Imagine a guy named Xiaochuan who repairs electric scooters in a county town. While waiting for a customer’s battery to be replaced, he’ll check Binance prices.
On November 4, he was watching $DYDX . It opened at 0.10352 and first dipped to a low of 0.09772 that day, 5.60% below the open. Later, it surged to a high of 0.108, 4.33% above the open. It closed at 0.10578, 2.18% above the open. From the high of 0.108 to the close of 0.10578, it fell back by 2.06%. He thought the rebound was still underway, so he bought near the close, recording his cost as 0.10578.
On November 5, it opened at 0.10584. It reached a high of just 0.10598, 0.13% above the open—barely moving up at all. It plunged to a low of 0.09134, 13.70% below the open and 13.65% below his cost of 0.10578. It closed at 0.09516, 10.09% below the open and 10.04% below his cost. He held on to his phone and didn’t sell, thinking that after such a big bearish candle, there would surely be some kind of bounce the next day.
On Friday, November 6, it opened at 0.09529. It reached a high of 0.09987, 4.81% above the open but still 5.59% below his cost of 0.10578. It closed at 0.09756, 2.38% above the open and 2.52% above the November 5 close of 0.09516, but 7.77% below his cost. Friday ended with a small bullish candle, and he felt a little relieved.
On Saturday, November 7, it opened at 0.09753 and dipped to a low of 0.09347, 4.16% below the open and 11.64% below his cost. It closed at 0.09518, 2.41% below the open and 10.02% below his cost.
On Sunday, November 8, it opened at 0.09519 and reached a high of just 0.09526, 0.07% above the open. It plunged to a low of 0.08532, 10.37% below the open and 19.34% below his cost. It closed at 0.08856, 6.97% below the open and 16.28% below his cost. From the low of 0.08532 to the close of 0.08856, it recovered by 3.80%. From the November 4 high of 0.108 to the November 8 close of 0.08856, it fell by 18.00%.
Later, Xiaochuan told a friend who came in to get his car repaired: “The November 4 close was 2.18% above the open, so I bought at 0.10578. On the 5th, the close was 10.09% below the open and 10.04% below my cost. On Friday the 6th, it ended with a small bullish candle, and the close was 2.52% above the November 5 close, but it was still 7.77% below my cost. Then it kept falling over the weekend, and by the November 8 close it was down to 0.08856, 16.28% below my cost.”
If you also bought near the close of a bullish candle, only to be hit the next day by a big bearish candle that closed 10.09% below the open, followed by more declines over the weekend, leaving the Sunday close 16.28% below your cost, would you still take that bullish candle on the 4th as a sign that the trend was starting up again?
$DYDX
On November 4, he was watching $DYDX . It opened at 0.10352 and first dipped to a low of 0.09772 that day, 5.60% below the open. Later, it surged to a high of 0.108, 4.33% above the open. It closed at 0.10578, 2.18% above the open. From the high of 0.108 to the close of 0.10578, it fell back by 2.06%. He thought the rebound was still underway, so he bought near the close, recording his cost as 0.10578.
On November 5, it opened at 0.10584. It reached a high of just 0.10598, 0.13% above the open—barely moving up at all. It plunged to a low of 0.09134, 13.70% below the open and 13.65% below his cost of 0.10578. It closed at 0.09516, 10.09% below the open and 10.04% below his cost. He held on to his phone and didn’t sell, thinking that after such a big bearish candle, there would surely be some kind of bounce the next day.
On Friday, November 6, it opened at 0.09529. It reached a high of 0.09987, 4.81% above the open but still 5.59% below his cost of 0.10578. It closed at 0.09756, 2.38% above the open and 2.52% above the November 5 close of 0.09516, but 7.77% below his cost. Friday ended with a small bullish candle, and he felt a little relieved.
On Saturday, November 7, it opened at 0.09753 and dipped to a low of 0.09347, 4.16% below the open and 11.64% below his cost. It closed at 0.09518, 2.41% below the open and 10.02% below his cost.
On Sunday, November 8, it opened at 0.09519 and reached a high of just 0.09526, 0.07% above the open. It plunged to a low of 0.08532, 10.37% below the open and 19.34% below his cost. It closed at 0.08856, 6.97% below the open and 16.28% below his cost. From the low of 0.08532 to the close of 0.08856, it recovered by 3.80%. From the November 4 high of 0.108 to the November 8 close of 0.08856, it fell by 18.00%.
Later, Xiaochuan told a friend who came in to get his car repaired: “The November 4 close was 2.18% above the open, so I bought at 0.10578. On the 5th, the close was 10.09% below the open and 10.04% below my cost. On Friday the 6th, it ended with a small bullish candle, and the close was 2.52% above the November 5 close, but it was still 7.77% below my cost. Then it kept falling over the weekend, and by the November 8 close it was down to 0.08856, 16.28% below my cost.”
If you also bought near the close of a bullish candle, only to be hit the next day by a big bearish candle that closed 10.09% below the open, followed by more declines over the weekend, leaving the Sunday close 16.28% below your cost, would you still take that bullish candle on the 4th as a sign that the trend was starting up again?
$DYDX