This article is a purely technical sharing of my personal original post. It is the result of my 10 years of experience in the financial and securities markets, including but not limited to (US Nasdaq, Hong Kong Hang Seng, Shanghai and Shenzhen A, and today’s cryptocurrency industry). A trading rule accumulated through actual combat is called the five-sided rule.
As the name suggests, the five sides include the macro side, the technical side, the news side and the data side, the emotional side, and the copycat side.
The five-sided rule applies to the cryptocurrency industry, including futures contract trends, short- and medium-term day trading, and spot trading of hot altcoins. Below I will conduct a detailed analysis of the Five Faces Rule. If you resonate with it, thank you for your likes and collection!
1. Macroscopic aspect
We specifically refer to the financial markets here, mainly the US Nasdaq Index (IXIC), S&P 500 Index (SXP), Dow Jones Index, Hong Kong Hang Seng Index, and Shanghai and Shenzhen A Index (the correlation is average). Of course, the Crypto market experienced a temporary liquidity crisis due to the FTX thunderstorm in November 2020. During that time, the crypto market did not follow the mainstream macro market trends, but instead experienced sluggish trading volume and sideways fluctuations. However, systemic risks (black swan events) are only extremely small probability events, and the market trends of most currency circles are closely related to these macro markets.
With Hong Kong's opening up and legalization of the cryptocurrency industry, it has also brought a mysterious force from the East to the healthy development of the cryptocurrency industry. At the same time, it also allows Hong Kong to have its own place in the cryptocurrency industry.
So whether we are doing trend trading, intraday trading, or scalping (ultra-short-term) trading, we can start synchronously operating related token transactions (contracts, contracts, spot, etc.), the European market will start to fluctuate more at 4 p.m. (Eastern Eighth District time), and the US market will start to fluctuate more from 9:30 p.m. (summer time) to 0:00 p.m. Other times that are not related to the macro market, most of them are sideways. Altcoin prices generally appear on Saturdays and Sundays.
In short, with the healthy development of the currency circle, the connection with the macro market is getting closer and closer. It is a good assistant for your trading to grasp the trends of the macro market and resonate with the currency circle.
2. Technical aspects
The technical aspect is a relatively broad scope that includes a lot of theory and practical experience.
The two schools of technical theory that I personally prefer are harmonic patterns represented by left-hand trading and right-hand trading chart structures.
In volatile market conditions, it is suitable to use left-hand trading to search for bottoms and tops. This will avoid emotions getting the better of you in frequent market shocks, which may lead to irrational trading caused by poor emotions.
Trading on the right side is suitable for trending markets. As the saying goes, trend is king. Even if your entry position is not good, as long as the position is well managed and the direction is correct, you can eventually turn losses into profits and obtain good profits.
Some people often say that it is forbidden to chase the rise and kill the fall. In fact, the real right-side trend trading is "chasing the rise and killing the fall" trading with the trend. But what needs special attention is that false breakthroughs often occur in actual trading, which will infinitely wear down your capital and mentality. Therefore, experienced right-side trading veterans will carefully monitor the market in real time at important pressure and support levels. , only after confirmation will the real direction be taken, which is what I often say, don't chase the first breakthrough, wait until it has walked through the structure for at least 1 hour before deciding whether to enter the market. If you make a breakthrough for the second time, step back to the previous pressure support position and continue to trend in the original breakthrough direction, then you can enter the market decisively, because the market will not lie to you a second time!
2. The second aspect of technical aspects is the specific indicators of the market, such as MACD, BOLL, EMA, VOL, RSI, OBV, etc. that are often used. I personally like bare K + chart + liquidity + 1 indicator (VOL). VOL is the trading volume indicator. The higher the trading volume, the greater the volatility, and thus the more opportunities for speculation.
3. Message data surface
Behind trend lines, double tops, and head-and-shoulders patterns, there are driving forces from fundamental factors. We call this force the message data plane! As the name suggests, news data that has a decisive impact on market trends is also a very important "indicator" that we need to refer to when doing transactions.
1. The first news that needs to be focused on is the Federal Reserve’s interest rate decision meeting, which also affects the trend of major macro markets. The most basic theory you need to know is that when interest rates rise, the liquidity of fiat currencies will be relatively reduced, so the funds invested in the risk market will naturally not be very broad. Just as the current rotation of the sector is not a general rise, but the rotation of individual leading coins. Because the funds in the market are very concentrated, there is no situation like a hundred flowers blooming during the quantitative easing policy period.
2. Major events or public event news. For example, the Qatar World Cup will be held in December 2022. The market has been hyping the sports football sector since mid-2022. CHZ, the leader in the sports sector, has maintained ultra-high daily trading volume before the opening ceremony of the World Cup. After the opening ceremony of the World Cup, Since then it has been falling all the way (all good things turned out to be bad things).
3. Transparent supervision. For example, the upcoming legalization and transparency of cryptocurrency transactions in Hong Kong has brought some vitality to related tokens in the Hong Kong sector, especially CFX, which everyone loves, with an increase of an astonishing 2000% in 2023!
Message data is very important to the crypto market because message data drives the volatility of the crypto market. Regardless of technical trends, news data is like fuel, which drives the encryption market forward!
Large institutional traders, small traders, veterans of crypto market trading, or newbies all rely on the same news data to determine market movements because, without any news data, the market will not move at all. !
For another example, Silicon Valley Bank declared bankruptcy some time ago, and you are holding shares of this bank.
What is the first thing you do when you hear this news? Did you anticipate changes in this company? What do you think of the changes in this company and the attitudes of other people?
Finally, we often pay attention to some data that affect the short-term market trend, such as the US non-farm payrolls, unemployment rate, and the upcoming CPI data, which will affect the decision of the Federal Reserve's interest rate meeting.
4. Emotional side
Whether you are a beginner or a seasoned veteran, all investors and traders have discovered that when the market is so crazy that you can't function normally, that is often when the market's major top or bottom is formed. Day trading is more prone to emotional stress. As a day trader, you should control your emotions at all times, especially when facing important news, reports, international events or crises.
Sentiment extremes are closely tied to major market tops and bottoms. This correlation can be confirmed by specific facts such as news headlines, magazine articles, television and radio reports, and trader anecdotes. Studying these can determine whether the market is approaching a bottom or a top. When all the news is bullish, the market top is imminent, while the proliferation of bad news means the bottom has arrived. Many of the day trading indicators discussed in this book translate this sentiment into market methods.
When the market sentiment is extremely greedy, it is the time for you to clear your position and sell; when the market sentiment is extremely panic, it is the best time for you to buy the entire position.
Buy when no one cares, sell when there is a lot of buzz!
5. Copycat noodles
Altcoins make people happy and worry them. Because the liquidity of copycats is generally low, but they also have wealth effects, they are also loved by many investors. When mainstream currencies fluctuate sideways or during the weekend, altcoins will be ready to rise straight to the sky, attracting a large number of speculators to participate. Just like OG when I wrote the article today, it increased by nearly 400% in one day, which undoubtedly makes people feel empty and anxious.
When I look at copycats, I usually select a few high trading volume (VOL) and sector leaders for batch analysis. When the disk structure of batches of copycats forms a resonant trend, then the market direction can be basically confirmed.
In addition, altcoins also have a total market capitalization indicator (codenamed Total3), which is also an important reference that I often use to analyze altcoins and market trends.
The above are the five-sided rules that I often use in the cryptocurrency market. The specific application also requires long-term speculation and trading strategies. If friends feel that they have benefited a lot, follow me and I will update technical information frequently.
