How to Use the Trader's 1-2-3 Rule

Suppose we are focusing on a cryptocurrency, and we use the 1-2-3 rule by observing its daily chart. First, we notice that a certain cryptocurrency has been continuously reaching new highs over a period of time, and the lows are also gradually rising, while the 20-day moving average crosses above the 60-day moving average. Thus, we confirm that this is an upward trend.

1: Next, during the uptrend, the cryptocurrency price experiences a retracement, pulling back to a significant low point from the past. This low point is the support level we have identified.

2: Then, we see a hammer candlestick pattern appearing near this support level, and the trading volume for that day has increased compared to the previous days. This is a strong buy signal.

3: Investors buy the token based on this signal and set the stop-loss level a certain distance below the support level, for example, at a 5% position. Subsequently, the cryptocurrency price continues to rise as expected, and you also achieve a good profit.