Cryptocurrency Exchange - Efficient Buying and Selling Methods for Small and Medium Funds

Any chart pattern of any variety and any cycle in the market can be broken down into combinations of three basic situations: upward, downward, and consolidation. Uptrends and downtrends form the trend; how to determine whether the market is trending or consolidating is the core issue in analyzing market movements (note: pay attention to the differences before and after the definition). A fundamental question is that market movements are hierarchical; an upward move on a 30-minute chart may only be a consolidation or a rebound within a downtrend on a daily chart. Therefore, discussing trends and consolidations without considering the level is meaningless; this must be firmly grasped. Note that the following and previous discussions, unless explicitly stated otherwise, are conducted at the same level. Only after understanding movements at the same level can different level trends be combined in research—that is a matter for later.

The six possible combinations of the three basic trends—upward, downward, and consolidation—may represent three different types of market behavior:

Trap Pattern: Upward Downward; Downward Upward.

Reversal Pattern: Upward Consolidation Downward; Downward Consolidation Upward.

Relay Pattern: Upward Consolidation Upward; Downward Consolidation Downward.

Market movements can be decomposed and studied through these three pattern types. From a bullish perspective, the first consideration is buying. Therefore, among the six basic patterns, the ones with buying value are: Downward Upward, Downward Consolidation Upward, and Upward Consolidation Upward. Patterns without buying value are: Upward Downward; Upward Consolidation Downward; Downward Consolidation Downward. It’s not hard to see that if you buy during a downtrend, the only pattern you will encounter afterward that has no buying value is Downward Consolidation Downward. This is one less scenario compared to buying during an uptrend.

When buying during a downtrend, there are only two risks to avoid: one, the decline is not over; two, the decline may be over, but a new downtrend follows a period of consolidation.

In the previous chapter “No Trend, No Divergence,” using divergence to find the first type of buy point during a downtrend aims to avoid the first risk above. After buying, the second risk is faced: how to avoid it? The solution is that once a consolidation pattern appears afterward, you must reduce your position and exit. Why not exit completely? Because after consolidation, two outcomes are possible: an upward move or a downward move. If it moves downward, it means a loss; and consolidation also consumes time. For small and medium funds, full exit is unnecessary. An important issue to be analyzed later is how to determine whether the consolidation will lead to an upward or downward move. If you master this skill, you can decide whether to reduce your position or to build a position during the consolidation phase (note: the key issue is how to determine the “3-buy” points). This is a major question, especially for large funds that do not want to manipulate the market, as the safest entry for large funds is only in the “Downward Consolidation Upward” pattern among the six types. The methods for market manipulation are different and can be discussed later if interested.

Based on the above analysis, a practical and effective trading method can be designed: After buying at the first type of buy point, immediately exit once a consolidation pattern appears, regardless of what happens afterward. This trading approach involves only participating in one of the six basic patterns: Downward Upward. For those with limited capital, this is the most effective trading method. The following is a detailed analysis:

For the “Downward Upward” pattern, the possible preceding movements are only two: Upward and Consolidation. If the pattern is Upward Downward Upward, it indicates that this pattern is a consolidation in a higher-level chart, and thus it can be categorized as a consolidation operation, which will be studied separately in later analyses of consolidations. In other words, for traders who only operate the “Downward Upward” buy-sell method, the “Upward Downward Upward” pattern is not considered. That is, if you want to use the “Downward Upward” method to buy a stock that shows the first buy point, and its previous pattern is “Upward Downward,” you do not consider it. Note: not considering does not mean there is no profit potential; it simply means this situation can be classified as a consolidation type operation. However, the “Downward Upward” buy-sell method refuses to participate in consolidations. As a result, the stocks that qualify under this method are fewer, leaving only the pattern “Consolidation Downward Upward.”

From the above analysis, it is clear that for the “Downward Upward” buy-sell method, the key condition is: a “Downward Consolidation” pattern must precede the first buy point. Clearly, this downward move must break below the previous consolidation; otherwise, it would not be classified as a “Consolidation Downward” pattern, and the pattern would remain a consolidation. The previous movement before this consolidation can only be two types: Upward or Downward. For the “Upward Consolidation Downward” pattern, it also essentially forms a higher-level consolidation, so it cannot be involved in the “Downward Upward” buy-sell method. Therefore, only one situation remains: “Downward Consolidation Downward.”

In summary, for the “Downward Upward” buy-sell method, the only qualifying scenario is: the first buy point appears after a “Downward Consolidation Downward” pattern. This leads to the standard procedure for selecting stocks using the “Downward Upward” method:

1. First, only select stocks showing a “Downward Consolidation Downward” pattern.

2. Enter when the first buy point appears during the second decline of this pattern.

3. Once entered, if a consolidation pattern appears, decisively exit.

Note: This exit will definitely not result in a loss because you can use a first-type sell point at a lower level to exit, ensuring profit. But why exit? Because it does not meet the standard of “Downward Upward” buy-sell operations that avoid consolidations. The downside of consolidations is time wastage, and there is a 50% chance that a downward move follows. For small and medium funds, participation is unnecessary. Always remember to operate strictly according to the standard; this is the most efficient approach. If no consolidation occurs after buying, congratulations, because the stock will at least rebound into the “Downward Consolidation Downward” consolidation zone. If such a pattern appears on the daily or weekly chart and develops into a big outperformer, the potential is quite high.

This method, whether for buying or selling, is highly suitable for small and medium funds. If mastered well, it is very efficient. However, it requires careful chart analysis and developing intuition. Also, pay attention to the comments and replies later in the articles, as they address details not covered in the main posts and respond to various questions raised. Review earlier chapters thoroughly to understand all issues; participating in the market without clarity is unwise.