The phrase 'seeking the dragon, dividing gold, and observing the tangled mountain' was originally used in feng shui to find auspicious locations, but in the cryptocurrency market, some investors have applied it analogously to technical analysis of tokens, especially in candlestick chart analysis. Below are its application methods in candlestick charts:
Seeking the Dragon
Find the main trend: In candlestick charts, 'seeking the dragon' can be likened to finding the main trend of cryptocurrency prices. By observing the long-term trends of cryptocurrency prices, one can identify the main trend lines of price increases or decreases, which can be support lines or resistance lines.
Pay attention to changes in trading volume: Changes in trading volume can serve as a basis for judging the strength of trends. If the trading volume increases when the price rises and decreases when the price falls, it indicates a strong upward trend.
Dividing Gold
Find key support and resistance levels: In candlestick charts, 'dividing gold' can be understood as finding the key support and resistance levels of cryptocurrency prices. By observing the performance of cryptocurrency prices within certain price ranges, one can identify repeatedly occurring support or resistance levels, which are often crucial points for price reversals.
Use technical indicators to assist in judgment: Combine other technical indicators, such as moving average systems, MACD, etc., to assist in judging the effectiveness of support and resistance levels. For example, when the price is near a support level and the MACD indicator shows a golden cross, it indicates strong upward momentum and a more reliable support level.
Observing the Tangled Mountain
Observe the fluctuations of stock prices: In candlestick charts, 'observing the tangled mountain' can be likened to observing the fluctuations of cryptocurrency prices. During the rise or fall of cryptocurrency prices, various patterns will form, such as head and shoulders, double bottoms, triangles, etc. These patterns can provide clues about future price trends for investors.
Pay attention to the tangling and consolidation of stock prices: When the cryptocurrency price repeatedly consolidates within a certain price range, forming a tangled pattern, it often indicates that the price is accumulating energy and preparing to break out. Investors need to closely monitor the direction of the price breakout to make timely buying or selling decisions.
A tangled layer is a crucial barrier.
Judgment of trends after breaking through tangled patterns: When the cryptocurrency price breaks through a tangled pattern, if it can continue to rise or fall, and the trading volume supports this, it indicates that the breakout is valid and the price will enter a new trend phase. Conversely, if the price quickly falls back after the breakout, it indicates that the breakout may be a false breakout, and the price will continue to fluctuate within the previous tangled range.
Set stop-loss and take-profit levels: After the cryptocurrency price breaks through the tangled pattern, investors can set reasonable stop-loss and take-profit levels based on the strength of the breakout and trading volume. If the price continues to develop in the expected direction after the breakout, take profit promptly when it reaches the take-profit level; if the price trend does not meet expectations, stop loss promptly when it reaches the stop-loss level.
It should be noted that although the application of 'seeking the dragon, dividing gold, and observing the tangled mountain' in candlestick charts can provide investors with some reference, price fluctuations are complex, and a single method is difficult to guarantee 100% accuracy. Investors in actual operations also need to combine other analytical methods and their own investment experience to make comprehensive judgments and cautious decisions.