I have been trading cryptocurrencies for years; the first three years were indeed sleepless nights, and I suffered significant losses for three years. After deep reflection, I earned for the next five years. I will share my experience with everyone to help you avoid detours. This article is lengthy and purely practical, so please read it carefully; it will be of great help to you!
The most practical trick for short-term contract trading in the cryptocurrency circle, the short-term contract 'quick knife cuts through the mess' helps you become a winning general on the battlefield of short-term contracts.
1: Accurate positioning, locking in target cryptocurrencies
1. Keep up with hot topics, gain insight into market sentiment:
Short-term trading is like hunting; you need to stay highly sensitive to market hotspots. Keep a close eye on industry dynamics, policy changes, and major events, as these can trigger sharp fluctuations in market sentiment, creating good opportunities for short-term trading. Once you catch a hotspot signal, strike decisively to 'strike while the iron is hot.'
2. Technical analysis, grasp the trend direction:
Candlestick charts, MACD, RSI, and other technical indicators are the 'compass' for short-term traders. By analyzing these tools, one can identify key support levels, resistance levels, and trend patterns, such as double tops, double bottoms, breakouts, etc., providing scientific basis for trading decisions. Remember, 'If you want to do a good job, you must first sharpen your tools.'
3. Diversify investments to reduce risk exposure:
Although short-term trading pursues quick profits, 'do not put all your eggs in one basket.' Reasonably allocate funds and diversify investments across multiple potential cryptocurrencies, capturing more opportunities while effectively spreading risks, ensuring that 'when the East doesn’t shine, the West does.'
2: Flexible operations, master trading timing
1. Quick in and out, follow the time principle:
The essence of short-term trading lies in 'quick battles and quick decisions,' avoiding attachment to the battlefield. Once the expected profit target or stop-loss point is reached, the trading plan should be executed without hesitation, lest one miss the best exit opportunity due to momentary hesitation. 'Take the profit when it's good, secure the gains.'
2. Follow the trend, adapt to the market rhythm:
The market is like a tide; those who follow it prosper, while those who go against it perish. After clarifying the trend direction, one should adhere to the principle of 'trend is king,' avoiding confrontation with the market's overall trend. Even if there are occasional pullbacks, as long as the major trend remains unchanged, hold your position firmly, ensuring 'no matter how strong the winds and waves, sit steadily on the fishing platform.'
3. Dynamic adjustment to respond to market changes:
The market changes rapidly, and trading strategies must be flexible. Regularly review your holdings and adjust profit-taking and stop-loss points according to new market dynamics, ensuring strategies remain in sync with the market. 'There are no constant conditions for soldiers, nor constant shapes for water'; only flexible responses can keep you undefeated in a turbulent market. Three: Psychological training, firmly grasp the key to profit.
1. Calm analysis, discard emotional interference:
In short-term trading, negative emotions such as greed, fear, and blind following can often become stumbling blocks to profitability. Learn to view market fluctuations with an objective and rational perspective, unaffected by others' opinions, and truly achieve 'regardless of the wind and waves, calmly sit in the fishing boat.'
2. Set goals, adhere to trading discipline:
Before each trade, clear profit targets and stop-loss points should be set and strictly adhered to. Regardless of how tempting the market may be, one must persist in 'plan your trade and trade your plan' to avoid falling into passivity due to impulsive decisions.
3. Continuous learning, enhance trading literacy:
Short-term trading in the cryptocurrency circle is not achieved overnight; it requires long-term learning and practice. Stay updated with industry news, read classic books, participate in online seminars, and continuously enhance your knowledge reserve and trading skills. Remember, 'learning is like rowing upstream; not to advance is to drop back.'
Short-term contract trading is like an exciting financial adventure, and the 'quick knife cuts through the mess' tactic is a powerful tool for navigating this adventure. Accurate positioning of target cryptocurrencies, flexible timing for trading, along with psychological training and enhancement, will enable you to navigate the world of short-term contracts in the cryptocurrency circle with ease and realize your dream of wealth appreciation.
Remember: 'Wise people plan according to the situation, while fools act against logic.' In the ever-changing cryptocurrency realm, may every short-term contract player become a wise trendsetter!
Candlestick Basics
The candlestick chart, also known as the candlestick chart, originated during Japan's Tokugawa shogunate era and was used by merchants in Japan's rice market to record the market's conditions and price fluctuations. It was later introduced into the capital market due to its delicate and unique drawing method.
Candlesticks are drawn based on the opening price, highest price, lowest price, and closing price of each analysis cycle. The structure of candlesticks can be divided into upper shadows, lower shadows, and the middle body.
In the digital currency market, green represents bullish, and red represents bearish. Through candlestick charts, we can completely record the performance of the cryptocurrency market in each analysis cycle. After a period of price consolidation, a special region or shape is formed on the chart; different shapes represent different meanings. We can explore some regularities from the changes in these shapes. Generally, candlestick chart patterns can be divided into reversal patterns, consolidation patterns, gaps, and trend lines, etc.
First: The practical significance of candlesticks
In the cryptocurrency circle, candlestick charts are the most intuitive analytical tool. 'One leaf falling can indicate the arrival of autumn,' this is the way of thinking that candlestick charts bring us. Simple candlesticks remind us that no matter how the cryptocurrency circle operates, we can find clues in the details. Whoever can grasp the clues drawn by candlesticks faster and more accurately will be able to avoid more losses and achieve greater gains.
In fact, different people view candlesticks and arrive at different 'opinions.' Therefore, the same candlestick chart presented to many investors can be 'analyzed' into numerous different results. It is precisely these results that make the battles in the cryptocurrency circle more intense. Sometimes, when doing quantitative analysis or trading more, one gradually discovers that many times candlesticks can be misleading and atypical. Thus, one becomes troubled daily, wondering why this happens. It shouldn't! Theoretically, it should behave this way or that! Gradually, doubts about candlesticks arise, researching market makers, false breakouts, and so on. Conspiracy theories abound during the consolidation phase.
Sometimes, it may be luck; a few coincidental counter-trend trades or assumptions might lead to capturing a few waves, making one feel they have truly discovered the essence behind candlestick patterns, believing they have mastered the market's pulse. But more often than not, like in the previous stage, a good result still cannot be obtained after quantifying. Many people get stuck in this stage, treading in place, hesitating to move forward. But once you truly get past it, you will find that whether you believe it or not, candlesticks operate as they do. Whether you act or not, they are there. They are neither divine nor trash. They are merely witnesses of the market's operational trajectory; there is no need to mythologize them or despise them.
The interpretation of candlesticks has become increasingly complex, as with the advancement of the investment community and the increase in investment capital, short-term candlesticks in the market are often manipulated and present 'traps.' Therefore, we need to use the principles of relativity and technical analysis methods to filter them. The principle of relativity includes quantitative measurement standards and analytical work, so that we can improve the probability of successful analysis and operations. If there are no candlestick charts, investing is still investing; the journey remains tortuous, and other methods can still be used. However, when facing the investment reality we are in, the thinking of candlesticks cannot be ignored, as to some extent, it is one of the starting points for real investment.
Many people also firmly believe that the premise of candlesticks is: the market is always right. Therefore, when seeing a particular candlestick pattern, because the market is always right, what the current candlestick reflects will also be the market's future trend. In fact, I believe many traders who have just started have a question: why, when the market has a very perfect technical pattern, does it often go against expectations? This is not because the technology itself is wrong, nor is it a problem with the user; it is just that we often only see the 'perfect' technical patterns, and we only see what we believe is correct. Analyzing various basic patterns of individual candlesticks.
Observing bullish and bearish indicates the direction. Taking bullish candlesticks as an example, after a period of struggle between bulls and bears, a closing price above the opening price indicates that the bulls have the upper hand. According to Newton's laws, in the absence of external forces, the price will continue to move in the original direction and speed; therefore, bullish candlesticks indicate that the market will continue to rise in the next phase, at least ensuring that the initial phase has an inertial upward movement. Thus, bullish candlesticks often indicate a continuation of the upward trend, which aligns with one of the three major hypotheses in technical analysis: stock prices fluctuate along the trend. This trend-following approach is also the core idea of technical analysis. Similarly, bearish candlesticks indicate a continuation of the downward trend.
Represents intrinsic momentum; the larger the body, the more obvious the trend of rise or fall; conversely, the trend is less obvious. Taking bullish candlesticks as an example, their body is the part where the closing price is higher than the opening price. The larger the bullish candlestick body, the more strong the upward momentum, just like the principle of physics where larger mass and faster speed result in greater inertia. The larger the bullish candlestick body, the greater its intrinsic upward momentum, which will be greater than the smaller bullish candlestick. Similarly, larger bearish candlestick bodies indicate stronger downward momentum.
Observe the length of shadows
Shadows represent reversal signals; the longer the shadow in one direction, the less favorable it is for the price to move in that direction. For example, the longer the upper shadow, the more unfavorable it is for the stock price to rise, and the longer the lower shadow, the more unfavorable it is for the price to fall. Taking the upper shadow as an example, after a period of struggle between bulls and bears, the bulls finally lose their advantage, leading to a weaker market sentiment. Regardless of whether the candlestick is bearish or bullish, the upper shadow portion has formed the next stage's upper resistance, increasing the probability of a downward adjustment. Similarly, the lower shadow indicates a higher probability of an upward attack.
Analyzing various basic patterns of combination candlesticks
What is the battle between bulls and bears often referred to in the cryptocurrency circle? Bulls and bears are two factions; the bullish side represents the green army, while the bearish side represents the red army. The two sides have different views, with bulls believing prices will rise and bears believing prices will fall, thus often resulting in battles. The bullish green army consists of those who are bullish on prices; they buy and raise prices, while the bearish red army consists of those who are bearish on prices; they sell and push prices down.
Every time period will produce battles; if the bearish army wins, the price will fall, and the candlestick chart will show red. If the bullish side gains a significant advantage, indicating strength, the entity shown on the candlestick chart will be larger. If the bearish side's resistance is weak, indicating too little resistance to the bullish side, the candlestick chart will show very short shadows.
1: Dark Cloud Cover Combination
After a bullish price increase, a bearish candlestick appears, and this bearish candlestick brings the price below half of the previous bullish candlestick's body. This combination often occurs after the market has already surged for a while or even reached a peak, indicating a market reversal, which will subsequently lead to a downward trend.
2: Island Combination
After a period of rising prices, a gap-up bearish candlestick appears, resembling an island. This combination, although the closing price of the bearish candlestick is still higher than yesterday's, reveals the weakness of market sentiment and the operating methods of previous profit-takers, indicating that the market outlook is not optimistic.
3: Middle Pillar Combination
This combination is relative to the 'Dark Cloud Cover' combination. After the price shows a bearish candlestick decline, a bullish candlestick appears, and this bullish candlestick causes the price to rise above half of the previous bearish candlestick's body. This combination often appears after the market has already significantly declined or even reached a low point, indicating a market reversal, which will subsequently lead to an upward trend.
4: Inclusion Combination
The bodies are dual-natured between bullish and bearish, but both are today's long bodies completely encompassing yesterday's small body, indicating that the market will develop along the direction of the long body.
5: Pregnancy Combination
The body is dual-natured between bullish and bearish, but it is the opposite of the Inclusion Combination form. The small body of today is encompassed by the large body of yesterday, resembling being nurtured in a womb, hence called the Pregnancy Combination. Whether it relates to genetics is unknown, but this Pregnancy Combination often indicates the market's future direction, which is typically in line with the direction of the maternal body; that is, a bullish body gives birth to a bearish outcome, while a bearish body gives birth to a bullish outcome.
6: Morning Star Combination
This combination occurs after a bearish candlestick, followed by a small bullish candlestick or a small bullish cross, and then a large bullish candlestick that gaps up. This combination often appears after a prolonged decline or consolidation in the market, where the small bullish candlestick below is like the long-awaited Morning Star in the minds of market participants. The subsequent strong bullish candlestick indicates that the long night has passed, and the market welcomes brightness. Thus, the Morning Star combination becomes the turning point for a market reversal upward.
7: Evening Star Combination
This combination is exactly the opposite of the Morning Star combination, becoming the turning point of a market reversal decline. The gap-up cross at the top, after the subsequent gap-down large bearish candlestick forms, finally becomes a Evening Star. If the top is a bearish T-line with a medium upper shadow, this combination is vividly referred to as a 'Shooting Star'.
8: Three Red Soldiers Combination
When this combination of three consecutive small bullish candlesticks appears in a low zone, it indicates that the market has emerged from a long-term bearish shadow and is on the road to a rebound.
9: Three Black Crows Combination
When this combination of three consecutive black crows appears in a high zone, it indicates that the upward trend has ended and a downward trend has begun.
Summary
Using candlesticks to describe the market has a strong visual effect, and it is one of the charts that best represent market behavior. Nevertheless, some common candlestick combinations are merely summaries of typical shapes based on experience, lacking strict scientific logic. When applying candlesticks, remember the following points.
1. There will be a certain error rate in candlestick combination analysis. Market fluctuations are complex, and the actual market situation may differ from our judgments. Experience statistics can prove that the success rate of using candlestick combinations to predict future trends is not very high.
2. Candlestick analysis methods must be combined with other methods. After using other analysis methods to determine whether to buy or sell, only then should candlestick combinations be used to choose the specific time and price for action.
3. Modify, create, and adjust combination patterns continuously based on actual conditions. Combination patterns are merely products of summed experiences; in the actual market, situations that completely meet the candlestick combination patterns we introduced are rare. If you blindly copy combination patterns without any changes, you may miss suitable opportunities for a long time. Adjust the combination patterns appropriately according to the situation. One should understand the internal and external principles of each combination pattern. Because it is not a perfect technology, this is the same as other technical analysis methods. Candlestick analysis is established based on human subjective impressions and is one of the analysis methods expressed on historical pattern combinations.
