First tip: Trading volume is the guiding light for price trends.
Fundamental factors such as demand, technology, policy, and market supply are undoubtedly the main factors affecting cryptocurrency prices. However, the primary force determining the rise and fall of prices at any given moment is still the trading activity in the market itself. No matter how significant the bullish or bearish factors, they cannot compare to the impact of trading volume. The directional indicator of trading volume is especially evident in real transactions. Here’s a very accurate saying to share: 'When trading volume increases and price rises, it will continue to rise; when trading volume increases and price falls, it will continue to fall; when a stock price suddenly surges at a high point, be wary of a crash; when a stock price suddenly surges at a low point, there is a high probability of a subsequent surge.'
Price movement indicates direction, while trading volume indicates momentum. Since trading volume is the total of buy and sell contracts. High trading volume does not necessarily mean more buyers or sellers; an upward trend merely 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 and price analysis serve as a guiding light for our future market predictions.
Second tip: 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 relatively narrow range for several days, the longer the oscillation lasts, the more solid the candlestick lines of the range will be, thus the greater the force when a breakout occurs. When trading cryptocurrencies, we must pay attention to such opportunities.
The reasoning is quite simple; it's like the magma in a volcano. Before a volcanic eruption, the magma must contend with the hard crust of the Earth. The longer it is suppressed, the greater the eruption force will be, which is what is meant by 'either erupting in silence or perishing in silence'.
The meaning of the market is also easy to understand; in a narrow range of fluctuations, whether going long or short, there is basically no profit to be made as all profits are eroded by transaction fees, losing the significance of closing positions. Therefore, the number of open contracts is bound to accumulate more and more. At this time, large institutions are either actively collecting chips waiting for a counterattack or looking for opportunities to distribute chips during the fluctuations to prepare space for opponents. As the tug-of-war continues over time, the ownership of chips slowly completes its transition. When the balance in the dense area is finally broken, upward surges or downward crashes will naturally manifest, with two forces pushing this unbridled market further:
Large investors are either actively collecting or waiting to distribute. In a narrow range of fluctuations, a storm is brewing on the clear horizon, while turbulent undercurrents are swirling beneath the calm sea. The longer the dense chip area is extended along the time coordinate, the greater the explosive power upward or downward.
When the dense chip area is finally broken, three forces will drive the market changes more violently. One is that small investors who have gained strength will not spare anyone, aggressively adding positions and pursuing victory; another is those who were forced to cut losses after being deeply trapped earlier, who usually will stop-loss and accept losses, further fueling the market; and the third is observers who see the trend clearly and immediately become followers, going with the trend.
Because the brewing of the dense chip area requires time, patience is needed for waiting for a breakout. If the direction of the dense chip area is unknown, the risk in the market outweighs the profit; dragging it out will lead to impatience, and when one becomes numb to self-observation, the market may suddenly develop in the opposite direction, leading to being trapped. It is better to first observe the situation from a distance, waiting for the right moment, and set limit orders; only when the market breaks out should one follow the trend.
Third tip: Pay attention to the intraday turning signals.
There is no bull market that only goes up and no bear market that only goes down. The alternating appearance of rises and falls is a fundamental rule in cryptocurrency trends. However, reversals have two different types of evolution: one is a change in the overall direction, where a significant upward trend turns into a significant downward trend, or vice versa.
This kind of turning point is usually represented by patterns such as double tops or double bottoms (also known as W or M shapes), triple tops or bottoms, head and shoulders tops or inverse head and shoulders bottoms, etc. These are generally significant movements that usually take about three weeks to a month and a half to develop.
Another type is a technical adjustment, where a small drop occurs during a large rise or a small rise occurs during a large drop. This kind of turning point is usually marked by a candlestick with a high open and low close, often with an upper shadow, or a candlestick with a low open and high close, often with a lower shadow, which denotes minor movements. If these situations occur within a single trading day, we consider it a turning signal. A large rise or fall is often composed of several smaller waves of increase or decrease. After a rise or fall, there is often a pullback to digest before the next wave of rise or fall. At this time, we must learn to follow the operation closely, short during declines, and go long immediately when a turning signal appears.
Fourth tip: Strategies during market fluctuations.
The rapid rise in cryptocurrency trends is not something that occurs daily; one-sided trends are often operated between a period of rises and falls, or between two periods of rises or falls, often resulting in a segment of repeated ups and downs. This so-called repeated rise and fall refers to price levels hovering within a narrow range, falling back when close to the upper limit and rising again when touching the lower limit. We refer to this kind of market as consolidation, or a 'box' trend.
The reason for the repeated ups and downs is that there are no obvious bullish or bearish news in the market, causing the market to lose directional momentum for one-sided development. At this time, traders should only engage in short-term speculation, with both bulls and bears in a tug-of-war state. Many people often get confused during this time, being 'hit left and right', as the distance between the upper and lower limits is not large. As soon as the upper limit is reached, it turns downward; as soon as the lower limit is touched, it turns upward. Profit opportunities are fleeting, and greed can lead to being trapped.
Fifth tip: Use technical analysis wisely in short-term trading to make money.
In the cryptocurrency market, even the strongest upward trend cannot reach a peak all at once, and even the weakest market will not touch the bottom with a vertical line. There must be a process of consolidation, and only after this consolidation can a new wave of rise or fall be brewed. This consolidation is technically referred to as a technical adjustment; but what causes this adjustment?
Firstly, some of the profit-takers are selling off, which creates downward pressure on the market;
Secondly, some of the loss-makers are adding positions to average down the price, which changes the direction of the market: some large investors feel that the adjustment or rise has reached their psychological expectations and engage in short-term operations, which certainly has a significant impact on the price.
This adjustment provides us with a short-term opportunity. Seizing this opportunity can yield considerable profits. For example, during an upward trend, if there are three consecutive days of rising red candlesticks, but each one is shorter than the last, and the increase is decreasing day by day, this indicates a signal that a strong upward trend is about to reverse. Conversely, the same logic applies during a weak downward trend; when an upward adjustment occurs, short positions should be taken, or when a downward trend shows a rebound, long positions should be taken. This is the best time to make money.
In summary: There are many methods to grasp specific market situations, and many people have learned numerous technical indicators, ultimately getting themselves confused. This is really unnecessary; trading techniques and methods only need to be adequate. Summarizing a set of trading methods that work for oneself is the way to remain undefeated in the cryptocurrency market.
