Eight Key Principles of the Cryptocurrency Market
The eight key principles of the cryptocurrency market encapsulate rich trading experiences and distill the essence of market psychology and operational strategies. Below is an analysis of the core logic of each principle, helping you better understand and apply them, while also highlighting precautions.
1. Averaging Down to Break Even, Seeking Profit is Greed
The core idea is that after being stuck in a position, don’t rush to break even; averaging down to lower your cost is a prudent move, but don’t expect short-term windfalls. Be cautious with averaging down; confirm if the trend is stabilizing, otherwise, you might lose even more. It is advisable to set stop-loss orders in advance. Before averaging down, thoroughly analyze the project's fundamentals and market sentiment; do not blindly “catch the falling knife.”
2. Calm Surface, High Wave Ahead, Beware of Huge Turbulence
A calm market is often a false illusion before a storm; a small rise may indicate large fluctuations ahead. The cryptocurrency market is highly volatile; a period of calm might signal accumulation or distribution by major players. You can sense risks in advance by monitoring trading volume and on-chain data. Don’t be misled by low volatility, and be prepared for sudden market movements at any time.
3. After a Big Rise, a Correction is Inevitable, K Line Forms a Triangle Over Several Days
A correction after a rise is a market rule; the triangular shape in K lines often indicates the direction of a breakout. Triangular formations, such as ascending, descending, and symmetrical triangles, are classic signals in technical analysis. Pay attention to trading volume and trend lines before a breakout; corrections are normal adjustments and do not warrant panic selling. However, false breakouts are common, so it's advisable to confirm with other indicators.
4. Buy on Dips, Not on Rallies; Sell on Rallies, Not on Dips; Going Against the Market is Heroic
This principle advocates for contrarian trading: buy low and sell high, avoiding chasing prices up and down. During a downtrend, market panic may present bottom-fishing opportunities; during an uptrend, market greed is suitable for taking profits. However, contrarian trading requires a strong mindset and precise judgment, and should be combined with trends and capital flow; do not blindly bottom-fish or sell.
5. Don't Sell on Rallies, Don't Buy on Dips, Don't Trade in a Sideways Market
This principle warns against emotional trading and emphasizes waiting for clear signals. Rallies and dips are extreme points of emotion, and a sideways market lacks direction; patiently waiting for trends to clarify can improve your winning rate. During sideways periods, pay attention to on-chain activity and project dynamics to prepare for the next market wave.
$BTC
$ETH
$XRP
The eight key principles of the cryptocurrency market encapsulate rich trading experiences and distill the essence of market psychology and operational strategies. Below is an analysis of the core logic of each principle, helping you better understand and apply them, while also highlighting precautions.
1. Averaging Down to Break Even, Seeking Profit is Greed
The core idea is that after being stuck in a position, don’t rush to break even; averaging down to lower your cost is a prudent move, but don’t expect short-term windfalls. Be cautious with averaging down; confirm if the trend is stabilizing, otherwise, you might lose even more. It is advisable to set stop-loss orders in advance. Before averaging down, thoroughly analyze the project's fundamentals and market sentiment; do not blindly “catch the falling knife.”
2. Calm Surface, High Wave Ahead, Beware of Huge Turbulence
A calm market is often a false illusion before a storm; a small rise may indicate large fluctuations ahead. The cryptocurrency market is highly volatile; a period of calm might signal accumulation or distribution by major players. You can sense risks in advance by monitoring trading volume and on-chain data. Don’t be misled by low volatility, and be prepared for sudden market movements at any time.
3. After a Big Rise, a Correction is Inevitable, K Line Forms a Triangle Over Several Days
A correction after a rise is a market rule; the triangular shape in K lines often indicates the direction of a breakout. Triangular formations, such as ascending, descending, and symmetrical triangles, are classic signals in technical analysis. Pay attention to trading volume and trend lines before a breakout; corrections are normal adjustments and do not warrant panic selling. However, false breakouts are common, so it's advisable to confirm with other indicators.
4. Buy on Dips, Not on Rallies; Sell on Rallies, Not on Dips; Going Against the Market is Heroic
This principle advocates for contrarian trading: buy low and sell high, avoiding chasing prices up and down. During a downtrend, market panic may present bottom-fishing opportunities; during an uptrend, market greed is suitable for taking profits. However, contrarian trading requires a strong mindset and precise judgment, and should be combined with trends and capital flow; do not blindly bottom-fish or sell.
5. Don't Sell on Rallies, Don't Buy on Dips, Don't Trade in a Sideways Market
This principle warns against emotional trading and emphasizes waiting for clear signals. Rallies and dips are extreme points of emotion, and a sideways market lacks direction; patiently waiting for trends to clarify can improve your winning rate. During sideways periods, pay attention to on-chain activity and project dynamics to prepare for the next market wave.
$BTC
$ETH
$XRP
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