Imagine now there is a limited number of stalls, let’s assume there are only 10. Now, the only people using the stalls are two types: 1. Those who use the stall and leave; 2. Those who occupy the stall without using it and stay there forever.
Over time, all these stalls will inevitably be filled by the second type of person, namely those who occupy the stall without using it. The first type of person uses the stall and leaves, they do not monopolize the stall, but the second type, once they come, will reduce the number of available stalls because they do not leave.
Thus, as long as there is an increment of people who occupy the stall without using it, even if there is only one among 100 people, as time goes on, it is only a matter of time before all stalls are completely occupied by this type of person.
And when the stalls are completely occupied by such people, there will be no extra stalls available for use.
This is the famous stall theory.
Now, let’s replace the first type of person who uses the stall and leaves with short-term speculators in the market, while the second type who occupies the stall without using it are long-term speculators.
What are the characteristics of long-term speculators? They will only sell when the price is relatively high; before that, they will firmly hold their positions.
As mentioned above, over time, as long as the coin price oscillates within the original price range, long-term speculators will inevitably occupy most of the circulation, while short-term speculators will be pushed out. When most of a coin's circulation is held by these long-term speculators, what does that mean?
This means that the potential selling pressure will decrease more and more, equivalent to most of the chips being 'frozen', while the selling pressure decreases and the buying pressure has no limits. What does this mean?
This needs to educate about the commonly used pricing mechanism in today’s market, and such a pricing mechanism has a bug:
If you understand this bug and utilize it, it is the first step toward achieving financial freedom through financial speculation. Not just in stocks, but in all markets you can think of, including commodity futures, forex, and real estate, the market pricing mechanism has this bug.
This bug makes the cost of coin price and stock price surges and drops potentially reach 0 yuan.
To help newcomers, let's start from the most basic.
What you see in the intraday trend is actually a line connecting the latest transaction prices for each minute and is unrelated to transaction volume.
And in transactions, the buying and selling pressure are equal because a transaction must have both a buyer and a seller.
So how does the coin price rise?
It's simple; it's a matter of supply not meeting demand. Some may be confused; didn’t we say that the buying and selling pressure in transactions are equal?
In simple terms: if a coin is priced at 10 yuan and there are 10 people willing to buy it at 10 yuan, but only 9 people willing to sell, it means that after 10 transactions, there is still 1 person who wants to buy but cannot.
If he must buy this coin, he can only seek selling pressure at a higher price level, for example, going to 10.1 yuan. If he does this and really finds selling pressure to complete the transaction, then the latest transaction price will be 10.1 yuan. If the selling pressure at 10.1 yuan is still insufficient, this person can only seek selling pressure at an even higher price of 10.2 yuan, and then we will see the latest stock price is 10.2 yuan.
So you see, although the buying and selling pressure in transactions must be equal, the potential buying and selling pressure at the same price level is different. When the number of buyers exceeds that of sellers, the price will rise; conversely, it will fall.
For ease of understanding, the above is explained in simple terms; in reality, buying and selling pressure is not divided by the number of people but by the amount of capital. For example, if a person has 100 million in capital and wants to use this 100 million to buy a certain stock, but the current price only has 50 million in selling pressure, then the remaining 50 million can only seek transactions at a higher price level.
Similarly, the principle for a coin price drop is the same; just switch the buying and selling pressures mentioned above.
After understanding the most basic logic of coin price fluctuations, what is this bug? How can we utilize this underlying logic to profit?
Because the price we see is the latest transaction price, which is the marginal price, meaning that no matter how many transactions occurred before, this latest transaction price is the latest price and is unrelated to transaction volume.
Imagine if a coin is priced at 10 yuan, and in the most recent minute, only one trade occurred at a transaction price of 1,000 yuan; we would see a spectacular scene where this coin instantly rises from 10 yuan to 1,000 yuan, and its market value multiplies by 100.
Of course, in reality, there won’t be such fools willing to pay 100 times the price for the same thing.
Even if there are such fools, according to the exchange's order placement mechanism, they will prioritize executing at the lowest listed sell order price. This means that even if they are willing to buy this coin at 1,000 yuan, if someone lists a sell order at 10.1 yuan, they will prioritize executing at 10.1 yuan.
However, sometimes there will be such special situations that will make you see the coin price suddenly soar.
For example, imagine a certain altcoin has a major player. Suppose this major player has bought all circulating chips of this coin. Let’s say the current price of this coin is 10 yuan, and the total circulation is 1 million, making the total market value 10 million yuan.
Now, I will ask everyone a question: if this major player wants to push this coin to 1,000 yuan, meaning the market value multiplies by 100 and reaches 1 billion, how much cost will the major player incur?
Give everyone some time to think about it.
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Answer: 0 yuan.
That wouldn’t be very likely! Quite absurd, right?
Because all the circulation is in the hands of that major player, as long as they do not sell, there will be no selling pressure in the market.
As long as he places a sell order at 1,000 yuan and takes 1,000 yuan to complete the transaction, this 1,000 yuan effectively returns to his pocket, but we see this altcoin's intraday trend instantly rises from 10 yuan to 1,000 yuan, and its market value thus multiplies by 100.
From this perspective, he does not need to incur any costs and has multiplied his total assets by 100 times.
Through this extreme example, I want everyone to understand a principle: when a certain coin is held in large quantities by a certain institution, it is equivalent to most of the circulating market value being 'frozen', and the actual circulating market value is very low. In this case, the cost required to push the coin price to a high level is very low and becomes easier to raise.
But it's all for nothing; even if the market value rises higher, and the coin price reaches 10,000 yuan or even 100 million yuan, that is just floating profit on the surface.
To achieve real profit, he must sell all the stocks he holds to cash out; only then can it be considered finished.
This is the bug in the capital market pricing mechanism; defining the latest market price by the latest transaction price seems reasonable, but it allows capital prices to be easily manipulated by funds.
So, as small retail investors with limited capital, how can we utilize such a bug to profit?
Returning to the above stall theory.
When the coin price has been stagnant for a certain period and has accumulated a large number of transactions, the potential selling pressure near the current price will become very low.
This means that only a small amount of capital is needed to move the stock price.
Imagine a certain altcoin has been stagnant for a period and has accumulated a large volume of transactions at the same price level, meaning many hands have changed, which indicates that most holders’ cost price is at this level. Let’s assume this level is 10 yuan.
Similarly, the reason these people buy at the 10 yuan position is that they believe this coin will rise above 10 yuan. As for how much it will rise, each person has their own answer, but they form a unified consensus that this coin will not be less than 10 yuan.
So at 10 yuan, everyone will choose to hold for a rise.
Thus, we can say that here at 10 yuan is a support level. If the coin price rises on low volume and then falls back, the closer it gets to 10 yuan, the less selling pressure there will be because most holders' costs are at 10 yuan.
As time goes by and transactions accumulate, long-term speculators will occupy more and more positions.
This means that the 'selling vacuum zone' above the current price of 10 yuan will become larger.
Thus, only a small amount of capital is needed to push the coin price up.
Thus, we can say that the 10 yuan position has become an important support.
The above short-term speculators and long-term speculators are always relative concepts, not absolute ones. For example, someone who is bullish to 30 yuan is a long-term speculator relative to someone who is bullish to 20 yuan but is short-term compared to someone who is bullish to 60 yuan.
Thus, bullish people are always squeezed out by even more bullish people, which leads to the coin price oscillating around the original price level for a while before breaking into a larger range, and after a longer period, it will enter an even larger range. Therefore, the stock price will always be in an upward trend, although there will be back-and-forth oscillations.
Of course, the above premise is that this coin has no negative factors, and the market is in a state of long-term inflation.
—This is the underlying logic of a bull market.
But if you think the coin price will never fall, then you are very mistaken.
You need to understand not only the underlying logic of a bull market but also that of a bear market.
Returning to the previous question, an important question arises: why, if the price breaks below the 10 yuan support level, does the trend turn bearish and the coin price tends to fall, making 10 yuan a resistance level?
For example, we can see that after a new coin is issued, it often rises for a while on the first day and then falls. If it breaks below the issue price, it will plummet without looking back. Why does a break below support lead to the coin price entering a bearish trend?
Understanding this point is crucial, as it is the core of retail trading.
The core of retail trading lies in setting stop-loss points, where the stop-loss point for going long is the support. If it breaks below support, one must decisively stop loss. The position size should be set based on the distance from the stop-loss point (support); if the stock price is far from the stop-loss point, the position should be lighter, and one can add positions when it retraces close to the stop-loss, but if it breaks below the stop-loss point, one must decisively liquidate.
If done this way, even if the winning rate is only 50% or even lower, each loss will be small, while profits will be unlimited.
To achieve this, one must first learn how to identify support points, as well as recognize true and false breakthroughs at support or resistance levels.
To recognize this, one must first understand why breaking below support will shift the trend from bullish to bearish, while breaking above resistance will shift the trend from bearish to bullish.
