$BTC $ETH The essence of currency speculation is technical analysis + history + psychology. The ultimate goal of studying currency speculation is to find ways to make money from the K-line, such as buying low, selling high, and making stable profits.
What factors affect price? 100 KOLs can find 100 reasons to explain price changes. Some people are bullish and some are bearish. This is a normal thing. It is precisely because the market disagrees on price predictions that some people buy and some sell.
Russ Tweed's "Financial Psychology" studies how psychological factors affect changes in the prices of financial assets. Do rules really exist? It does exist. There is a concept called "deterministic chaos".
For coins with poor liquidity, price changes are random, while for coins with good liquidity, price changes have inherent movement patterns. Currency prices change every moment, and some of the behaviors that affect price fluctuations are rational and logical, while others are impulsive and absurd. As long as the Crypto market exists, this phenomenon will never disappear.
Four basic principles of financial psychology: 1. The market is ahead; 2. The market is irrational; 3. Chaos dominates; 4. Technical graphics self-fulfill.
1. The market leads the way
Anyone who speculates in currencies or stocks has noticed that whenever the market rises or falls sharply, various KOLs, analysts, experts and reporters will exaggerate and find out the top ten advantages or five disadvantages for you. The market gets ahead of the news. When markets are rising, no one likes to hear bad news, and information is disseminated publicly to reinforce market sentiment. When the market peaks and falls, news and analysis from all aspects are often positive.
Just like at the peak of the last Bitcoin bull market, the market shouted the slogans of "$100,000" and "Eternal Bull Market"; at the peak of the last bull market, Xu Xiaoping raised his arms and shouted, "all in blockchain."
2. Markets are irrational
Newton famously said: I can calculate the movement and distance of celestial bodies, but I cannot calculate the madness in the human heart. One of the greatest physicists in history, Newton himself lost a lot of money in the South Sea Bubble.
Sentiment follows price. If the price is rising, the feeling is that it should continue to rise. If the price falls, it feels like it should continue to fall as well.But sometimes, a special emotion will gradually spread from a few people to more people and evolve into a group movement. Markets are completely consumed by the irrational emotions of hope, greed, and fear known as FOMO, and we’ve witnessed the meme-forming madness.
3. Chaos Dominance
Traditional economic theory believes that there is a so-called equilibrium point in the market, at which supply and demand reach a balanced state. But in fact there is never a so-called equilibrium point. Scholar Laszolo divides the factors that affect the dominant role of the economic system cycle into three categories: technological innovation; conflict and conquest; social and economic disturbances, such as commodity shortages, financial crises, etc.
Indeed, there is inherent long-term unpredictability in many economic and financial systems. The essence of chaos phenomena is that efforts to predict long-term events and long-term quantitative analysis are futile. Even if there is no new news in the market, prices will fluctuate as long as there are transactions. Will Bitcoin reach $100,000? Who knows, where is the person who once shouted that $100,000 was the starting point of the bull market?
4. Technical graphics self-actualize
Market investors are divided into technical people and random people. The prerequisite for the survival of the technical people is that there are a large number of random people who don't know anything and just speculate. Only the technical people can make a living. What is the reason for buying and selling?
American economist Robert Shiller conducted a survey and asked 175 institutional investors and 125 individual investors what their reasons were for buying or selling. The conclusion is, buy because it goes up and sell because it goes down, not based on the news in the media. This suggests that price changes themselves prompt investors to buy or sell.
What are the characteristics before a bull market crash?
(1) Pull up in a straight line and put a huge amount upwards. It shows that newbies are flooding into the market and taking orders at high levels.
(2) The support line is broken, the K-line pattern deteriorates, and the novices who have just taken over the market become more and more uneasy.
(3) The market suddenly reverses and plummets, and the novice's anxiety develops into fear.
(4) The rebound is weak and has been unable to regain lost ground. A long bear market is ahead.
