The cryptocurrency market is ever-changing, and trading short-term is a game for the skilled. The key to selecting cryptocurrencies for short-term trading lies in hotspots; investors must have a keen insight into the formation of these hotspots.
When selecting cryptocurrencies for short-term trading, you should master the following four key techniques:
First, look at the trading volume. As the saying goes, 'volume leads price.' Volume is the precursor to price. An increase in cryptocurrency prices must be accompanied by volume. An increase in trading volume signifies a rise in turnover rate and an increase in average holding cost, which reduces selling pressure at higher levels, allowing the price to continue rising. Sometimes, under good conditions where the dealer's chips are locked in, prices may also rise on reduced volume, but this situation won't last long. Otherwise, the average holding cost cannot increase, selling pressure will surge, and the price will lack sustained upward momentum. Therefore, short-term operations must choose cryptocurrencies with volume, especially those with increased volume at the bottom should be given special attention.
Second, look at chart patterns for short-term operations. In addition to placing great importance on trading volume, one should also pay attention to changes in chart patterns. There are several patterns worth noting: V-shaped reversals, W-bottoms, head and shoulders bottoms, rounded bottoms, platforms, ascending channels, etc. A breakout from the neck line with increased volume in W-bottoms, head and shoulders bottoms, and rounded bottoms is the best time to buy. There are two points that must be emphasized: first, there must be a breakout with volume for it to be considered effective; second, breakouts at low price levels are more reliable.
Third, look at technical indicators. There are numerous technical indicators in the Bitcoin market, each with its emphasis. Investors cannot cover all of them; they only need to be familiar with a few. Commonly used technical indicators include the stochastic indicator (KDJ) and the relative strength index (RSI). Generally speaking, when the K value crosses above the D value twice at a low level (around 20%), it is a better buying opportunity; conversely, when it crosses below the D value twice at a high level (above 80%), forming a death cross, it is a better selling opportunity. The RSI indicator indicates that when it is between 0-20, the price is oversold and can be accumulated; when it is between 80-100, it is overbought and can be liquidated.
Fourth, look at moving averages. Short-term operations generally refer to the 5-day, 10-day, and 30-day moving averages. When the 5-day moving average crosses above the 10-day and 30-day moving averages, and the 10-day moving average crosses above the 30-day moving average, it is called a golden cross, which is a buying opportunity; conversely, it is called a death cross, which is a selling opportunity. When all three moving averages are arranged upwards, it is called a bullish arrangement, indicating strength. A volume contraction pullback to the 5-day, 10-day, and 30-day moving averages is a buying opportunity.
In addition, when trading short-term, one must also learn an important thing: cutting losses.