Long-term reference: emotional aspect
In fact, the older generations are more familiar with this section, but recently there are many new fans entering the market, so we have specially released an issue for the newbies.
1. Greed Index
You can scroll down on the homepage of the square to see the market sentiment calculated by Binance based on its own algorithm.
In most cases, when the greed index is greater than 70, if $BTC stagflation occurs, you must be careful of high-level risks. Of course, in a small part of the time, in a one-sided market, the price of pie will rise all the way, and the greed index will remain high during this period. But this is a small part of the time after all, and you can't blindly gamble in the current one-sided surge.
However, at all times, when the greed index is less than 30, bottom fishing can be put on the agenda.
But one very important point, which I concluded after multiple observations, is that most of the time, when the greed index first hits below 30, there will be another wave of sharp decline. This sharp decline can be very severe; just looking at this year as an example, the drop to 56,000, the drop from 57,000 to 53,000, and the drop from 80,500 to 49,000, and the drop to 52,500 in early September, all occurred on a basis of market fear, with the main force smashing down again. The final drop is the most severe, often thousands of points (it should be tens of thousands of points now); we must be cautious.
After that, the market will be repaired. It is important to emphasize that the so-called repair does not mean a new high, but a staged upward trend. If the greed index rises too quickly, the long positions for bottom fishing should be exited.
2. Funding Rate
The funding rate is also a very good indicator, equivalent to using the holdings of long and short positions to judge the emotions of retail investors.
Or from the perspective of the main force killing retail investors, it can also be understood this way: when there are too many people shorting in the market, the main force will pull back to stop out the shorts before going down again. When there are too many people going long in the market, the main force will insert a needle downwards to stop out the longs before going up again.
For example, if many people short over the weekend, the funding rate will quickly approach negative values. On Monday, it will hunt for short stop-losses and then drop again (the center leaving the pen in the theory of cyclical trends). This includes the current funding rate turning negative again; at this point, there will be another rebound at the 1-hour level, and even the daily line may close positively, then hunt for short stop-losses before continuing to drop.
However, we also need to pay attention to the fact that from a mid-term and long-term perspective, when the funding rate just turns negative, it is generally not a temporary bottom. The real bottom is when the funding rate stays negative for a long time; that is the signal. If it just turned negative, it only indicates the existence of a small-level rebound opportunity.
In addition to the USD-based funding rate, we also need to look at the crypto-based funding rate together.
Why?
Because in USD-based trading, there are both long-term, medium-term, and short-term traders, as well as those who go long and short.
However, for crypto-based positions, the first position must definitely be a long position, and it should be a long-term long position.
So when the USD-based positions show a funding rate that turns negative as shown in the chart, it means that holders of long positions are starting to build short positions to hedge their long positions to avoid liquidation.
That is to say, the bulls are shorting, and the bears are also shorting. At this point, the funding rate will be even more exaggerated than the USD-based rate.
We need to be aware that when the funding rate shows a situation like this in the chart, it is definitely not a temporary bottom. There are at least two more steps to go:
The big coin starts to make a move at the 1-hour/4-hour level, and the long positions that opened hedging positions believe the risk is eliminated. To close out their hedging positions, they will liquidate their short positions. The funding rate corrects from being negative for a long time to being positive for a long time (at least 2 days).
An unexpected sharp decline. At that time, the funding rate will definitely be positive because during the sharp decline, it triggers the liquidation of short positions and the liquidation of long positions. Then in the next 4 hours, the funding rate will quickly turn negative because those who haven't been liquidated yet start to hedge their trend-long positions out of panic.
Only at this time can this place possibly be a temporary bottom. The reason for saying 'possibly' is that this kind of situation can repeatedly occur in a downtrend.
I would like to add two things; some friends asked me yesterday if they could short at $SUI . Actually, it cannot be shorted now. Let's look at the chart:
We can clearly see that the 5-minute, 15-minute, and 1-hour levels all show an increase in volume during a rise and no volume during a decline. If you short at this time, it is definitely not an ideal position. The core teaching content I provided yesterday was about volume-price divergence.
Although the 4-hour level is still declining with volume, while the increase has no volume, we must be cautious about the layout of short positions when a small level of increased volume and price rise appears.
Finally, the previous chat room was full; I cleared some people last night and this morning. Chat room ID: 79348990
If the room is full, there is a backup chat room: 9985696
I try to make time to appear in the chat room every day.
