First tactic: Trading volume is the guiding light of price trends.
Supply and demand, technology, policy, currency supply, and other fundamental factors are undoubtedly the main influences on cryptocurrency prices. However, the final decisive force for the rise or fall at any given moment still lies in the market's trading activities. No amount of negative or positive news can outweigh the actual trading activities of funds. The directional role of trading volume is particularly evident in real transactions. Here, I would like to share a very accurate guideline: when trading volume increases and prices rise, it will continue to rise; when trading volume increases and prices fall, it will continue to fall; if a stock price suddenly sees a massive spike at a high point, be wary of a potential crash; if a stock price suddenly sees a massive spike at a low point, there is a high probability of a subsequent surge.
Price trends indicate direction while trading volume indicates momentum. Since trading volume is the total of buying and selling contracts, high volume does not necessarily mean more buyers or sellers. An upward trend simply indicates that buyers are willing to transact at higher prices, while a downward trend indicates that sellers are willing to transact at lower prices. Momentum and direction are two different things and should not be confused; only then will volume-price analysis serve as a guiding light for our market predictions.
Second tactic: Where there is accumulation, there will be explosive power.
What does this mean? It means if a price oscillates back and forth in a narrow range for several consecutive days, the longer the oscillation time, the firmer the box candlestick becomes, and thus the greater the force of the breakout when it happens. We must pay attention when encountering such opportunities during our daily trading in cryptocurrencies.
The reasoning is actually quite simple. It is like magma in a volcano; before an eruption, the magma must contend with the hard crust. The longer it is suppressed, the greater the force of the eruption. This is what is meant by 'not erupting in silence but dying in silence.'
The meaning of the market is also easily understood; when the index is in a narrow range of fluctuations, whether going long or short, there is basically no profit to be made in this area, and all profits are given to trading costs, losing the significance of closing positions. Therefore, the number of open contracts will inevitably accumulate. At this time, large institutional players either actively collect chips waiting for a counterattack or distribute chips during the fluctuation to prepare space for opponents. As time drags on, the transfer of chips slowly completes. When the equilibrium of the accumulation zone is finally broken, the upward surge or downward plunge will naturally manifest, and at the same time, three forces will propel this unbridled market.
Large holders are either actively accumulating or waiting to distribute. In a narrow range of fluctuations, developments are horizontal, and storms are brewing on a clear horizon, with undercurrents churning beneath a calm surface. The longer the chip accumulation zone is stretched along the time axis, the greater the explosive power, whether upwards or downwards.
When the chip accumulation zone is finally broken, three forces will drive the market's volatility more intensely. One is that the small retail investors who are gaining will not relent, aggressively increasing their positions and pursuing victory; another is those who were previously deep in the red forced to cut losses, which adds fuel to the market. The last is that those holding cash and observing the market will turn into followers once the trend becomes clear, going with the flow.
Because the accumulation zone requires time to develop, patience is needed for the breakout. If the direction of the accumulation zone is unknown, whether upwards or downwards, entering the market rashly poses a risk greater than the reward. If dragged out, impatience will grow; when one becomes numb to self-observation, suddenly the market moves in the opposite direction, and one may already be trapped. It is better to first sit back and watch the tigers fight, waiting for the right moment, placing good limit orders, and only chasing the trend once the market breaks out.
Third tactic: Pay attention to intraday turning signals.
There is no bull market that only rises without falling, nor is there a bear market that only falls without rising. The alternation of rises and falls is the fundamental law of cryptocurrency trends. However, the reversal of rises and falls has two different types of evolution: one is a change in the general direction, where a strong upward trend turns into a strong downward trend or vice versa. This kind of turning point usually manifests as double tops or double bottoms (also known as W or M patterns), three peaks or three troughs, head and shoulders or inverted head and shoulders, and all belong to significant movements, typically requiring about three weeks to one and a half months to develop.
The other is a technical adjustment, where a significant rise experiences a slight drop or a significant drop experiences a slight rise. This type of turning point is typically marked by a long red candlestick with a high opening and low closing, often with upper shadows; or a long green candlestick with a low opening and high closing, often with lower shadows, which belong to minor movements. If these situations occur within a single trading day, we have a turning signal. A large upward or downward trend is often composed of several smaller waves of rises or falls. After a section of rise or fall, there will often be a retraction to digest before the next wave comes. At this time, we need to learn to closely follow actions, go short during a downtrend, and immediately go long when a turning signal appears.
Fourth tactic: Strategies during repeated market conditions.
The significant upward trend in cryptocurrency does not happen every day: it is a one-sided trend. It operates between a period of rising and falling, or between two segments of rising or falling, and often shows a repeated fluctuation. This so-called repeated fluctuation refers to prices hovering in a narrow range, falling back when nearing the upper limit and rising back when touching the lower limit. We call this type of market consolidation, also known as a 'box' trend.
The reason for repeated fluctuations is that there are no obvious positive or negative news in the market, causing the market to lose its directional momentum. During this time, only short-term speculation should be done, as both bulls and bears are in a tug-of-war state. Many people often get confused during this time, getting hit from both sides. Because the distance between the upper and lower limits is not large, and once it hits the upper limit, it turns downward, while hitting the lower limit causes it to rise again; profit opportunities come and go quickly, and greed leads to being trapped.
Countermeasures and methods.
1. When the direction of upper and lower peaks is not particularly clear, if profit turns positive and it feels like the upward peak has been reached, take profit, reducing the position by 30%. If it continues to rise and the feeling of stagnation appears, continue to reduce the position by 20%. If it drops and turns negative, increase the position by 20%. If it continues to fall and seems to be unable to drop further, indicating a consolidation state, increase the position by 30%. Through this back and forth operation, you will find that no matter how long the box consolidation lasts, your cost will keep decreasing, and in the end, you may not even realize you are in profit.
2. After determining it is a repeated market, buy long when approaching the lower limit, close the position and sell when it reaches the upper limit, then reverse to short. When it falls back to the lower limit, close the position and reverse to long again. This tactic emphasizes mobility and flexibility. Once at the upper or lower limit, one must immediately reverse the trade. In fact, the best approach is to just observe without action. Repeated markets should only be watched, waiting for a breakout upwards or downwards before entering the market. But the key question is, do we really have that patience?
Fifth tactic: Use technical analysis cleverly for short-term trades to make profits.
In the cryptocurrency market, no matter how strong the upward trend is, it cannot peak in one go, and no matter how weak the market is, it will not bottom out in a vertical line. There must be a process of consolidation. Only after consolidation can a new wave of rise or fall be brewed. This consolidation is technically termed a technical adjustment. So what causes this adjustment?
Some of the selling is from profit-takers exiting the market, which puts reverse pressure on the market.
Some of the buying is from losers averaging down the price, which causes a shift in market direction.
Third, some large holders feel that the adjustment or rise has reached their psychological expectations and implement short-term operations. Such trading definitely has a significant impact on prices. This adjustment provides us with a short-term opportunity. Seizing this opportunity can lead to considerable profits. For example, in an upward trend, if there are three consecutive days of rising red candlesticks, but each one is shorter than the last, and the increase diminishes daily, this indicates a signal that a strong rise is about to reverse.
Conversely, during a weak downward trend, the same logic applies. When there is an upward trend and an adjustment appears, go short; or when there is a downward trend and a rebound occurs, go long. This is the best time to make money.
Summary: In grasping specific market conditions, there are many technical methods for observing the market, and many people have learned numerous technical indicators, ultimately leaving themselves confused. This is truly unnecessary; trading techniques and methods only need to be adequate. Summarizing a trading method that suits oneself is essential for standing undefeated in the cryptocurrency market.
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The impermanence brings impermanence!!!
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