“Severe overselling”, “Insufficient downward momentum”, “Entering a downward channel”, “Head and shoulders pattern”, “Long stagnation leads to a fall” - these terms sound professional, yet they often trap trading novices. Candlestick technical analysis seems scientific, but it hides the complexity and uncertainty of the market.
A real case
During a certain period in 2023, $BTC had a daily volatility of less than 5% for a whole week, the market was stagnant, and the volatility was extremely low. The Bollinger Bands narrowed, and the candlestick pattern appeared “healthy” and “safe”.
A top family office in Hong Kong, due to funding needs, decided to sell BTC that was allocated three years ago. On the last day of a certain week, the BTC price slowly rose by 5%, reaching the weekly high. The asset manager believed the time to sell had come, urgently convened a meeting, and instructed the team to sell 10,000 BTC.
However, the operators lacked experience and directly placed a market order on a certain CEX, instantly crashing the market with 10,000 BTC. Arbitrage robots quickly split the orders, transmitting to the global market, and the order book was broken, resulting in a large bearish candlestick that shocked the entire market.
Question: Can candlesticks predict “whale dumping”?
Candlesticks and indicators are merely static representations of historical data, reflecting facts that have already occurred. With this static information, can you predict the upcoming dynamics of the market?
In the global trading game, who can foresee the sudden buying or selling intentions of an institution or individual? An action involving a large amount of capital is enough to trigger violent fluctuations in a short time.
Five major traps of candlestick analysis
1. “Bare K strategy” is pseudoscience: Over-reliance on candlestick patterns or technical indicators while ignoring the real drivers behind the market is akin to superstition.
2. Don’t casually blame the “big players”: A sharp decline is not necessarily due to “big players dumping”, often caused by unexpected events or operational errors.
3. Even amateur teams can create waves: Many sudden spikes and drops are not carefully planned, but rather due to unexpected events or basic errors.
4. Filtering noise is key: When analyzing the market, it is essential to eliminate the interference of sudden price movements and focus on the long-term market-making range.
5. Short-term fluctuations are emotional traps: Extreme market conditions can easily trigger chasing highs and cutting losses, leading to a vicious cycle of dopamine.
Conclusion
Candlestick analysis has reference value, but excessive reliance is like seeking a sword in a boat. The market is the result of dynamic games among countless participants, and static candlesticks cannot reveal the full picture. To improve trading success rates, one must break free from the limitations of technical indicators and understand the driving logic of capital flows, emotions, and sudden events.
