Super simple and useful trading methods for Bitcoin, remember to bookmark.
First Move: Trading Volume is the Guiding Light for Price Trends
Supply and demand, technology, policy, currency supply, and other fundamental factors are undoubtedly the main influencers of digital currency prices. However, the ultimate factor determining the ups and downs at any given time is still the trading activities in the market itself. No matter how significant the negative or positive factors are, they cannot compare to the trading activities of capital. The directional role of trading volume is particularly evident in real transactions. Here’s a very accurate rule to share: when trading volume increases, prices rise; when trading volume decreases, prices fall; beware of a sudden large volume at a high price as it may signal a sharp decline; a sudden large volume at a low price likely indicates a significant future increase.
Price trends indicate direction while trading volume indicates momentum. Since trading volume is the sum of buy and sell contracts. A large trading volume does not necessarily mean that there are more buyers or sellers. An upward trend simply indicates that buyers are willing to transact at high prices, while a downward trend indicates that sellers are willing to transact at low prices. Momentum and direction are two different things and should not be confused. Only in this way can volume-price analysis serve as a guiding light for our predictions about future market trends.
Second Move: Where there is accumulation, there will be explosive power.
What does this mean? It means that if a price oscillates back and forth within a narrow box for several consecutive days, the longer the oscillation time, the stronger the breakout will be when it finally occurs. When we trade digital currencies daily, we must pay attention to such opportunities.
In fact, the reasoning is simple; it is like magma in a volcano. Before the volcano erupts, the magma must compete with the hard crust for power. The longer it is suppressed, the greater the explosive power will be. This is what is known as 'either erupting in silence or perishing in silence.'
The meaning of the market is also easy to understand. In a narrow range of oscillation, whether going long or short, there is basically no profit to be made in this area, and any slight profit is given to transaction fees, losing the meaning of closing positions. Therefore, the number of open contracts will inevitably accumulate more and more. At this time, the major players will either actively collect chips waiting for a counterattack or take the opportunity to distribute chips, preparing to give opponents space. As time drags on, the transfer of chips will gradually be completed. When the balance of the concentrated area is finally broken, it will naturally show an upward surge or downward plunge, while at this time three forces will help drive this unleashed market.
Large investors either actively collect or wait for the right time to distribute, developing horizontally within a narrow range, while a storm brews on the clear horizon, and tumultuous undercurrents churn beneath the calm sea. The longer the concentrated chip area stretches along the time coordinate, the greater the explosive force will be, whether upward or downward.
When the balance of the concentrated chip area is finally broken, three forces will drive the market to change more violently. One is that the small investors who gain momentum will not spare others, aggressively increasing their positions and pursuing victory; another is that those who were deeply trapped in previous positions will be forced to cut losses, which will further fuel the market. The third is that those holding cash will see the clear trend and immediately become trend-followers, acting in accordance with the market.
Because the brewing of a concentrated chip area takes time, one must have patience to wait for a breakout. If the direction in the concentrated chip area is unknown, entering the market rashly poses a risk greater than the reward. If one drags on, impatience will set in, and when one becomes numb from self-observation, the market suddenly develops in the opposite direction, and one will have already been caught. It is better to first sit back and watch the tigers fight and wait for the right moment, placing limit orders in advance, and only chase after the breakout.
Third Move: Pay Attention to Intraday Reversal 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 a fundamental rule of digital currency trends. However, the reversal of rises and falls has two different types of evolution: one is a change in the major direction, where a major upward trend turns into a major downward trend or vice versa.
This kind of reversal usually appears as double tops or double bottoms, also known as W or M shapes, three peaks or three valleys, head and shoulders tops or inverted head and shoulders bottoms, etc. These are all major movements that generally take about three weeks to a month and a half to develop.
Another type is a technical adjustment, which means a small drop during a major rise or a small rise during a major drop. This kind of reversal is usually marked by a high open and low close, often with upper shadows in K-line; or a low open and high close, often with lower shadows in K-line, which belongs to minor actions. If these situations occur within a single trading day, we will consider them as reversal signals. A major upswing or downswing is often composed of several minor waves of rise or fall. After a rise or fall, there will be a retracement to digest before the next wave of rise or fall. At this time, we must learn to follow the market closely, short in a downtrend, and go long immediately when a reversal signal appears.
Fourth Move: Strategies During Market Fluctuations
The rise of digital currencies does not happen every day; a one-sided trend operates within a range between a period of rising and falling, or between two periods of rising or falling, often resulting in a fluctuating market. The so-called fluctuations refer to price levels hovering in a narrow area, retreating when approaching the upper limit and rising back when hitting the lower limit. We call this market consolidation, also known as a 'box' trend.
The reason for repeated ups and downs is that there are no obvious positive or negative news in the market, causing the market to lose the directional momentum for one-sided development. At this time, only short-term speculation is done, and both bulls and bears are in a tug-of-war state. Many people often get confused and disoriented when they are 'hit to the left and hit to the right' at this time. Because the distance between the upper and lower limits is not large, once it reaches the upper limit, it turns downward, and once it touches the lower limit, it turns upward. Profit opportunities are fleeting, and greed can lead to being caught.
Countermeasures:
1. When the direction of the upper and lower peaks is not particularly clear, if you are in profit, feeling that the upward peak has been reached, take profits and reduce positions by 30%. If it continues to rise but seems to stagnate, reduce positions by another 20%. If it falls and turns negative, increase positions by 20%. If it continues to fall but seems to have lost momentum and is in a consolidation state, increase positions by 30%. By doing this repeatedly, you will find that no matter how long the box consolidation lasts, your cost will gradually decrease, and in the end, you may profit without even realizing it.
2. Once it is determined that it is a fluctuating market, buy on the approach to the lower limit to go long, and sell to close when it rises to the upper limit, then go short. If it falls to the lower limit again, close and reverse to go long. This kind of tactic emphasizes mobility and flexibility. One must immediately reverse trading when reaching the upper or lower limits. In fact, the best practice is to just observe and not act. In a fluctuating market, one should observe and wait for an upward or downward breakout to enter. But the key question is, do we really have this patience?
Fifth Move: Use Technical Analysis for Short-Term Trading Smartly
In the digital currency market, no matter how strong the upward trend is, it cannot reach a peak all at once, and no matter how weak the market is, it cannot reach a bottom in a straight line. It must go through a period of consolidation. Only after the consolidation can a new wave of ups or downs brew. This consolidation is technically referred to as a technical adjustment. So what causes this adjustment?
Part of the profit-takers selling off, creating downward pressure on the market.
Secondly, part of the loss-makers will increase positions to balance the price, and this buying pressure will change the direction of the market.
Thirdly, if large investors feel that the adjustment or rise has reached their expectations, they will execute short-term operations, which will have a significant impact on price levels. This kind of adjustment provides us with a short-term opportunity. Seizing this opportunity can yield considerable profits. For instance, during an upward trend, if there are three consecutive days of rising red K-lines, but each one is shorter than the previous, indicating a diminishing increase, this signals that the strong upward trend is about to reverse.
Conversely, the same principle applies during a weak downward trend, short-selling when an upward adjustment occurs, or going long when a rebound occurs during a downward trend. This is the best time to make money.
Conclusion: In grasping specific market trends, there are many technical methods to observe the market, and many people have learned numerous technical indicators, ultimately confusing themselves. This is truly unnecessary; trading techniques and methods should be just right. Summarizing a set of trading methods that suit oneself is the way to remain undefeated in fluctuating markets.
In life, one must experience ups and downs to gain great insights! As long as you do not give up, the more you try, the closer you will get to success. What is great in life is not having done a certain thing, but having dedicated oneself to doing one thing throughout one’s life.