How to operate in the cryptocurrency market?
11 Tips for Beginners in the Cryptocurrency Market.
1. When entering the cryptocurrency market, prioritize learning.
The first step into the cryptocurrency market is not to rush to find quick riches, but to calm down and learn systematically. Master the basic concepts of digital currencies, trading methods, risk management, market analysis, information acquisition, and other skills; every step is crucial. Remember, the accumulation of knowledge is the cornerstone of wealth. Without a solid foundation, any speculative behavior is like building castles in the air.
2. Firmly stay away from contracts.
In the cryptocurrency market, whether experienced veterans or skilled experts, many have suffered significant losses on contracts; newcomers must steadily engage in spot trading and hold firmly.
3. Avoid touching small coins.
Most small coins in the cryptocurrency market are fraught with hidden dangers and are tools for cutting non-mainstream investors. Once they fall, they may directly drop to zero, with declines exceeding 99% being common. Those small, obscure coins should never be attempted; instead, decisively choose mainstream coins.
4. Stay away from small exchanges.
Smaller exchanges are always at risk of running away or may experience network disconnections. At that time, the money inside may not be withdrawable. It is advisable to choose mainstream exchanges and to diversify funds across different mainstream exchanges to reduce risks. Currently, the mainstream exchanges mainly include Binance and OKEx.
5. Rationally view the myth of hundredfold coins.
Stories of hundredfold and thousandfold coins are always enticing, but remember, such opportunities are rare and often come with huge risks. The era of tenfold and hundredfold returns in the cryptocurrency market has already passed. Major institutions and elites are entering the market, and the big bonuses are no longer there. Do not blindly pursue high returns while ignoring potential risks. In this market, stability is more important than aggressiveness. Being able to double your funds is already quite good. If a newcomer can avoid losses, they have already surpassed over 90% of the others.
6. Don't put money in unknown wallets.
If the capital is large, consider putting it in a wallet, but small wallets also have risks of running away. If choosing to use a wallet, be sure to select a reliable one carefully.
7. Choose an investment method that suits you.
Avoid ultra-short contracts, short-term trading, holding coins, mining, NFTs... There are various investment methods in the cryptocurrency market, but not every one of them is suitable for you. The volatility in the cryptocurrency market is enormous; it’s not uncommon for Bitcoin to drop 20% in a day, and altcoins may even be cut in half. Choose the investment method that suits you based on your actual situation. For newcomers, short-term trading is difficult to control; holding coins may be a relatively prudent choice, as it emphasizes long-term holding and value growth.
8. Always set stop-loss and take-profit levels.
Set goals for yourself; when the price drops to a certain level, decisively execute an exit operation: when it rises to a certain level, sell decisively, and don’t worry about how much it rises afterward. Many people lose money in bull markets because they do not know when to take profits.
9. Don't put all your funds into the cryptocurrency market.
The cryptocurrency market is fraught with risks, and there are risks associated with both deposits and withdrawals. It is recommended to start with a small amount of your spare money to practice in the cryptocurrency market.
10. Find a reliable team and mentor.
The cryptocurrency market is filled with traps, and over 99% of people are losing money. Find an experienced, reliable mentor; even if they cannot guarantee profits, they can at least help you avoid many pitfalls.
11. Regularly review and summarize.
Regularly review your investment behaviors, identify problems and shortcomings, and continuously improve your investment strategies. Cautious progress is the cornerstone of success in the cryptocurrency journey. Rational investment is the key to wealth, and taking steady steps is crucial to achieving wealth legends.
Many people feel that it is too difficult for ordinary individuals to turn their fortunes around; it seems impossible. Indeed, it is challenging, but if you follow the methods outlined below, it is very likely that you can truly change your life's trajectory.
[Must Know] One of the Most Accurate MACD Indicators (Collection).
1. The MACD is the most commonly used indicator by experts.
The role of the MACD indicator in technical analysis is extremely special and can be said to be an indispensable part of learning technical analysis. Its importance can be summarized in at least the following points.
First, the MACD indicator is one of the most effective technical indicators tested by historical trends and is also the most widely used.
Second, the MACD indicator is derived from the EMA moving average indicator and has a good application effect in grasping trending markets. Trend investors generally reference this indicator in practice.
Third, the MACD indicator's top and bottom divergence is recognized as one of the best methods for 'buying the bottom and selling the top', which is an important tool for the concretization of trend theory and wave theory.
Fourth, many veterans have had this experience: when they first entered the market and started learning the MACD indicator, they eventually discarded it, only to return to the MACD indicator after a long period of learning and comparison, especially after practical verification. This illustrates the uniqueness of the indicator.
Fifth, the application of the MACD indicator in quantitative trading is also extremely widespread.
Because of these advantages, the MACD indicator has become the most commonly used technical indicator among professional traders.
2. The concept and calculation of the MACD indicator.
The MACD indicator, or the Exponential Moving Average Convergence Divergence indicator, was created by Gerald Appel and is used to track price trends and assess K-line buy and sell opportunities. This indicator is commonly used in market software and is known as the 'King of Indicators'. As shown in [Figure 1].
The MACD indicator in the cryptocurrency market consists of the DIF fast line, DEA slow line, MACD histogram, and the zero axis, referred to as the 'three lines and one axis'. Investors analyze price movements through the crossing, divergence, breakout, support, and resistance of these 'three lines and one axis'. The MACD indicator has become a preferred indicator listed by many market software, indicating its wide application and also suggesting that this indicator is one of the most effective and practical indicators tested by history.
3. The MACD golden cross and death cross.
The 'Golden Cross' and 'Death Cross' formations are extremely important patterns in technical indicator analysis. The golden cross, also known as the golden crossover, refers to a shorter-period indicator line crossing upward through a longer-period indicator line (of the same type), often signaling the emergence of a short-term buying opportunity. If the golden cross appears after a rapid short-term decline during a downtrend; after a pullback during an uptrend; or after a consolidation during an uptrend, i.e., when the golden cross appears at a stage low, it is a more reliable buy signal.
The death cross formation, also known as a death cross, refers to a shorter-period indicator line crossing down through a longer-period indicator line (of the same type), often signaling the emergence of a short-term selling opportunity. If the death cross occurs after a consolidation during a downtrend; after a rebound during an uptrend; or after a rapid increase during an uptrend, i.e., when the death cross appears at a stage high, it is a more reliable sell signal.
After understanding the golden cross and death cross formations, we can specifically look at the golden cross and death cross formations of the MACD indicator lines. The appearance of golden crosses and death crosses in different positions reflects different market meanings.
Situation One: Buying points of low position golden crosses.
If the position of the golden cross between the DIFF line and DEA line appears below the zero axis and is far from the zero axis, this golden cross is referred to as a low position golden cross. Investors can view this golden cross merely as a short-term price rebound; regarding whether the K-line can truly reverse, further observation and confirmation with other indicators are needed.
As shown in the above figure:
On August 27, 2019, in the BTC 10-minute candlestick chart, a low position golden cross appeared with the price retracement, followed by a rebound of $200, short-term investors can seize the opportunity to enter.
Situation Two: Buying points of golden crosses near the zero axis.
If an upward trend has formed and the golden cross between the DIF line and DEA line occurs near the zero axis, this is often an excellent buying opportunity for investors.
This is because when an upward trend forms, a golden cross near the zero axis indicates that the adjustment has completely ended and a new upward trend has started. If this is accompanied by a golden cross of the volume line, it indicates that the price increase is supported by trading volume, making the buy signal even more reliable.
Once this buying point appears, investors absolutely should not miss it; otherwise, they will miss out on a significant upward trend.
As shown in the above figure:
On August 19, 2019, at 09:30, in the BTC 5-minute candlestick chart, Bitcoin broke above the 30-day moving average, indicating that an upward trend has initially formed. For a period thereafter, the price almost continuously traded above the 30-day moving average.
On August 19, 2019, at 14:00, the MACD indicator formed a golden cross near the zero axis, indicating that the market is about to see a significant upward movement. Investors can buy decisively.
Situation Three: Buying points of high position golden crosses.
If the golden cross between the DIFF line and DEA line occurs above the zero axis and is at a considerable distance from the zero axis, this golden cross is referred to as a high position golden cross. High position golden crosses generally appear during the consolidation phase of the K-line's upward movement, indicating that the consolidation has ended and the K-line is about to resume the previous upward trend. Therefore, once a high position golden cross appears, it is a good signal for increasing positions.
In practical scenarios, when an upward trend forms, and the K-line rises slowly and persists for a long time, once the MACD indicator forms a high position golden cross, it often signifies that the K-line is about to accelerate its upward movement.
Because of this, high position golden crosses can also be used for wave operations. Investors can use the MACD indicator to continuously target upward waves during an upward trend.
As shown in the above figure:
On June 25, 2019, in the BTC 3-hour candlestick chart, Bitcoin's price rose again after a consolidation during an upward trend, and the MACD indicator formed a high position golden cross. This indicates that the pullback has ended, and the price will resume the previous upward trend. Investors should pay attention to seizing this opportunity to increase their positions.
Situation Four: Selling points of low position death crosses.
A low position death cross refers to a death cross occurring at a considerable distance below the zero axis. This type of low position death cross often appears at the end of an upward rebound in a downward trend; therefore, a low position death cross is a sell signal indicating the end of a rebound. At this time, investors without positions should observe, while those deeply trapped should consider selling first and buying back later at a lower price to reduce costs.
As shown in the above figure:
On July 14, 2019, in the LTC 3-hour candlestick chart, the MACD indicator of Litecoin showed a low position golden cross, leading to a slight rebound in price, followed by a rapid drop.
Immediately after, the MACD indicator exhibited a death cross below the zero axis, and then the K-line began a new round of downward movement. Spot investors can sell their positions at the death cross and then buy back to lower their holding costs.
Situation Five: Selling points of death crosses near the zero axis.
If the previous market direction has been a downward trend, and at this time the DIFF line breaks below the DEA line near the zero axis, this crossing is referred to as a death cross near the zero axis. It indicates that the market has accumulated considerable downward momentum near the zero axis, and the appearance of a death cross signifies the release of downward momentum, suggesting that the K-line will continue its original downward trend, signaling a sell.
As shown in the above figure:
On August 12, 2019, in the BTC 1-hour candlestick chart, the DIFF line of Bitcoin broke below the DEA line near the zero axis, forming a death cross. This indicates that the market's downward momentum is beginning to release, signaling a sell; investors should decisively sell their positions, or they will be deeply trapped.
Situation Six: Selling points of high position death crosses.
When the DIFF line breaks below the DEA line at a considerable distance above the zero axis, it is called a high position death cross. This type of death cross is sometimes accompanied by MACD divergence. It manifests as: during the ongoing price rally, new highs are continuously created, but the MACD indicator's DIF line and DEA line no longer continue to rise or push up but diverge from the price trend and gradually move down.
Above the zero axis, when the DIF line crosses below the DEA line, it forms a downward crossing trend, known as a death cross, which is a relatively reliable sell signal.
As shown in the above figure:
On August 23, 2019, in the TRX 1-hour candlestick chart, after the TRON coin rose in a wave, the price continued to reach new highs, but the DIF line and DEA line no longer continued to rise, then formed a death cross, signaling a sell.
4. MACD and K-line divergence.
Divergence is a term that describes energy in physics and is a widely used analysis method with a high success rate in technical analysis. In a downward trend, when the price reaches new lows, but the indicator line does not reach new lows, it is called bottom divergence, indicating that upward momentum is accumulating, signaling a buy. In an upward trend, when the price reaches new highs, but the indicator line does not reach new highs, it is called top divergence, indicating that downward momentum is accumulating, signaling a sell.
I. Bottom divergence.
(1) Bottom divergence between the MACD histogram and DIFF line.
The bottom divergence between the DIFF line and price refers to when the price reaches new lows during a downward trend, but the DIFF line does not reach new lows. It indicates that during the price's downward movement, the DIFF line's decline is less severe than the price's decline, and upward momentum is accumulating in the market, suggesting that the price is about to stop falling, with a high probability of an upward movement in the coming period.
The MACD histogram is the hidden MACD histogram behind the DIFF line, divided into red and green. Its divergence with price is an important use of the MACD indicator and is widely applied in practice. The bottom divergence between the MACD histogram and price refers to when the price is continuously making new lows, but the MACD histogram does not make new lows. The upward momentum in the market is accumulating, and the price is about to stop falling, with a high probability of an upward movement in the coming period.
When a bottom divergence occurs, investors can grasp specific buy points in two ways.
(2) Specific buying timing.
The bottom divergence between the DIFF line, MACD histogram, and price is not a specific point in time but a pattern that appears over a period. However, the specific buying time for investors is a specific point, indicating that the price is about to stop falling. Therefore, to grasp specific buying timing, when the DIFF line, MACD histogram, and K-line show bottom divergence, investors must integrate this bottom divergence with other technical analysis tools to specify the buying point.
First: The color change of the histogram or the MACD golden cross.
The color change of the histogram indicates that the market's upward momentum has begun to dominate. This generally occurs after the 'shortening of the histogram'; although it may be delayed for a time, it is more reliable. When a bottom divergence appears, if the histogram successfully changes color or forms a golden cross, investors can buy.
As shown in the above figure:
On August 26, 2019, in the Ethereum (ETH) 15-minute candlestick chart, the price of Ethereum reached a new low during a decline, but the MACD histogram did not reach a new low, forming a bottom divergence pattern with the price. This indicates that the market's upward momentum is beginning to accumulate, and there is a high probability that a wave of upward movement will occur soon.
Following closely, the color change of the histogram increases the reliability of these two sequential buy signals. Investors can enter when the histogram changes color.
Second: Combine with other technical analysis tools and K-line reversal patterns.
Bottom divergence combined with K-line reversal patterns, such as 'single needle bottoming' and 'bottom red three soldiers', is precisely the specific application of the 'multi-indicator combination' principle.
As shown in the above figure:
On August 26, 2016, in the BTC 30-minute candlestick chart, Bitcoin's price reached a new low, but the MACD histogram did not reach a new low, forming a bottom divergence pattern with the price, indicating that the market's upward momentum is continuously increasing.
Accompanied by the price's downward stop, it forms a buy signal of 'MACD histogram and price bottom divergence + K-line single needle bottoming'. Subsequently, the price experienced a wave of upward movement.
II. Top divergence.
(1) Top divergence between the MACD histogram and DIFF line.
The top divergence between the MACD histogram and K-line indicates that during an upward trend, when the price reaches new highs, the MACD histogram does not reach new highs. This indicates that downward momentum is accumulating in the market, and the price may drop at any time.
The top divergence between the DIFF line and K-line refers to when the price reaches new highs during an upward trend, but the DIFF line does not reach new highs. This indicates that the downward momentum in the market is accumulating, and there is a significant probability that the price will experience a downward trend next.
(2) Specific selling timing.
Similar to bottom divergence, in practice, according to the principle of multi-indicator combination, investors can use the following methods to make sell signals more specific.
First: The color change of the histogram or the MACD death cross.
After the divergence between the MACD histogram and K-line forms, if the histogram suddenly shortens sharply, it indicates that the market's downward momentum is beginning to release. Investors should pay attention to selling in a timely manner. The color change of the MACD histogram indicates that the downward momentum has begun to dominate; it generally occurs after the histogram is continuously reducing. If there is a divergence between the histogram and K-line, followed by a color change or a MACD death cross, investors should pay attention to exit in a timely manner.
As shown in the above figure:
On August 9, 2019, in the HT 1-hour candlestick chart, the Huobi price reached a new high, but the MACD histogram did not reach a new high, forming a top divergence pattern with the price. This indicates that the market's downward momentum is beginning to accumulate, and a downward movement may occur at any time.
Second: Combine with other technical analysis tools and K-line reversal patterns.
After the appearance of divergence between the MACD histogram and price, if other technical analysis tools simultaneously show sell signals, the reliability of the market's sell signal will greatly increase; investors should be prepared to exit decisively. Common sell signals in this category include 'histogram and price top divergence + K-line reversal patterns', etc.
Second: Combine with other technical analysis tools and K-line reversal patterns.
After the appearance of divergence between the MACD histogram and price, if other technical analysis tools simultaneously show sell signals, the reliability of the market's sell signal will greatly increase; investors should pay attention to exit decisively. Common sell signals in this category include 'histogram and price top divergence + K-line reversal patterns', etc.
As shown in the above figure:
On July 20, 2019, in the ETH 3-hour candlestick chart, Ethereum's price reached a new high, but the MACD histogram did not reach a new high, forming a top divergence pattern with the price. This indicates that the market's downward momentum is continuously increasing, suggesting a possible downward movement.
During an upward trend, a longer bullish candle appears first, followed by a shorter real body K-line (either bullish or bearish). People liken it to a star, which is the main body of the K-line combination. The third K-line is a longer bearish candle that penetrates deeply into the body of the first K-line. The evening star is a signal of price peak and decline, with some predicting an accuracy rate of over 80%.
(About some topping and bottoming K-line formations. We will have several dedicated courses to explain this in depth later, please stay tuned.)
5. Modifying MACD parameters.
The lag in response to price fluctuations sometimes makes buy and sell prices less than ideal, which is a defect of the MACD indicator. One way to change this situation is to adjust the indicator parameters to make the MACD indicator more sensitive to trends, thus allowing buy and sell point prices to be more favorable.
In commonly used market software, the default parameters for the MACD indicator are 12/26/9. With such parameter settings, the MACD indicator often exhibits significant lag in response to price movements.
The lag of the MACD indicator can be addressed by adjusting parameters. Common parameter combinations include 5/34/5, 5/10/30, etc. Investors can also try and explore more in practice.
Nine Major Tips for Trading in the Cryptocurrency Market!!!
1. Don't rush to buy when the market crashes; wait to see the trend first. Don't rush to catch the bottom; understand the situation before taking action.
2. If you make a profit, stop and don’t be too greedy. Greed can lead to losses; be careful not to end up with nothing.
3. If you lose money, don’t be discouraged; think about how to adjust your strategy. Don't give up easily; opportunities are reserved for those who are prepared.
4. Don't always think about making a quick profit; long-term investment is more stable. Don't trade frequently; patiently hold good potential coins is more reliable.
5. Don't just follow which coin is rising; the market changes rapidly. Avoid chasing highs and cutting losses; rational analysis is essential.
6. Don't let emotions affect your buy and sell decisions; maintain a good mindset. Avoid emotional trading; rational analysis leads to success.
7. Don't always think about getting rich quickly; trading requires patience and planning. Don't just think about getting rich; being grounded is more practical.
8. Don't invest all your money in one place; reasonable fund allocation is more important. Don't put all your eggs in one basket; diversified investments are safer.
9. If you lose money, don't rush to add more money; first, look for the reason. Avoid blindly averaging down; having a strategic response is more important.
