"Big shot, is Bitcoin going to rise or fall?"
"Should I buy now or sell?"
"What does this candlestick mean?"
Every day, countless newcomers ask these questions in the group. Seeing their anxious and confused expressions, I can almost see myself five years ago — that "crypto rookie" who stared at the screen while clutching a phone, even setting price alerts for bathroom breaks. Today, I'm going to discuss how to "understand" this love-hate relationship with the cryptocurrency market in the most down-to-earth way.
1. Don't be terrified by candlesticks: They are just a "sentiment thermometer"
Many newcomers feel dizzy when looking at candlestick charts; those red and green bars resemble a hospital's ECG. In fact, candlesticks are not that mysterious; they are like a "sentiment thermometer":
1. Bullish candlestick (red bar): The market is partying
It's like binge-watching a series that suddenly updates with 10 new episodes; you feel so excited you want to dance. When a candlestick closes bullish, it indicates strong buying power, and everyone is scrambling to buy.
2. Bearish candlestick (green bar): The market is emo
It's like discovering your favorite milk tea shop raised its prices, instantly killing your desire to drink it. When a bearish candlestick appears, the sellers have the upper hand, and many are eager to sell.
3. Upper shadow: Someone tried to "reach the top" but failed.
It's like jumping to reach fruit on a tree but failing and falling down. A longer upper shadow indicates heavier selling pressure above.
4. Lower shadow: Someone tried to "buy the dip" but got stuck.
It's like rushing into a store to buy discounted clothes, only to find out they can be even cheaper. A long lower shadow indicates strong support below.
The rustic summary of seasoned investors:
"A lot of red bars mean the market is feverish; a lot of green bars mean the market has a cold. A long upper shadow means high pressure at the top; a long lower shadow means strong support at the bottom."
2. Trading Volume: The "heartbeat monitor" of the market
Looking at candlestick patterns alone isn't enough; you also need to consider trading volume — it's like taking a temperature and measuring blood pressure when seeing a doctor.
1. Volume and price rising together: Healthy increase
It's like your heart races while running, but your breathing is smooth, which is a good thing. When prices rise and trading volume increases, it indicates strong buying power, and the trend may continue.
2. Volume-price divergence: Be cautious
It's like your heart racing even when you haven't exercised; this might be your body sending an alarm. When prices hit new highs but trading volume shrinks, it indicates insufficient upward momentum, and a pullback might occur.
3. Volume increasing but price decreasing: Run away quickly
It's like being chased by a dog, your heart racing to the point of explosion. When prices drop significantly and trading volume increases, it indicates panic is spreading; at this point, don't think about bottom fishing; prioritizing survival is crucial.
Real Case:
In May 2023, when Bitcoin broke $30,000, I noticed the trading volume had tripled compared to the previous day. At that time, I shouted in the group: "This surge has momentum!" Sure enough, a week later, Bitcoin hit $35,000.
3. Moving Averages: The market's "average face"
Moving averages smooth out the market's daily prices, allowing you to see the major trend. Commonly used are the 5-day, 10-day, and 30-day moving averages.
1. Short-term moving average crossing above long-term moving average: Golden cross, buy signal
It's like when the girl you like suddenly smiles at you, which is a good sign. When the 5-day moving average crosses above the 10-day moving average, it indicates strengthening short-term trends.
2. Short-term moving average crossing below long-term moving average: Death cross, sell signal
It's like discovering the goddess you like has a boyfriend; it's time to retreat quickly. When a death cross occurs, it indicates that the short-term trend is weakening.
3. Moving averages in bullish arrangement: The bull market is here
It's like scoring perfect marks on three consecutive exams, with the teacher praising you as a top student. When short-term, medium-term, and long-term moving averages are in a bullish arrangement (30-day, 10-day, 5-day from bottom to top), it indicates the market is in an upward channel.
4. Moving averages in bearish arrangement: Bear market warning
It's like being scolded by your boss for being late three days in a row, feeling like you might get fired. When in a bearish arrangement, quickly reduce your position or stay out.
The rustic methods of seasoned investors:
"Just look at the 5-day and 10-day moving averages, golden cross for buying, death cross for selling; it's simple and effective."
4. MACD: The market's "emotion radar"
MACD sounds sophisticated, but it's just a "sentiment detector", consisting of the DIF line, DEA line, and histogram.
1. DIF line crossing above DEA line: Golden cross, buy
It's like when the person you secretly love suddenly asks you out to dinner, and your heart races.
2. DIF line crossing below DEA line: Death cross, sell
It's like discovering your date actually has a partner, instantly making your heart sink.
3. Histogram lengthening: Emotion heating up
A longer red bar indicates increased buying power; a longer green bar indicates increased selling power.
4. Histogram shortening: Emotion cooling down
It's like coming home from a fun night out at KTV, and the excitement slowly fades away.
Practical Skills:
When the MACD forms a golden cross below the zero line, it is often a good time to buy the dip. In November 2022, when Bitcoin fell to $15,000, the MACD formed a golden cross below the zero line, and I decisively bought in, making a 50% profit two months later.
5. News: Market's "gossip news"
The cryptocurrency market is particularly sensitive to news, just like how the local aunties love to gossip.
1. Good news: The market is going to party
For example, when Musk tweets "Tesla accepts Bitcoin payments," the price skyrockets immediately.
2. Bad news: The market is in a panic
For example, when a certain country announces a ban on cryptocurrency trading, prices will plummet.
3. Distinguish true and false news
Some news is deliberately released by market makers, just like when your friend tricks you into believing that "KTV is free tonight," but you find out it’s a split bill.
The bloody lessons of seasoned investors:
In May 2021, there were rumors that "China would fully ban Bitcoin"; I was so scared that I liquidated my assets. Later, I found out it was false news, and the price actually rose by 20%. Since then, I learned: listen to the news but don’t believe it all.
6. Market Sentiment: Everyone's "collective subconscious"
There’s a curious phenomenon in the cryptocurrency market: when everyone thinks prices will rise, they often fall; when everyone is in despair, opportunities may arise.
1. Fear and Greed Index: The market's "mood diary"
This index ranges from 0 to 100; a higher value indicates greater greed in the market, while a lower value indicates greater fear.
0-25: Extreme Fear, possibly a buying opportunity
26-50: Fearful, operate cautiously
51-75: Greedy, consider reducing your position
76-100: Extreme greed, run away quickly
2. Social media heat: The market's "thermometer"
When discussions about Bitcoin are rampant in WeChat groups and Weibo, it indicates that the market is overheated; when no one is talking about it, it could be the bottom.
The unique skills of seasoned investors:
I created a "cryptocurrency sentiment monitoring group" to tally members' buying and selling intentions daily. When 90% of people shout "buy buy buy," I know it's time to retreat; when 90% of people shout "it's over," I may actually increase my position.
7. Finally, here are some hard truths for you
Don't think about accurately predicting the market: Even Buffett can't do it, and we ordinary people shouldn't either.
Trends are more important than price points: In an upward trend, any pullback is a buying opportunity; in a downward trend, any rebound is a selling opportunity.
Set stop-loss and take-profit: Just like wearing a seatbelt when driving, you must have protective measures when trading cryptocurrencies.
Invest with spare money: Don't invest your house or wedding money, or you won't sleep at night.
Maintain a good mindset: Don't get complacent after making a profit, and don't seek death when experiencing losses.
The ultimate advice of seasoned investors:
"Don't rush to make money at the beginning; first, learn not to lose money. Once you can survive in the crypto market for a year, consider how to make money. Remember: In the crypto world, those who survive the longest are the ultimate winners."
Now, when you open the trading software again, don’t you feel it's not that scary anymore? The candlesticks are no longer hieroglyphs, the trading volume is no longer a code, and the MACD is no longer alien text. Remember: The market isn't meant to be conquered, but to be understood. When you truly grasp the heartbeat of the market, making money becomes a natural outcome.
Finally, here's a catchy phrase I made up for you:
"Look at the red and green candlesticks for sentiment, trading volume for strength, moving average arrangements for trends, remember MACD golden and death crosses, distinguish news authenticity, go against extreme emotions, invest spare money without panic, and enjoy trading cryptocurrencies!"
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