In the field of cryptocurrency, technical analysis acts like a compass, guiding investors in their trading direction. This article will delve into practical cases, such as today's explosive eos, shell, bmt, etc., fully unlocking the reference value of the key indicator of volume reduction in cryptocurrency technical analysis, helping everyone to discover the hidden wealth codes within.
Avoid pitfalls: When looking for bottom volume reduction varieties on CEX, avoid choosing those with excessively small market capitalizations, as they face the risk of being delisted from CEX.
Bottom volume reduction has various reference significances in cryptocurrency analysis:
Coin price stop-loss signal: When the coin price has undergone a long-term decline, and trading volume gradually shrinks to a lower level in the bottom area, this is usually a sign that selling pressure is gradually weakening. During the coin price decline, as the price continues to drop, the panic among holders gradually releases, resulting in a large volume of selling, which leads to increased trading volume. However, when the trading volume shrinks to a very low level, it indicates that there are few people willing to continue selling, and the coin price may soon stop falling and stabilize.
Confirming bottom formation: Decreased volume at the bottom plays an important role in confirming the effectiveness of the bottom formation. For example, during the formation of common bottom patterns such as W bottoms and head-and-shoulders bottoms, if there is decreased volume in the bottom region, it indicates that market trading is thin, and floating positions have mostly been cleared. The main funds may be quietly collecting chips at this time, making the reliability of the bottom formation relatively high. Once the subsequent trading volume moderately increases and the coin price begins to rise, breaking through key resistance levels such as the neckline, the bottom formation can be further confirmed, signaling that the coin price will embark on a bullish trend.
Judging main fund trends: Bottom volume reduction can help investors determine the direction of main funds. If, during the bottom volume reduction, the coin price does not continue to fall sharply but shows some resilience, this may indicate that the main funds have already laid the groundwork and are quietly protecting the market. The main funds control the extent of the coin price decline to avoid triggering panic selling in the market, while using the opportunity of reduced volume to quietly absorb cheap chips. Furthermore, reduced volume may also mean that the main funds are still observing, waiting for a more suitable time to launch the market.
Bottom volume reduction is not an absolute buy signal; it also requires comprehensive analysis in conjunction with other technical indicators, overall market trends, and other factors. Below, we will look at practical cases to see how volume reduction is applied in finding investment coins.
What are the assets with bottom volume reduction? Everyone is welcome to leave comments for discussion.