Trading cryptocurrency. I have been trading cryptocurrency for over ten years, experiencing three bull and bear markets. The real opportunity to make big money in the crypto world comes during a bull market! Just capturing one wave is enough. Last month, I played with one of my small accounts and caught a meme coin that surged 160% in one day, turning 100,000 into over 6 million. It just takes one opportunity!
There is a simple and foolish method that can help you avoid losses. This trick is common sense; as long as you have self-discipline, all traders can do it. No matter what type of investor you are—whether you are a short-term scalper, a low-buying ambusher, or a trend-breaker—you must respect these eight common sense rules in the crypto world. If you adhere to them long-term, you will find your account is no longer losing and starts to profit.
The following content is summarized based on my practical experience and thoughts. I hope everyone can take it seriously and that it provides some help to confused trading friends.
One, the more you lose in trading, the more cautious you should be when averaging down. Many traders become very anxious after being trapped in a market and instead of thinking about exiting, they keep averaging down to reduce their holding costs, hoping for a rebound. This actually goes against common sense. The downward process cannot reverse losses in one or two days; averaging down is merely self-comforting. The more anxious you are, the easier it is to make mistakes, leading to regret. Why do people dare to average down at this position?
Discipline in operations must be strictly enforced. Many traders formulate detailed plans before the market opens, such as when to enter if the market drops to a certain level or what price point to buy certain coins. However, during trading, they often fall prey to stimuli and temptations. If you cannot even execute your own plan effectively, you are not trading but gambling; most operations at the moment of trading are likely to be wrong.
Third, avoid frequent operations in the market. Many traders who suffer significant losses are those who trade ultra-short, while those who treat trading as entertainment and lack advanced skills often suffer minimal losses by simply waiting.
Four, avoid constantly increasing your position in trading. In the cryptocurrency world, it is common to spend lavishly while struggling in life. However, this is a very real portrayal. Before you have proven your ability to make money, do not continuously increase your position, especially if it impacts your standard of living. Losses indicate that your trading system has flaws; at this time, you should reflect rather than try to cover up the hole with increased positions. It is essential to calmly explore a set of effective methods before increasing your efforts.
Five, missing out on a trade will not result in losses, but chasing a rally often leads to painful exits. There is a common phenomenon in the market where stocks you overlooked see significant gains. When you try to buy at a high, it often collapses immediately. The reason for this is that the company's operations have not changed; it is better to choose a midpoint price as a reference. Avoid standing guard at high positions when the market is low.
Sixth, trading should follow the trend. There are essentially three types of trends: upward trends, downward trends, and oscillating consolidation trends. Undoubtedly, during a downward trend, participating with light positions or even holding no positions during an upward trend will significantly increase your success rate.
Seventh, do not touch stocks that are on a downward trend without signs of stabilization. Buying the dip during a decline is akin to catching a flying knife, putting yourself in danger. Wait for a significant bullish candle to appear, which signals stabilization, before you can slowly start buying. This is the right-side buying method; blindly trying to catch a bottom will only deepen your losses.
Eight, never trade based on research reports or rumors. Many retail investors are attracted to rumors, which is a grave mistake. Using common sense, if someone wants you to join in, it's often because they want to offload their positions onto you. If a piece of information reaches a retail investor's ear, it's likely what the institutions want you to know; they want you to take the bait. In such situations, many end up trapped.
4. Discover patterns through volume: Skilled traders possess pattern recognition skills and can identify repeatable volume patterns. Understanding these common volume patterns can provide useful insights into market sentiment and future price movements.
Surging volume: This pattern occurs when long-term price fluctuations lead to a surge in volume, subsequently causing a trend reversal. It typically appears at the end of a long-term uptrend or downtrend and may signal market weakness.
Oscillating volume: The characteristic of the oscillating volume pattern is a significant decrease in volume, which triggers early traders to exit before a price reversal. This often traps weak traders, i.e., those who yield to market pressure.
Pullback/Withdrawal Trading Volume: This pattern occurs when the volume decreases during a counter-trend pullback within a larger trend. It signifies market consolidation before the trend continues.
Volume breakout: This pattern occurs when prices reach new highs or lows, accompanied by a sudden surge in volume. It confirms a strong belief in the occurrence of a breakout and indicates that the market is in an acceptance state above or below key barriers.
Declining volume in a trend: If volume decreases during an uptrend, it may indicate waning interest and a potential trend reversal. Conversely, during a downtrend, a decrease in volume may suggest that a bottoming process is occurring, and the trend could reverse to the upside.
5. Using volume indicators in your trading plan: Understanding volume and its impact is one thing, but effectively applying it to your personal trading strategy is another. Here are some suggestions that can help you integrate volume analysis into your overall trading strategy: Compare the number of options on up days versus down days: When prices rise, trades are more numerous than when prices fall. This indicates that bullish pressure is greater than bearish pressure, which is bullish. This may suggest that the current upward trend will continue. Pay attention to volume when re-testing support and resistance levels: When prices re-test support or resistance levels, volume is usually scrutinized. If volume significantly increases during these re-tests, these prices are likely to hold and stabilize at these levels. Look for volume divergence: Typically, volume and price should move in the same direction. If not, it may indicate that something is wrong.
For example, if the price rises but the volume decreases, it may indicate that the price trend is about to change.
Choose volume indicators that suit your trading time frame: Whether volume data is important depends on how long you plan to hold your trades. If you are a swing trader holding positions for days or weeks, daily volume data may be more useful. Conversely, day traders may find hourly or even minute-by-minute volume data more useful.
Be wary of one-time volume spikes: If volume suddenly increases without reason, it may be misleading, so it is crucial to seek confirmation signals from other indicators or later trading periods.
Use increased volume to detect institutional activity: Large investors or "whale" investors can have a significant impact on the market. A sudden increase in volume on high time-frame charts may indicate that institutional traders are buying or selling a particular token.
Remember that any single indicator, including volume, is not a "magic bullet" for achieving successful trading. Analyzing volume is only one of many strategies available and should be combined with other standards, indicators, and analytical tools. As the old saying goes, "volume precedes price." Applying volume analysis to your trading plan can give you a deeper understanding of market dynamics, helping you make more informed trading decisions and potentially gain an edge in the market.
6. Drawbacks of volume analysis strategies
While volume analysis strategies are a powerful tool in a trader's toolkit, it is essential to be aware of their drawbacks. When using this strategy, you may encounter the following challenges: Market manipulation: In some cases, market participants, especially those with significant capital, can manipulate volume levels to create false signals and mislead other traders.
Lagging signals: Sometimes, changes in volume may lag behind price changes, meaning significant increases or decreases in volume may not immediately result in substantial price fluctuations.
False peaks: Volume analysis may occasionally yield false peaks. In such cases, a sudden surge in volume does not lead to significant price fluctuations.
Price distortion in low float: In assets with low liquidity or "price float," changes in volume may be distorted, making it difficult to accurately interpret the data.
To mitigate these challenges, a prudent approach is to combine volume analysis with other indicators and technical analysis tools. The combination of multiple signals can improve the reliability of trading strategies and reduce the chance of falling into misleading signals.
7. Conclusion
Volume provides a way for traders to understand the intensity of market activity and the psychological dynamics of traders. Once you understand what volume is and how it affects price movements, you can apply it to your trading strategy for a deeper understanding of market sentiment.
By utilizing volume indicators such as OBV, VWAP, VROC, and Chaikin Money Flow, and understanding common volume patterns, you can significantly enhance your trading acumen. If you integrate these tools into your trading plan, you can gain a more detailed understanding of market dynamics and more accurately predict price movements.
I am preparing for a divine order that will soon open!!!
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Impermanence brings impermanence brings impermanence!!!
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