The K-line chart is the secret diary of major traders. Understanding it allows you to navigate the cryptocurrency space with ease. Today, I will share K-line techniques summarized from three years of practical experience, helping you break free from news dependency and avoid blindly following trends.
1. Moving Average System: A Barometer of Bullish and Bearish Trends
Moving averages are powerful tools for judging market trends, with different period moving averages representing different levels of trends.
7-Day Moving Average (Short-Term Moving Average): A reference indicator for short-term trends. Being above the 7-day moving average indicates short-term bullish dominance; stabilizing above the 7-day moving average often suggests further price increases.
30-Day Moving Average (Medium-Term Moving Average): A reference indicator for medium-term trends. Effectively breaking below the 30-day moving average typically indicates a weakening of the medium-term trend, requiring cautious operations.
200-Day Moving Average (Long-Term Moving Average): The dividing line between bullish and bearish trends. When the price operates above the 200-day moving average, it represents a long-term bull market; breaking below the 200-day moving average suggests the onset of a long-term bear market. For example, near the 200-day moving average for Bitcoin is often a region of fierce competition between bulls and bears.
2. MACD Indicator: Contest of Bullish and Bearish Forces
The MACD indicator reflects the comparison of bullish and bearish forces and is an important basis for judging buy and sell signals.
Golden Cross (Bullish Signal): The DIF line crosses above the DEA line, indicating strengthened bullish forces and potential price increase.
Death Cross (Bearish Signal): The DIF line crosses below the DEA line, indicating strengthened bearish forces and potential price decline.
Bottom Divergence (Buying Opportunity): Price makes a new low, but the MACD indicator does not make a new low, indicating a potential buying opportunity. For example, during a previous drop in Bitcoin price, although the price made a new low, the MACD indicator showed divergence, followed by a strong price rebound.
3. Trading Volume: Clues of Major Player Behavior
Trading volume reflects the activity level of market transactions and is an important clue for judging major player behavior.
Increased Volume with Price Rise (Strong Breakthrough): Volume increases, price rises, indicating strong bullish forces in the market, a definitive signal for upward movement.
Decreased Volume with Price Decline (False Breakdown and Washing): Volume shrinks, price declines, which may indicate major player washing behavior; there is no need to panic.
Increased Volume with Limited Price Rise (Major Player Selling): Volume increases, but the price increase is limited, or even experiences a pullback, suggesting that major players may be selling, requiring caution. For example, after a cryptocurrency surged, the volume continued to increase, but the price failed to rise further, followed by a significant pullback.
Practical Mantra: Don't short above the moving average, charge when the MACD golden cross appears. Hold when volume and price rise together, and quickly escape during shrinking volume rebounds.
Remember: The K-line chart is not omnipotent; it is just one of many analytical tools. Combining it with fundamental analysis allows for more accurate judgments. The K-line can speak, but it depends on whether you can understand the language behind it.
