A 42-year-old old friend from Shanghai, who has been navigating the crypto world for 10 years, neither relying on insider information nor luck, has turned an initial capital of 500,000 into more than 50 million solely based on a simple set of principles.
He lives a low-key life, owning 5 properties, 1 for personal use, 1 for family, and the remaining 3 for rent. This achievement is all thanks to a steady and solid approach.
Today, I will share his core experiences with fellow crypto enthusiasts. Understanding these is more practical than learning ten different technical analyses.
Today, I will thoroughly analyze the iron laws and trading strategies of cryptocurrency that have endured the trials of the market, hoping to illuminate the path for everyone in their investment journey in the crypto world, helping everyone to avoid detours and significantly increase their chances of profit.
If these iron laws of cryptocurrency trading can be strictly followed by investors and flexibly applied in combination with the actual market conditions, they will definitely help everyone avoid common investment traps and greatly increase the chances of making profits in the cryptocurrency market.
94% Win Rate! How to Trade the "Three White Soldiers" K-line Pattern
Among Japanese candlestick patterns, the Three White Soldiers Pattern is a bullish reversal candlestick pattern that typically appears at the bottom of a falling price trend, signaling that a price reversal may be imminent.
Since the Three White Soldiers pattern is a bullish reversal pattern, we want to see prices fall before the pattern appears, so it is also a common signal of the end of a trend.
How to identify the Three White Soldiers pattern?
The Three White Soldiers pattern is a triple candlestick pattern consisting of three consecutive bullish candlesticks at the bottom of a downtrend. It is a mirror image version of the Three Crows pattern.
Here’s how to identify the Three White Soldiers pattern on a chart:
Three consecutive bullish candlesticks
◎ Larger entity
◎ Shadows should be small or non-existent
The pattern looks like this on a chart:
Therefore, to identify the Three White Soldiers candlestick pattern on a chart, you need to look for three consecutive bullish candlesticks that appear at the bottom of a downtrend.
Additionally, each candlestick must have a relatively long body and open higher than the previous candlestick's close, ultimately forming a "V" shape.
Variations of the White Three Soldiers candlestick pattern
Of course, the Three White Soldiers candlestick pattern may appear differently on a daily trading chart.
You may see a large gap between the close of one candlestick and the open of the next, causing them to start inside each other.
It is also common to see candlesticks gradually getting smaller as they form.
It might look like this on a chart:
How to trade the Three White Soldiers candlestick pattern
To trade the Three White Soldiers candlestick pattern, it is not enough to simply find the same shape of the pattern on the chart.
What makes a pattern effective is not just the shape, but also the position it appears in. This means that the same shape appearing in different positions can mean different things.
When trading the Three White Soldiers, we first want to see the price drop, forming a bearish move.
The appearance of the Three White Soldiers pattern after this bearish move could signal a reversal to the upside.
It looks like this:
So when should we enter a trade based on the Three White Soldiers pattern?
Quite simply, when the high of the last candlestick is broken, you can enter the trade.
This is the trigger for you to adopt a conservative long strategy, as shown below:
As for the stop loss, we can set it below the first candlestick of the white three soldiers candlestick pattern.
Additionally, to increase accuracy, we would like to trade the Three White Soldiers candlestick pattern by combining it with other technical analysis or indicators.
Trading the Three White Soldiers Candlestick Pattern Strategy
Steps:
Find a downtrend
◎ Mark the low point formed by the price after each decline
◎ Also compare the price lows with the RSI indicator
When you see the RSI making higher lows while the price is making lower lows, you have found a divergence.
Wait for the Three White Soldiers pattern to form with lower lows in price that align with higher lows in the RSI
Go long when the price breaks through the high of the last candlestick of the Three White Soldiers pattern
◎ Set stop-loss and take-profit targets in anticipation of price increases
Strategy 2: Trading the White Three Soldiers with Fibonacci
In addition to using trend reversal indicators, you can also use Fibonacci retracement levels to detect possible support or resistance areas and determine whether a trend reversal is likely to occur.
Fibonacci shows retracement levels where prices tend to reverse. Depending on the strength of the trend, different levels will work differently with the Three White Soldiers pattern.
Steps:
◎ The market is in an upward trend
◎ Then wait for a drop
◎ Use the Fibonacci tool to draw levels from the low to the high of this wave
When the price hits the Fibonacci level and the Three White Soldiers pattern appears, this is the signal to wait.
Go long when the price breaks through the high of the third candlestick of the Three White Soldiers
◎ Set stop-loss and take-profit targets in anticipation of price increases
To draw Fibonacci retracement levels, you need to find a completed trend and drag it from the lowest level to the highest level of the previous trend (as shown in the image below).
Then, once you have drawn the Fibonacci retracement levels, you can zoom in and look for your entry levels. Additionally, you can use Fibonacci to find your stop-loss placement and take-profit targets.
Using the example above, the entry point would be the close of the third candlestick (since the market is trading above the 78.6% Fibonacci level).
Then, the stop loss can be placed at the lowest level of the first candlestick or at the 0.0% Fibonacci level (i.e. the lowest level of the previous price range). Finally, the take profit can be placed at the highest level of the previous trend or at one of the following Fibonacci levels.
Strategy 3: Trading the Three White Soldiers using Moving Averages
Moving averages are excellent indicators for trend trading. When the price is in an uptrend, price pullbacks towards the moving average.
Steps:
◎ Find an uptrend and the price jumps above the moving average
◎ Wait for the price to fall back to the moving average
Check if there is a Three White Soldiers pattern on the moving average
Go long when the price breaks through the high of the last candlestick of the Three White Soldiers candlestick
◎ Set stop-loss and take-profit targets in anticipation of another price increase
What is the success rate of the White Three Soldiers pattern?
According to the Encyclopedia of Candlestick Charts written by internationally renowned trader Thomas N. Bulkowski, the Three Soldiers candlestick pattern has a success rate of up to 84%.
Advantages and disadvantages of the White Three Soldiers candlestick pattern
Here are the most common advantages and disadvantages of trading the Three Soldiers pattern:
Summarize
The Three White Soldiers is a three-candlestick pattern.
To be effective, it must occur after a price drop.
This is a bullish reversal pattern, meaning it signals a potential upside reversal in price.
To increase your accuracy, you can use RSI, moving averages, and other trading indicators to trade the Three White Soldiers.
The win rate of the White Three Soldiers candlestick pattern is 84%.
It is worth noting that no trading strategy is omnipotent, and sometimes you will encounter a major market shift while using your strategy, and the market will start to develop with strong momentum.
To ensure that you can bear appropriate risks, please lock in profits and take profits when the trend is in your favor.
Remember, when using these strategies or indicators, always test them in demo trading.
Tips:
The longer the shadow, the more twisted the bulls and bears are!
The longer the entity, the clearer the trend!
3. Common K-line patterns, understand market sentiment in seconds!
1. Doji:
The real body is extremely small, and the upper and lower shadows are almost the same length → Bulls and bears are tied, the market is about to change!
Location:
Too much increase → May have peaked!
If it falls too much → it may have bottomed out!
2. Hammer:
The lower shadow is very long and the real body is small → someone is buying the dip after it falls to the floor → a reversal is possible!
(Suitable for bargain hunters!)
3. Hanging Line:
The lower shadow line is extremely long, but it appears after a continuous rise → Be wary of the main force pulling up the price to sell!
(Run!)
4. Red Three Soldiers:
Three consecutive small bullish candlesticks → The trend is steadily upward → Follow up!
5. Black Crow:
Three consecutive small black candlesticks → Downward trend → Stay away!
Practical tips, even novices can use it!
1. Look at the volume:
K-line rises sharply + trading volume surges → Real breakthrough, just do it!
K-line rises sharply + trading volume shrinks → increase prices to sell, run!
2. Find the key position:
Support level: After falling to a certain level and rebounding multiple times → it is possible to buy the bottom!
Pressure point: After rising to a certain position many times and then being smashed → the price may have reached its peak!
3. Don’t be greedy:
Don’t guess randomly based on a single K-line, look at the combination of 3 or more!
For example, the "Morning Star" (down → small star → up) is a reversal signal, but a single small star is useless!
V. Summary
Summary: K-line is the "electrocardiogram" of the currency circle. If you understand the entity, shadow line, and shape, you can predict the rise and fall!
Don’t be superstitious about a single K-line. Combine it with trading volume and key positions to increase your winning rate!
In the trading market, analysis methods are usually divided into two categories: technical analysis and fundamental analysis.
Fundamental analysis has a high barrier to entry, and without a few years of experience as a foundation, it is difficult to gain any results. Therefore, novices usually dislike fundamental analysis, especially those who like to see results in a short time and are reluctant to invest time in it.
Therefore, technical analysis is particularly popular due to its simplicity, ease of use, and lack of a complex theoretical foundation. Technical analysis is usually divided into indicators, candlestick patterns, and other methods. Indicators are more complex, using the candlestick price and function to form a mathematical model. They are an advanced application of the candlestick, which we will discuss in detail later.
The K-line pattern is relatively suitable for beginners because you only need to observe with your eyes and remember with your brain. Simply put, the next time you see the same K-line combination, you can judge the future trend based on the previous trend.
If fundamental analysis is compared to martial arts secrets such as the Nine Yang Divine Art or the Qiankun Daluoyi, then technical analysis is the popular martial arts such as the Seven Injury Fist and the Small Grappling Hand, which are easy to learn and use and have a reputation in the martial arts world.
Now CA Markets will take everyone to compete in skills. Although there are only six moves, the accuracy rate is still very high. Pay attention!
1. Rectangular (box) arrangement
A rectangle is a pattern formed by a series of price fluctuations between two horizontal upper and lower boundaries. Prices fluctuate within the range.
When the price rises to a certain level, it encounters resistance and turns back, but quickly gains support and rises again. However, when it returns to the same high point as last time, it is blocked again, and when it falls to the last low point, it is supported again.
By connecting these short-term highs and lows with straight lines, we can draw a channel. This channel is neither upward nor downward, but develops in a parallel direction. This is the rectangular pattern.
Rectangles are consolidation patterns that can occur in both rising and falling markets. Long, narrow rectangles with low volume are more common at initial bottoms. Rise and Fall: Buy and sell signals are generated after a breakout from the upper and lower boundaries. The rise and fall range is usually equal to the width of the rectangle itself.
Effectiveness: A rectangle with a large high and low range is more powerful than a narrow and long rectangle. As shown in the figure above, the circle is the predicted increase and the box is the buying point. Example:
2. Flag type
The flag pattern is like a flag hanging on the top of a flagpole. This pattern usually appears in rapid and large market fluctuations.
After a series of tight, short-term price fluctuations, the price forms a rectangle that tilts slightly in the opposite direction of the original trend. This is a flag pattern. Flag patterns can be divided into rising flags and falling flags, as shown in the figure below.
The flag pattern is a consolidation pattern. This means that after the pattern is completed, the price will continue to move in the original trend direction. The rising flag pattern will break upward, while the falling flag pattern will break downward.
Time standard: There is a time standard for the flag pattern, that is, the flag pattern consolidation time is generally around 7-14 days. Amplitude: After breaking through the flag pattern, the amplitude of the rise will generally not be less than the space of the wave of market immediately before the flag pattern. Example:
3. Diamond
The diamond shape resembles a diamond, with a V-shaped neckline. Trading volume is like a triangle, gradually decreasing. The diamond shape is actually a combination of a trumpet shape and a symmetrical triangle.
The left half resembles a trumpet pattern, with the second rising point higher than the previous one and the falling low also lower. When the third rise occurs, the high fails to rise above the second high, and the subsequent falling low is higher than the previous one. The price fluctuations shift from continuously expanding outward to converging inward. The changes in the right half resemble those of a symmetrical triangle.
Morphological significance:
As prices continue to rise, investors become impulsive and irrational, leading to increased price volatility and a surge in trading volume. However, sentiment quickly cools, trading volume decreases, and price fluctuations narrow. The market shifts from high investment interest to a wait-and-see approach, with investors awaiting further market changes before making decisions. Diamond patterns rarely represent bottom reversals; they typically appear at the top of an intermediate decline or at a peak of high trading volume, signaling a reversal.
Bullish and bearish signals: When the lower right support of the diamond is broken, it is a sell signal; but if the price breaks through the right resistance upward and the trading volume surges, it is a buy signal.
Amplitude: The method to measure the minimum decline is to start from when the price falls below the lower right line of the diamond, and measure the vertical distance between the highest point and the lowest point in the pattern. This distance is the minimum amplitude of the price decline in the future.
4. Symmetrical triangle
Under normal circumstances, the symmetrical triangle is a consolidation pattern, that is, the price will continue to move in the original trend.
The minimum rise measurement method for a symmetrical triangle: When the price breaks out, draw a line from the first rising high of the pattern parallel to the bottom. We can expect the price to rise at least to this line before encountering resistance. As for the speed of the price increase, it will rise at the same angle as before the pattern began.
Therefore, we can estimate the minimum price increase and the time required for completion from this measurement method. The same measurement method is used for the minimum price drop of the pattern.
Example: After the symmetrical triangle pattern ended, there was a period of correction, and then the foreign exchange market continued to fall in the original direction.
5. Ascending and descending triangles
Both ascending and descending triangles are consolidation patterns. An ascending triangle forms during an uptrend, suggesting a potential breakout, while a descending triangle does the opposite. Trading volume decreases throughout the triangle's formation, only to see significant volume at the breakout.
An ascending triangle pattern provides a short-term buy signal when it breaks through the top horizontal resistance line, while a descending triangle pattern provides a short-term sell signal when it breaks through the lower horizontal resistance line. However, an ascending triangle pattern requires high volume to confirm a breakout, while a descending triangle pattern does not require high volume to confirm a breakout.
It is worth mentioning that although these two patterns belong to the consolidation pattern and have a general upward and downward regularity, they may also develop in the opposite direction. They should be verified with technical indicators such as trading volume. As shown in the figure:
six
Island type
After the price has been rising continuously for a period of time, if there is a sudden gap-like rise, and then the price hovers at a high level, and soon the price falls again with a gap, the gaps on both sides occur in approximately the same price area, making the high-level consolidation area look like an island on the chart, and the gaps on both sides make the island isolated and stand alone above the ocean.
Typically, volume is high during the formation of an island, and the same is true when prices form an island during a decline. A gap that appears before the island is called a consumption gap, while a gap that appears after the island in the opposite direction is called a breakout gap.
These two gaps appear within a short period of time, ranging from a single trading day to several days or weeks. The two gaps that form the island pattern often occur within the same price range. The island pattern begins with a consumption gap and ends with a breakout gap. In this case, the gap is filled by a gap-filling gap, so the gap is completely filled.
Morphological significance:
The price continues to rise, making it impossible for those who originally wanted to buy to buy at the expected price. The continued upward trend finally makes them unable to bear it and rush in regardless of the price, thus forming an upward gap.
However, the price did not continue to rise because of such a jump, and there was obvious resistance at a high level. After a short period of consolidation, the price was finally unable to support the high level and fell in a gap.
The price continues to fall, and the island pattern finally formed is the same as in a bull market.
Island patterns often appear at the top or bottom of long-term or medium-term trends. When an island pattern forms during an uptrend, it's a sell signal; conversely, if it appears during a downtrend, it's a buy signal.
Guard - Develop four "stupid habits"
Operate positions in batches, don't go all in, don't rush in
Know how to trade with the trend, not against it.
We must learn to keep our warehouse empty. If there is no opportunity, we will just wait.
Review your trades every day and write down your mistakes with a pen or on your computer. You must hold on to your profits and stop your losses.
Although it is very boring, only this "stupid habit" can bring good results.
Stop dreaming of getting rich overnight. The more you fantasize, the more you become carried away, and the harder it is to control your emotions. Those who make money over the long term are never the smartest, but the most patient and disciplined.
What I rely on is: only trade Bitcoin and my concubine, keep an eye on one moving average, stick to the stop loss, and execute for the long term.
If you do this for a year, even if you only make 5% per month, that would be double the profit.
The real winners in the cryptocurrency world are not gamblers, but people who use “stupid methods” and stupid habits.
In a word, stupid money may be the money that can last.
