How to Use the Trader's 1-2-3 Rule
Assuming we are focused on a cryptocurrency, we utilize the 1-2-3 rule by observing its daily chart. First, we notice that a certain cryptocurrency has continuously reached new highs over a period of time, and the lows are gradually rising as well, while the 20-day moving average crosses above the 60-day moving average, thus confirming that this is an upward trend.
1: Next, during the upward movement, the cryptocurrency price experiences a pullback, returning to a significant previous low point, which we identify as a support level.
2: Then, we see a hammer candlestick pattern appear near this support level, and the trading volume for that day has increased compared to the previous days, signaling a strong buying opportunity.
3: Investors buy the tokens based on this signal and set their stop-loss below the support level by a certain margin, for example, 5%. Subsequently, the cryptocurrency price continues to rise as expected, and you also achieve good returns.
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