#加密市场反弹 My air force brothers have been beaten continuously in the past two days. I don’t predict when there will be a correction. I will simply talk with the new brothers about why a correction will definitely occur in a continuously rising market?
In the financial market, a continuous rise in prices is always accompanied by a correction. This is the natural law of market operation. In order to better understand this phenomenon, we can use metaphors from life and simple analysis to explain it.
What is a callback?
A pullback, in simple terms, is a process in which prices fall or retreat briefly after a period of sustained market growth. It does not mean a reversal of the market trend, but rather a normal fluctuation of prices on the way up. So why is a pullback inevitable? We can look at this issue from several perspectives.
1. Profit taking: Just like climbing a mountain with a backpack that gets heavier and heavier
Imagine you are climbing a mountain. At first, it is easy and you even think you can reach the top in one breath. However, as you keep going up, your backpack becomes heavier and heavier (just like your book profit increases when the price keeps rising). Although you want to keep climbing, the weight of the backpack forces you to stop and rest, or even throw away some unnecessary things to lighten the burden.
In the market, this phenomenon is called profit taking. When prices rise to a certain level, many investors will choose to sell some of their assets to lock in profits, which leads to increased selling pressure in the market and a short-term decline in prices. Just like climbing a mountain, you need to take a break so that you have the strength to continue climbing.
2. Buying consumption: The higher you go, the thinner the air becomes
During the price increase, the main force driving the price increase comes from buyers. When the market is strong, prices will naturally continue to rise. But just like climbing a mountain, as you get higher and higher, the air becomes thinner and your physical strength begins to fail. The same is true for the market. The power of buyers cannot be infinitely strong. As prices continue to rise, new buyers may temporarily stop and wait and see, causing the buying power to be exhausted. At this time, the power of sellers will prevail and prices will fall back.
3. Market sentiment changes: peers begin to doubt
Suppose you and a group of friends are climbing a mountain together. Everyone is very excited at the beginning, but when you reach a certain height, some friends suddenly start to worry: "We have climbed too high, there may be danger ahead." So some people start to doubt the safety of continuing to climb, and some even start to turn back. This spread of emotion will slow down the progress of the entire team, or even stop to rest.
In the market, when prices continue to rise for a period of time, some investors may worry that the market is overheated or bubbled, so they start to sell their assets, pushing prices down in the short term. This change in sentiment often triggers a correction.
4. Technical pullback: the flat area between mountains
When climbing a mountain, it is not always a steep slope. Sometimes you will encounter a flat area where you can adjust your breath and take a break. The same is true for the market. In the process of rising, prices often encounter some key technical points, such as previous highs, support levels or resistance levels. These points are like flat areas in the mountains. Prices will pause or pull back at these points to digest market sentiment.
Why are callbacks healthy?
A pullback is not a bad thing, on the contrary, it is an important part of the healthy operation of the market. If there is no pullback in a continuous upward trend, the market will be overheated, prices will bubble, and eventually lead to a more serious decline. A pullback can help the market digest excessive buying pressure, attract new buyers to enter the market, and accumulate strength for the next wave of rise.
Summarize
A market pullback is like stopping to take a breath while climbing a mountain. It is a normal correction process in the process of price increase, helping the market adjust the overheated emotions and forces. Whether it is profit-taking, buying consumption, or changes in market sentiment and technical factors, pullbacks are the natural result of market operation. Understanding and accepting pullbacks will not only allow you to better grasp the rhythm of the market, but also avoid making unnecessary emotional decisions due to short-term fluctuations.
