In over 10 years of cryptocurrency trading, it has been divided into several process stages.
One: Entered the crypto space with 8000, caught the bull market, and earned over 10 million.
Two: From over 10 million to a debt of 8 million.
Three: From entering the market with 200,000 to 20 million
Four: From over 20 million to currently over 2 small suns
Five: Ongoing, waiting for the next round of bulls to arrive until 10 small suns.
The content is too lengthy, but be patient and read through it, as it will be very helpful on your investment journey in the crypto space!
I might say, you will question it, but it doesn't matter. The reason I joined Zhihu is simple: sharing my knowledge can genuinely help some people, some families, and it's worth it! Criticism is fine; as long as it lets you know how money is made in the crypto space, that's enough.
Let me detail the insights and pure tips I've gained through these several stages!
There is the dumbest way to trade cryptocurrencies that allows you to maintain 'everlasting profits', aiming for 30 million!
At the end of last year, I played with 200,000, and now it's 20 million, easily achieving a hundredfold profit (suitable for everyone), this method is still relevant.
I am still using it, highly stable.
Don't worry about whether you can learn; I can seize this opportunity, and so can you. I'm not a god, just an ordinary person. The only difference is that others overlook this method. If you can learn this method and pay attention to it in your future trading process, it can help you earn at least 3 to 10 additional points of profit daily.
First step: Add cryptocurrencies with rising percentages within 11 days to your watchlist, but be careful to exclude those that have fallen for more than three days to avoid capital fleeing.
Step two: Open the candlestick chart and only look at the cryptocurrencies with MACD golden crosses at the monthly level.
Step three: Open the daily candlestick chart, only look at one 60-day moving average. As long as the coin price pulls back to near the 60-day moving average and a volume candle appears afterwards, enter the market heavily.
Step four: After entering, use the 60-day moving average as a standard; hold above the line and sell below it, dividing it into three details.
1: This means selling one-third when the price increase of the wave exceeds 30.
2: When the wave's increase exceeds 50, sell one-third.
3: This is the most important core that determines whether you can profit; that is, if you buy on a given day and unexpected situations arise the next day, causing the coin price to drop below the 60-day moving average, you must exit entirely, without any sense of luck. Although the probability of breaking the 60-day line is very low when using this monthly line combined with the daily line to select coins, we still need to have a risk awareness. In the crypto space, preserving capital is the most important thing. However, even if you have already sold, you can wait to buy back when it meets the buying criteria again.
Ultimately, the difficulty in making money lies not in the methods but in execution. 'When the coin price drops below the 60-day moving average, you must exit entirely; do not harbor any sense of luck.' Just this one sentence has killed 90% of people.
Everyone comes to the crypto space with the same intention, and this is beyond doubt. If you are just here to pass the time, then this place is not suitable for you.
Here is a list I have organized of all the sectors and leading currencies in the blockchain that you need to know in advance when entering the crypto space, including mainstream coins and altcoins, saving you time in sorting it out; you can double-click to bookmark it!
In the crypto space: The original and most comprehensive divergence trading strategy is my secret weapon for stable profits! Bookmark and review it 18 times!
Divergence: Definition and how divergence trading works
In the crypto space, divergence is a fairly common signal in technical analysis, indicating trend reversals and filtering out false signals. This article provides a detailed overview of convergence and divergence.
What is divergence trading
Divergence refers to the situation where the asset price moves in the opposite direction to technical indicators (such as oscillators). For example, the price moves upwards while the oscillator indicator line moves in the opposite direction.
Although divergence is a simple signal, many people are still confused about divergence trading in the crypto space. This is because there are many types and classifications of divergences.
Generally, there are several types of divergence:
① Conventional (simple)/hidden/extended divergence;
② Bullish/Bearish divergence;
③ Negative Divergence/Positive Divergence;
④ Positive Divergence/Reverse Divergence;
⑤ Divergence/Convergence.
There are five subtypes! This diversity can even confuse professionals. In fact, divergence trading seems easy! Let's understand all types of divergence signals.
Double Tops & Double Bottoms
To understand all types of divergences, we must first learn how to identify divergences in the market. Regardless of the type of divergence, all signals are based on three principles.
1. The main feature is the appearance of double tops or double bottoms in the price chart.
In other words, there should be two obvious highs or lows in the chart.
The above chart does not have a double top, and the highs are not obvious. Therefore, there is no divergence signal.
2. Divergence can only be discovered based on the highs or lows in the price chart and the divergence indicators.
The above chart shows the correct divergence, connecting the double tops in price with the local highs in the indicator.
The above chart is an example of misinterpreting divergence by incorrectly comparing price highs with indicator lows.
3. Price highs and indicator highs should correspond to each other.
The above chart shows the correct analysis of divergence, where the indicator highs correspond to the double tops in price.
The above chart illustrates a situation where the price highs and indicator highs do not correspond to each other in a timely manner, which is a serious error.
Types of Divergence
This way, you can easily spot divergences in the price chart. Now, let's understand the different types of divergences. Essentially, there are three main types of divergences: conventional divergence (also known as classic divergence or normal divergence), hidden divergence, and extended (reverse) divergence.
The above table summarizes the basic types of divergence. You will see that each type of divergence is subdivided into bullish and bearish divergence (negative divergence and positive divergence). Generally, conventional divergence indicates that the trend will reverse. Other types of divergence (hidden divergence and extended divergence) indicate that the trend will continue, and they are also referred to as reverse divergence. Many people confuse convergence and divergence. Let's clarify these concepts. Divergence means deviation. In trading terminology, it indicates that the price trend and the indicator line are diverging.
Convergence is the opposite of divergence. Convergence originates from the Latin word 'convergo' - to come together. Therefore, convergence is a kind of divergence when the price trend and the indicator line come closer.
Conventional Divergence
Conventional divergence is a strong trend reversal signal.
To discover bullish divergence, you need to analyze the price lows and the indicator lows. The price chart should reach lower lows, but the indicator should reach higher lows (on the left side of the table).
The blue line in the chart marks conventional bullish convergence. The price reaches a lower low, forming a double bottom shape, while the MACD reaches a higher low. In trading, this conventional divergence indicates that the bearish trend will soon reverse.
To discover conventional bearish divergence, you should analyze the price highs and the highs plotted by the indicator. The price should reach higher highs, but the indicator's highs become lower (on the right side of the table). Conventional bearish divergence indicates that the bull market trend should soon reverse, allowing for entry into short trades.
The above chart shows conventional bearish divergence. The price reaches a new high, but the MACD histogram fails to break the previous high. Therefore, the price trend should soon reverse downwards.
Hidden divergence: Convergence
Forex hidden divergence is the opposite of conventional divergence; it indicates trend continuation.
When the price reaches higher lows while the indicator forms lower lows, hidden bullish divergence occurs. The appearance of hidden bullish divergence signals in an uptrend indicates that the trend will continue. The left side of the above table shows an example of hidden divergence.
The above blue line connects the price lows that are getting higher, while the MACD lows are getting lower. Therefore, there is hidden bullish divergence, indicating that the trend will continue.
To discover hidden bearish divergence, we should analyze the price highs. After a downtrend, the price reaches a lower high while the MACD reaches a higher high. The appearance of hidden bearish divergence in a downtrend suggests that the expected reversal is incorrect, and the trend is likely to continue. It is displayed on the right side of the reference table.
The above chart shows hidden bearish divergence. The price highs are getting lower, while the MACD highs are getting higher. Therefore, the trend is not reversing upwards. The downtrend will continue.
Extended divergence
Extended divergence is similar to hidden divergence. However, extended divergence often fails to adhere to basic principles because it frequently occurs in sideways trends. It does not have clear price highs or lows. Many traders do not consider extended divergence to be a trading signal and regard it as a false signal.
The characteristic of extended bullish divergence is that the lows are getting higher. In bearish divergence, the highs are getting lower. Let's look at the examples in the table.
The above chart shows the extended bullish divergence of the MACD indicator. The price lows are approximately equal (slight deviations are acceptable). However, the second low of the MACD is higher than the first low. This divergence indicates that the upward trend will continue.
Bearish divergence is also determined based on indicator data; when the MACD reaches lower highs, it indicates that the price will continue to fall, allowing entry into short trades.
Common mistakes made when trading divergences
Novice traders often encounter incorrect information about divergences online. Below, I will discuss the common mistakes made when trading divergences:
1. On many trading websites, I have noticed that many authors mistakenly identify divergences. They state that if the indicator line moves upwards, the line connecting the peaks of the indicator shows true highs. Based on this, they connect the highs in the price chart. Similarly, in a downtrend, when the indicator highs are below the zero line, they connect the price lows on the chart. In other words, they believe that if the indicator shows a downtrend, they need to connect the lows; if the indicator shows an uptrend, they connect the highs.
Remember! When trading divergences, you should always start from the price chart. First, find the price extremes in the chart, ideally double tops or double bottoms. Next, explore the indicator data to find divergences.
2. The second most common mistake is that traders identify divergence only by connecting adjacent peaks of the indicators. But they do not check if these peaks appear in the same trend.
Important reminder! To discover a true divergence, you need to compare price extremes that are only in the same trend.
3. Another example of false divergence: Traders believe that if the connecting line in the indicator chart is inclined upwards while the connecting line in the price chart is inclined downwards, this is convergence. This is incorrect!
Remember! Determine divergence based on the divergence/convergence of price and indicator highs or lows, not by the direction of their connecting lines.
4. Many traders analyze the divergence between price highs and indicator lows, which is also incorrect.
5. If you discover divergence, make sure the indicator highs and price highs appear simultaneously. You should not analyze price extremes that appear at different times!
6. As an early signal, divergence has quite a few false signals. Trading solely based on divergence is very incorrect!
7. Do not consider divergences that have already occurred with price movements afterwards. They must be successful divergences but are incorrect. You should not trade based on past divergences.
8. Another common mistake is assuming that divergence is only a reversal signal. Divergence indicates that the trend may reverse or continue, depending on the type of divergence.
How to avoid entering a trade too early when trading divergences
Make sure you follow these steps:
① Determine the current trend direction in the price chart and draw trend lines. Identify two consecutive highs/lows to discover divergence.
② Attach the MACD histogram to the price chart and determine the highs/lows on the indicator based on the price extreme points.
③ If you find divergence between the indicator and asset price, determine the signal direction.
④ Next, determine the entry point. I suggest entering trades based on the candlesticks that close outside the trend line.
⑤ The basic divergence strategy suggests setting stop-loss levels at a certain distance from the highest/lowest points.
⑥ The basic strategy requires setting take-profit levels at twice the distance of the stop-loss.
This is a basic strategy you can rely on in financial trading. For novice traders, this may be a good guide. Try trading divergences yourself and develop your trading strategy.
Summary and suggestions on divergence trading
Indicator divergence is one of the basic early signals. It is easy to spot divergences in any market and with any trading tool. Divergence signals are universal and can serve as basic strategic elements and additional filters in the market. Any trader using technical analysis should understand and use divergence signals.
My main summary and suggestions for divergence trading are as follows:
Using divergence signals alone for trading is insufficient; please use technical indicators to confirm divergence.
If you are confused about the various types of divergences, thoroughly understand the main type 'conventional divergence.' Conventional divergence can help you identify trend reversals and enter trades at the top or bottom of trends. Be sure to correctly identify divergences.
When analyzing divergences, consider multiple/accumulated signals; divergences in longer time frames help confirm divergences in shorter time frames.
Divergence convergence signals are similar across all platforms; you can trade divergences in any market!
There is no universal indicator for divergence trading; you can try different combinations of technical indicators. But do not take risks; you are only in the practice phase, prioritizing risk control.
Here are 16 blood-soaked experiences summarized over 10 years in the crypto space, worth repeated reflection and learning. Sharing with those destined to see it, hope it helps everyone.
1: A sharp market drop is often a test for high-precision cryptocurrencies. If the cryptocurrencies you hold decline less during a significant market drop, it is likely that the big players are defending the price so it does not fall too much. This indicates that your coin possesses relative stability, making it worth holding, with potential returns in the future.
2: For beginners, if you are not familiar with how to buy and sell, there is a simple and direct method. In short-term trading, you can observe the 5-day moving average; if the price breaks above the 5-day moving average, consider buying; conversely, if it breaks below the 5-day moving average, consider selling. For medium-term trading, you can refer to the 20-day moving average; similarly, breaking above the 20-day moving average may indicate holding, while breaking below it may suggest selling. There are many different trading methods, and the best method is the one that suits you best, but regardless of the method, the key is execution. Sticking to one method, over 90% of people will not have issues; simple and conventional methods are often the most effective.
3: When a main upward wave forms, if there is no obvious volume support, you can decisively intervene; if it continues to rise, you can hold. When the price drops, if the volume decreases significantly, and the trend has not been broken, you can continue to hold. If the price crashes with a significant volume increase, it is advisable to reduce positions promptly to avoid risk.
4: When a cryptocurrency is trending, the key is to observe the trading volume; other indicators can be temporarily set aside. If the volume is decreasing or remaining steady while the price continues to rise, it may be worth holding. However, if the volume significantly increases while the price rises, you should consider selling, as there may be a large number of sellers exiting. The relationship between volume and price is very important; volume is like water, and price is like a boat.
5: In online trading, if after buying a certain cryptocurrency, there is no fluctuation within three days, consider selling promptly. If the price drops after buying, causing a loss of 5%, it is recommended to stop loss unconditionally to further prevent losses. Risk control and rebounds are crucial.
6: If a cryptocurrency has fallen 50% from its historical high and has continued to decline for 8 days, it has entered an oversold channel. In this case, an oversold rebound may be imminent, and you might consider taking this opportunity.
7. In cryptocurrency trading, choose to trade leading coins, focusing on strong currencies, and avoid messy markets. Because in a bull market, leading coins have the largest increases, and in a bear market, they also tend to decline less. Blindly buying when prices drop and fearing to chase when prices rise are both unwise. The strong will remain strong, and in short-term trading, the key is to buy high and sell even higher.
8. Follow market trends closely and act accordingly. The purchase price does not necessarily have to be as low as possible; what matters more is appropriateness. The high or low of the purchase price does not determine whether you have an advantage because the market can sometimes drop without limits. Avoid junk coins; following trends is the wiser choice.
9. Do not let short-term profits cloud your judgment. The most important thing is sustained profits, and to achieve this goal, you need to review your trades seriously. Is your trading success due to skill or luck? Building a stable trading system suitable for yourself is the key to continuous profitability.
10. Do not trade blindly just for the sake of trading. If you do not have enough confidence to ensure that this trade will be profitable, do not force yourself to open a position. Staying in cash is also a skill; selling fairly is experienced, while being able to stay in cash as much as possible is a master skill. In trading, what needs to be considered is not profit but capital preservation; the key to successful trading is not in budgeting but in success rates.
11. In a speculative market, being flexible is not a wise strategy. Use a steadfast trading system to respond to market changes and do not change your trading system. Do not be afraid to try different methods, but stick to one effective method, as in most cases, not making any changes is the best approach. Usually, you will find that you make the most mistakes when things are toughest.
12. I believe that those who persistently want to trade do so because they 'love' the activity. Passion is very important; to succeed in something, you must love practicing it. But do not become so obsessed that you cannot extricate yourself; remember that family is our most important responsibility.
13. The external environment is not responsible, but we can control our inner self. Never attribute your failures to others; this is crucial. Regardless of the circumstances, we must take responsibility for our decisions. Only by taking responsibility can we honestly face our mistakes and avoid repeating them. A trader who truly faces their mistakes is a courageous warrior.
14. A few small rumors, because there is no absolute right or wrong in opinions. Many times, what you see is just what you want to see or what you want to hear. When you are no longer interested in the opinions of the media or so-called experts, congratulations, you are not far from entering and succeeding. This is because you may begin to cultivate your independent views and beliefs.
15. You may think you are handling the market trends in trading, but in reality, you are dealing with yourself. What we see as successful on the surface is just the result and performance; behind success often lies perseverance and patience, and great achievements are often hidden behind difficulties. Time is the most valuable asset; resilience is more important than intelligence, and mindset is equally important.
16. Trading is a form of cultivation; it is a process of refining one's character and improving one's qualities. Study with heart, deeply understand large cycles and high probability theories, and cultivate insight.
All of the above is a summary of my over 10 years of practical experience and techniques in cryptocurrency trading; it may not be applicable to everyone and needs to be combined with personal practice. As a trader, the most frightening thing is not having technical issues but lacking cognition, falling into these trading traps without realizing it! There is no invincible trading system, only invincible users of trading systems! This is the truth; trading systems must ultimately return to the individual!