Coin price and shape characteristics
1. Previous trend: The coin price is usually in the early or middle stage of a slow bull trend, or has experienced a period of sideways oscillation.
The pit digging process: A sudden appearance of a medium bearish line or a large bearish line breaks down quickly.
Decline and time: The decline is generally between 4% and 30%, and the down cycle is relatively short.
The pit filling process: The coin price can quickly rebound and return above the broken bearish line, completing the 'pit filling'.
2. Trading volume characteristics
During the decline: The trading volume in the pit shrinks significantly, showing 'historically low volume'.
During rebound: When the right half rises, trading volume continues to significantly increase, showing price increase with volume increase.
3. Technical indicator characteristics
During the breakout: Common technical indicators (such as MACD, moving average system) may temporarily deteriorate and show sell signals like death crosses.
During rebound: As the price of the currency rises, technical indicators will quickly recover.
Common shape classification of 'golden pit'
Based on the speed and shape of the rebound, 'golden pits' are usually divided into three categories:
1. Strong golden pit (V-shaped)
Shape characteristics: The downward break and upward recovery actions are swift. There are often gaps.
Technical significance: The main force's washout methods are fierce, with strong control capabilities, and subsequent upward movements are often rapid.
2. Medium-strength golden pit (U-shaped/W-shaped)
Shape characteristics: The downward break and upward recovery actions are relatively slow. They often oscillate at the bottom of the pit, forming a U-shape or W-shape.
Technical significance: The washout is relatively mild, takes a bit longer, but the explosive power after the buildup can also be strong.
3. Weak golden pit (rounded type)
Shape characteristics: The action is the slowest. The shape is mainly a rounded bottom, with rare gaps.
Technical significance: The oscillation at the bottom takes the longest time, requiring more patience to wait for direction selection.
Key buying points and operational essentials
After identifying the shape, grasping the buying point is key. There are usually two main buying points:
Buying point one: Buy on the left side of the pit (aggressive type)
Location: Appears after a rapid decline in the currency price, when it stops falling in the bottom area of the pit.
Signal: Observing a long lower shadow (such as a single needle probing the bottom), or a small bullish candlestick appears after extreme low volume.
Characteristics: This is a left-side trade, where the cost may be lower, but the risk is higher, requiring judgment on the reliability of the stop-loss signal.
Buying point two: Buy on the right side of the pit (conservative type)
Location: Appears near the platform (pit) before the price of the currency rebounds.
Signal: The price of the currency breaks through the pit platform with a large bullish candlestick, or recovers key moving averages.
Characteristics: This is a right-side trade, a buying point after the trend is confirmed, which is more stable and has a relatively higher success rate.
Technical key points in operation
Volume-price coordination is key: Be sure to confirm that the trading volume during the filling of the pit is significantly greater than the trading volume during the digging of the pit.
Recovery speed should be fast: The shorter the time to recover from the bottom of the pit to the pit mouth, the better. It is generally considered best within one day or one week, with stronger explosive power.
Set clear stop-loss: Any technical shape has the possibility of failure. The stop-loss can be set 3%-15% below the lowest price at the bottom of the pit; once it breaks, exit decisively.
Important notes and principles
1. Not a universal key: The 'golden pit' strategy is a technical analysis tool, and not all pits will rise sharply afterward. It should be combined with the overall market trend, sector heat, and fundamentals for comprehensive judgment.
2. Beware of 'false pits and real declines': Distinguish whether it is the main force washing the plate or a real decline caused by fundamental deterioration. If the decline is accompanied by substantial negative news or systemic market risks, it may not be a 'golden pit'.
3. Do not seek a sword by carving the boat: Not all bull markets have standard golden pit shapes before they start. The core idea (the starting point after the washout) should be flexibly applied, rather than mechanically waiting for specific patterns.
4. Manage positions and expectations: Even for buying points with high confirmation, it is recommended to enter in batches to avoid a full position at once. At the same time, have reasonable expectations for returns and strictly implement stop-loss and take-profit disciplines.