Alright, students, today we will take a look at the 4-hour chart of BAT/USDT.
We will focus on **BAT/USDT**, and please note the changes in the **Bollinger Bands** shape. When the upper and lower bands of the Bollinger Bands contract inward like they are now and become very narrow, we call this a "Bollinger Band Squeeze." It’s like a compressed spring, indicating that market volatility is decreasing, and the forces of bulls and bears are temporarily balanced, accumulating energy. Usually, after this kind of "squeeze," there is often a wave of fierce one-sided movement, meaning that the price will choose a direction for a breakout. Our goal as traders is to capture that moment of breakout.
Now, we see a strong bearish candle (red candle) breaking down through this consolidation area and falling below the middle band of the Bollinger Bands. This strongly suggests that energy is being released to the downside, and the price is likely to continue falling.
**Why should the stop loss be set at this position?**
We set the stop loss at 0.2260 dollars, which is above the top of the recent consolidation range and the upper band of the Bollinger Bands. The reason for this setup is: if the price does not fall as we expected and instead turns around and breaks above the high of the entire consolidation area, it proves that our judgment about the "downward breakout" is wrong, and market sentiment has reversed. The stop loss point is our "wrong judgment point," which protects our principal and avoids greater losses in case of misjudgment.
**Example of trading setup:**
- **Entry Point:** 0.2090 (enter when the price breaks below the consolidation area)
- **Target 1:** 0.1985 (near the previous swing low)
- **Target 2:** 0.1920 (next potential support level)
- **Stop Loss:** 0.2260 (above the consolidation area)
**Tip:** Always manage your risk according to the trend of the 4-hour chart.
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