross. We can understand this trend as "overwhelmed but insufficient", that is, the price has rebounded to the previous high, but MACD has just reached the golden cross. More than 80% of the results of this trend will be the same as this picture, and the toughness will weaken after a while.
Image source: TradingView
Let's take the 1-hour trend of Ethereum as an example. MACD is golden cross, the green column has risen sharply, and the price has followed up. This kind of increase is a high-quality increase, which means that you can enter the market to follow up. Then the price enters the sideways adjustment stage, and MACD turns into a dead cross. After the adjustment, MACD entered the Golden Cross, but attention was paid to the increase and trend and continued like the previous Golden Cross, but was unable to rise, and the MACD volume column did not continue to strengthen. This "hanging breath" state is very dangerous. Although MACD is a golden cross, it is not strong, and the longer this state continues, the more dangerous it becomes. When the price breaks through a new high but MACD does not reach a new high, we call it a "top divergence" and is a strong sell signal. Similarly, when the price breaks through a new low but MACD does not reach a new low, we call it "bottom divergence" and it is also a buy signal.
Image source: TradingView
2. Interpretation and application of BOLL and RSI indicators
BOLL (Bollinger Bands)
BOLL is mainly a very simple and practical technical analysis indicator designed by US stock analyst John Brin based on the standard deviation principle in statistics. I personally think it is very useful in secondary transactions of blockchain. BOLL is composed of three lines: upper, middle and lower, also called upper rail, middle rail and lower rail. The upper, middle and lower lines of the Bollinger Band mean pressure and support respectively. When they reach the upper track of the Bollinger Band, they will pull back due to pressure. When the Bollinger Band goes below the upper track, they will pull up due to support. When the stock price rises above the upper Bollinger Band, it means overbought, and there is a possibility of a correction, which also means that the stock is currently very strong. On the contrary, when the stock price falls below the lower Bollinger Band, it means oversold, and it also means that the market is extremely weak. When the stock price falls from the upper Bollinger Band to the middle track, the middle track plays a supporting role. If it falls below the middle track, it becomes a pressure level. When the stock price rises from the lower Bollinger Band to the middle track, this also faces Pressure, breaking through the middle track and standing firm means that the pressure level turns into a support level.
The following are 10 golden basic rules of Bollinger Bands, which are very important:
Beware of a pullback if the price breaks out of the upper track
If the price falls off the lower track, beware of counterattacks.
Strong market trends are always above the middle track
The weak market is always below the middle track
The narrowing of the upper and lower rails hides sudden changes
The bigger the opening, the greater the market momentum.
The mid-rail line guides the trend direction
The sudden closing of the channel indicates a reversal
The channel suddenly opened and the consolidation stopped.
The longer the channel narrows and the smaller the opening, the more obvious and dramatic the changes in the market outlook will be.
Example explanation:
Let’s take the one-hour trend of Bitcoin as an example. BOLL is mainly divided into three lines, namely the upper track, the middle track, and the lower track. When the price exceeds the upper track, it means overbought, and the probability of a pullback is greater. When the price falls below the lower track, it means oversold, and the probability of a pullback is greater.
Image source: TradingView
Let’s take the 1-hour trend of $TRB as an example. When the BOLL band narrows, it means that extreme market conditions will occur. However, BOLL cannot accurately judge the specific direction. Other indicators are needed to assist in judgment. The longer the narrowing time, the higher the BOLL band. Short means the market will be more intense in the future. At the same time, in a strong rising market, BOLL will rise slowly along the middle track, while in a super strong market, BOLL will continue to rise above the upper track. On the contrary, in a weak market, BOLL will fall along the middle rail. At this time, the middle rail changes from a support position to a pressure position. Under extremely weak market conditions, BOLL will continue to fall beyond the lower track.
Image source: TradingView
RSI (Relative Strength Index)
RSI (Relative Strength Index), its principle is to estimate the strength of the market trend by calculating the rise and fall of stock prices, and predict the continuation or reversal of the trend based on this. The value of RSI fluctuates from 0 to 100, which means that the price will not exceed this range no matter what. We can simply understand that when RSI reaches 70, it means that the market is overbought and the risk of a callback increases, and when RSI falls below 30 When, it means that the market is oversold and may rise.
Example explanation:
Let’s take Bitcoin’s 1-hour trend as an example. When the RSI falls below 30 to 11, it means sideways trading and a correction are needed. However, this kind of correction is not absolute. It can only mean that the market situation is very weak and cannot be used as a basis for direct buying. Secondly, when the RSI exceeds 70, it means it is overbought and there may be a risk of a pullback. But this still cannot be used as a basis for buying and selling, and can only be used as an auxiliary judgment. Note: Under extreme market conditions, RSI can reach 99 or 1, so do not use RSI as the main basis for judgment.
Image source: TradingView
Let’s take the 4-hour trend of $EDU as an example. After the RSI broke through 70, it continued to rise, and the RSI finally reached 99. Therefore, we cannot use the method of buying the bottom at 30 and selling at 70. We need to determine the nature of the stock/currency, whether it is a small market capitalization currency, a meme currency, or a currency with high market control. Compared with blue-chip currencies, the RSI judgment of other small currencies may need to be raised to the 90 and 10 ranges instead of 30 and 70. This needs to be judged by yourself.
Image source: TradingView
3. Flag-shaped finishing variations
Flag-shaped consolidation is also called triangle consolidation. This consolidation is not judged by indicators, but by the trend changes on the K line. We can summarize it into 16 common basic change types. If you see a similar trend, you can buy it. Generally, the success rate is very high. Large, the follow-up is bullish, but there are times when it fails. It is recommended to buy at the low point of the flag. When it breaks through the triangle area and rises, the breakthrough area becomes a support position. If it falls later, you can intervene near the support.
Image source: TradingView
Example explanation:
Let’s take the 15-minute trend of $APT as an example. Its trend is a standard replica of the third and tenth trends in the above figure. However, it should be noted that this is only a successful case. Many main players and bookmakers will deliberately make similar graphics to deceive people into getting on the bus. We need to pay attention to screening or stop losses in time.
Image source: TradingView
Let’s take the 1-hour trend of $TRB as an example. We observe that $TRB used the three-week flag consolidation trend to achieve a three-fold increase in a week. Therefore, when we see similar trends in the market again, we can Draw it for verification.
Image source: TradingView
4. Summary
As the saying goes, Tao, law and technique are all indispensable in trading. This report only focuses on the "technique" in the trading process. It is far from enough to just learn and master the use of technical indicators. There are many pitfalls in the market. And every three months or so, the market's trends, upward pulls, and downward trends will be greatly updated, so you need to keep reading and summarizing, and observe the subtle changes in the market.
People are alive, indicators are dead. The existence of technical indicators is a method for us to assist in judging transactions after sufficient understanding and risk control. They cannot be used directly to make profits. After all, all technical indicators are lagging. , cannot be 100% accurate. Only after we have sufficient understanding and risk control can we assist in investment, otherwise it is just gambling.
At the same time, all technical indicators are not as simple as explained in the report. Each indicator has different deformations and methodologies. If studied carefully, each indicator can be studied for several years, so the article does not mention all deformations and methods. At the same time, everyone has different styles and uses different indicators, so they need to be gradually adjusted according to their own trading style.
[Disclaimer] The market is risky, so investment needs to be cautious. This article does not constitute investment advice, and users should consider whether any opinions, views or conclusions contained in this article are appropriate for their particular circumstances. Invest accordingly and do so at your own risk.
This article is reprinted with permission from: "Rhythm Blockbeats"
Original author: Joan Westenberg, idle thoughts